European Transition Economies Research Articles

The role of the informal sector, flexible working time and pay in the Russian labour market model

Unlike most other transition economies in Europe, in Russia correlation between employment dynamics and GDP dynamics has been weak, contributing to a relatively low rate of unemployment. This article seeks to explain this phenomenon by investigating a combination of inefficient enforcement of labour regulations and the emergence of a vast informal sector of the labour market, leading to the unusually broad implementation of flexible working time and flexible pay, as a critical factor in the stabilisation of employment in the country.

Investigating factors associated with the spillover effect of investments in telecoms: Do some transition economies pay too much for too little?

One of the routes by which investments in information and communication technologies (ICT) could impact a macroeconomic bottom line of economies is by contributing to total factor productivity (TFP), an important component of economic growth. While the more traditional “investments to revenues” resource-intensive path has been well researched, the nature of the indirect “investments to TFP” link remains much less clear. Specifically, it is not well understood what conditions must be present for economies to exhibit the relationship between investments and TFP. In the current study, conducted in the context of 18 transition economies in Europe and the former Soviet Union, we aim to identify some of the factors associated with the presence of the relationship between the subset of investments in ICT, investments in telecoms, and two components of TFP – change in efficiency and change in technology. The results of the analysis of the data set spanning from 1993 to 2002 suggest that while the presence of the link between investments and change in technology was associated with the level of investments, the presence of the relationship between investments and change in efficiency was associated with the quality of a full-time telecom workforce. The consequent analysis of the data set spanning from 2003 to 2008 supports this finding and also provides evidence of the importance of the macroeconomic strategies that balance an increase in the levels of investments with the increase in the levels of efficiency of utilization of investments and the generation of revenues.

Creating organizational innovations in countries in transition using Finnish change laboratory: A case study from Serbia

The Finnish Change Laboratory intervention method has been used in several Western countries to support innovation and learning within organizations. This study explored the applicability of the Change Laboratory method to work activities in Eastern European transition economies. The case of a Change Laboratory project at a Serbian publishing house was examined and discussed. The Change Laboratory led to a clear break from previous models and resulted in a new, much more efficient model of work organization based on teams. The studied publishing house can be characterized as an innovator within a relatively laggard industry. This characteristic increased the Serbian publisher?s potential for developing ?learning partnerships? with publishing activities in EU Member States. These ?learning partnerships? enabled appropriate Western concepts to be found that could be used as stimuli to develop a new model of work for the publishing house during the Change Laboratory.

The impact of current and founding institutions on strength of competitive aspirations in transition economies

AbstractNorthian institutional theory argues that firms adapt to their current institutional environments. Organizational imprinting theory argues that firms will be constrained by their founding institutional environments. We explore the combined influence of these two institutional environments on the strength of competitive aspirations using a unique dataset of firms in the shifted institutional environment of Central European transition economies. Our results indicate founding institutional environments temper adaptation to current institutional environments for certain competitive aspirations and this effect increases as the size of the shift between current and founding institutional environments increases. Copyright © 2011 John Wiley & Sons, Ltd.

E-government implementation strategies in developed and transition economies: A comparative study

In the last decade, electronic government in Europe has emerged and established itself as a viable alternative channel for public service delivery. While e-government has now matured in most developed European countries, transition economies in Europe, have only recently begun to recognise its potential benefits and incorporated e-government as part of their national strategy. Although time may result in the amplification of e-government experience for transition economy countries, lessons drawn from developed countries indicate that political, fiscal, social, strategic and organisational issues need to be addressed when formulating plans for deploying e-government. Using case study research, this paper examines strategies adopted by the UK and Slovakia in the context of e-government implementation. Particularly, the paper examines how the perspectives on e-government vision, strategy, focus and related organisational change influence the implementation and diffusion of e-government in developed and transition economies in Europe.

A further investigation of unemployment persistence in European transition economies

This paper analyses the dynamics of the unemployment rate in the eight countries from Central and Eastern Europe which joined the EU in 2004. Unit root tests allowing for nonlinearities and structural changes suggest that the unemployment rate is not stationary in most of the sample countries. Tests allowing for fractional integration, however, reveal that shocks are highly persistent, implying a slow rate of convergence to the natural rate of unemployment. The unemployment rate is least persistent in Hungary and Slovenia, more persistent in the Czech Republic, Slovakia and the Baltic States and extremely persistent in Poland. The degree of persistence appears to reflect the different levels of economic and institutional development in the countries and possibly also the role of the government.

The Two-Decade Process of Institutional Adjustment in the Transition Economies of the Former Soviet Union: Overachievers, Mediocre Performers, and Underdogs

Since the onset of the transformation process, there has been divergence in place as far as the speed and progress of institutional changes of the economies of the Former Soviet Union are concerned. Based on the thorough analysis of the EBRD data on attainments in institutional adjustment in diverse spheres of the transition economies of Europe and Central Asia (ECA), it is possible to classify them into the following three groups: 1) overachievers, 2) mediocre performers, and 3) underdogs. Such a diverse performance in institutional changes of the countries in question is due to an array of various reasons. It is asserted that the countries’ future development paths will be determined by the thus far attained institutional enhancements.

On the determinants of credit rationing: Firm-level evidence from transition countries

Using survey data for firms from Eastern European transition economies we investigate the determinants of credit rationing. Our rationing definition incorporates firms whose loan application was rejected, but also ‘discouraged’ potential borrowers. We employ a bivariate probit with censoring, approach that accounts for the underlying selectivity since rationed firms are a subset of those without a loan. We include firm-specific attributes related to the alleviation of informational asymmetries, and therefore expected to affect credit rationing. We find that credit rationing depends on firm size, profitability, sales growth, ownership type, legal status, sectoral heterogeneity and the country-specific level of domestic credit.

Economic Integration, Inequality and Growth: Latin America Versus the European Economies in Transition

The paper first summarizes the theoretical and empirical literature on the growth and income inequality impact of the liberalization of trade, FDI, portfolio flows, and migration over 1980-2000. It then compares the inequality and growth performance recorded in Latin America over 2000-2008 with that recorded in the fast liberalizing European economies in transition during the same period. The paper argues that the latter region recorded growth rates of GDP broadly slightly higher than those of Latin America, but experienced greater growth instability and a rise in income inequality. The paper suggests that such divergent performance is explained by differences in policies

Comparative Analysis of Managerial Ownership and Its Effect on Corporate Performance in Selected Asian and European Transition Economies

This paper analyzes determinants and consequences of managerial ownership within ownership structures of the selected European and Asian transition countries. Focus of the analysis is the influence of the specific unification of ownership and control on corporate performance. Findings in the paper are based on research that produced empirical data for Croatia which is subsequently compared with evidence from other Asian and European transition countries facing the same issues. Consequently, transitional ownership structures, influenced by actual privatization process, like emergent corporate governance mechanisms, highly concentrated ownership and undeveloped markets for corporate control are also described. Research findings show that direct or indirect managerial ownership are important phenomena in transition countries, research has also shown that stable and concentrated managerial ownership have positive effects on firms' profitability in the observed transitional environments.

The entrepreneurial ladder, gender, and regional development

Gender differences at five levels of entrepreneurial engagement are explained using country effects while controlling for individual-level variables. We distinguish between individuals who have never considered starting up a business, those who are thinking about it, and nascent, young, and established entrepreneurs. We use a large international dataset that includes respondents from 32 European countries, three Asian countries, and the United States. Findings show that cross-country gender differences are largest in the first and final transitions of the entrepreneurial process. In particular, some European transition economies are characterized by relatively low propensities of women to convert start-up considerations into start-up activities and low survival rates of businesses started by women.

A re-assessment of credit development in European transition economies

The aim of the paper is to assess the dynamics of credit development in the aftermath of the 2008 international crisis for a group of 11 European transition economies. Specifically, using filtering methods and dynamic panel estimations, the paper analyzes whether the expansion in banking credit before the recent financial crisis could be considered as “excessive” and whether its recent slowdown could be seen as a “credit crunch”. Our results suggest that the countries that had been characterized by a larger and more protracted excessive credit before the onset of 2008 crisis have experienced the largest credit contraction.

The Real Exchange Rate Fluctuations Puzzle: Evidence For Advanced And Transition Economies

This paper tries to analyze the sources of the real exchange rate fluctuations for a set of advanced economies and Central and Eastern European transition economies. To address this, in a first step, we compute two measures of the share of the variance of the real exchange rate accounted for movements in the relative prices of traded goods between the countries. One measure is based on R2 coefficient and the other one is based on the mean-squared error (MSE) of the changes in the real exchange rate. In a second step, we estimate structural (identified) vector autoregression (SVAR) models, and decompose real and nominal exchange rate movements into those caused by real and nominal shocks. In a third step, we complete previous ones with an impulse-response analysis. Three central messages are derived from results: (1) for transition economies, under regimes of managed nominal exchange rates, the relative price of non-traded goods explain a large percentage of the variance of the real exchange rate; (2) there is evidence of instability in the variance decomposition of the real exchange rates for advanced economies across samples, and (3) as result of diverse fiscal and monetary policies in transition economies, real exchange rates in some economies are driven mostly by real shocks while in others are driven mostly by nominal shocks.

Armenia: An Assessment of the Real Exchange Rate and Competitiveness

This paper uses a range of different methodologies to estimate the equilibrium real exchange rate in Armenia with both single-country and panel estimation techniques. We estimate a country specific autoregressive distributed lag model and then proceed with the estimation of a cointegrated panel consisting of transition economies in Europe and Central Asia. This addresses cross section dependence by using common correlated effects estimators. While our analysis focuses on Armenia, the methods are applicable to a large number of transition economies, and the paper thus provides an overview of methods that can be used to assess a country’s equilibrium exchange rate.

Armenia: An Assessment of the Real Exchange Rate and Competitiveness

This paper uses a range of different methodologies to estimate the equilibrium real exchange rate in Armenia with both single-country and panel estimation techniques. We estimate a country specific autoregressive distributed lag model and then proceed with the estimation of a cointegrated panel consisting of transition economies in Europe and Central Asia. This addresses cross section dependence by using common correlated effects estimators. While our analysis focuses on Armenia, the methods are applicable to a large number of transition economies, and the paper thus provides an overview of methods that can be used to assess a country’s equilibrium exchange rate.

In search of a new development model: Lessons from the global crisis

The third wave of globalization started in 1971 based on floating exchange rates, free trade and capital flows. Over more than three decades the world trade grew much faster than value added: the share of trade in global GDP increased from 13% in 1970 to 25% in 2005. Globalization excelled during the 1980's with the spread of market reforms, trade liberalization and wide acceptance of an export-based development model among the emerging market economies (EME) and the European transition economies. The 2008 global economic crisis severely interrupted financial and trade flows, questioned the viability of the globalization trends and the export-based development model. Despite significant differences in views, most analysts agree that the globalization process will continue. The question is will this be accomplished by fixing structural problems (Rajan), choosing smart globalization consistent with democracy and national self-determination (Rodrik), or by delegating the necessary regulatory and policy responsibilities to supranational bodies (Stiglitz). Despite few minor fixes, the crisis effectively confirmed the key elements of the pragmatic development model stemming out the experience of successful countries with the pivotal role of the state in securing quality governance, macroeconomic stability, infrastructure and industrial policy consistent with long term market signals.

Behind the Eastern-Western European Convergence Path: The Role of Geography and Trade Liberalization

This paper proposes a 2-country 3-region economic geography model that can account for the most salient stylized facts experienced by Eastern European transition economies during the period 1990-2003. In contrast to the existing literature, which has favored technological explanations, trade liberalization and factor mobility are the only driving forces. The model correctly predicts that in the first half of the period trade liberalization led to divergence in GDP per capita, both between the West and the East and within the East. Consistent with the data, in the second half of the period, this process was reversed and convergence became the dominant force. We suggest that the initial East-West divergence would have been mitigated in the presence of significant migrations within the East.

A Cross-Cultural Comparison Of Factors Influencing Self-Scan Checkout Use

<p class="MsoNormal" style="text-align: justify; line-height: normal; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: "Times New Roman","serif"; color: black; font-size: 10pt; mso-ansi-language: EN-GB; mso-themecolor: text1;" lang="EN-GB">The purpose of this paper is to study the factors influencing the acceptance of self-scan checkouts in Russia, an emerging East European transition economy, and Germany, an established Western European market. In particular, the paper seeks to examine the potential effects of social pressure, self-efficacy and technology anxiety on the self-scan checkout usage decision. Additionally, the article attempts to find out whether firms need to adapt their strategies of market launch to the special needs of the different countries. The design of this study was empirical. Data were collected from students in two universities in Germany and Russia. The findings of the study clearly show the differences between the two countries. The German participants have a lower level of social pressure and technology anxiety whereas the Russian participants have a lower level of self-efficacy. </span></p>

The real effect of financial crises in the European transition economies1

The aim of this work is to assess the impact of financial crises on output for 11 European transition economies (CEECs). The results suggest that financial crises have a significant and permanent effect, lowering long-term output by about 17 percent. The effect is more important in smaller countries, with relative higher dependence on external financing, and in which the banking sector noticed more important financial disequilibria. We also found that fiscal policy measures have been the most efficient tools in dealing with the crises, while the role of monetary policy instruments has been rather blinded. Exchange rate resulted to be more a propagator than a crises absorber, while the IMF credit has been found to have positive (but not significant) impact on growth performance. Finally, the effect for the CEECs is much bigger than in the EU advanced economies, for which we found that financial crises lowers long-term output only by 2 percent.

Comparison between response dynamics in transition economies and developed economies

In developed economies, the sign of the price increment influences the volatility in an asymmetric fashion--negative increments tend to result in larger volatility (increments with larger magnitudes), while positive increments result in smaller volatility. We explore whether this asymmetry extends from developed economies to European transition economies and, if so, how such asymmetry changes over time as these transition economies develop and mature. We analyze eleven European transition economies and compare the results with those obtained by analyzing U.S. market indices. Specifically, we calculate parameters that quantify both the volatility asymmetry and the strength of its dependence on prior increments. We find that, like their developed economy counterparts, almost all transition economy indices exhibit a significant volatility asymmetry, and the parameter γ characterizing asymmetry fluctuates more over time for transition economies. We also investigate how the association between volatility and volatility asymmetry varies by type of market. We test the hypothesis of a negative correlation between volatility and volatility asymmetry. We find that, for developed economies, γ experiences local minima during (i) "Black Monday" on October 19, 1987, (ii) the dot-com bubble crash in 2002, and (iii) the 2007-2009 global crisis while for transition economies, γ experiences local maxima during times of economic crisis.