Post-transition Countries Research Articles

Determinants of Public Debt Dynamics in Transition and Post-Transition Economies

ABSTRACT This article examines the dynamics of general government debt across 27 transition and post-transition countries spanning from 1996 to 2019. We devise and assess a theoretical model incorporating key determinants shaping the trajectory of public debt. Our evaluation employs panel data models. The findings underscore inflation, GDP growth, and nominal exchange rate as primary influencers of public debt. However, the significance of the exchange rate diminishes, displaying negative signs, when excluding post-transition euro area countries from analysis.

The impact of thin and thick truth: The limits of truth commission design in polarized societies

Dealing with the legacy of the past has become a popular demand in postconflict and posttransition countries. However, the pursuit of truth can be a divisive issue that threatens rather than promotes understanding, particularly in divided societies. Would a minimalist truth satisfy the victim-centered right to know, without disturbing delicate balances in society? This article theorizes how different designs of truth commissions impact social outcomes, contrasting two ideal types: thin truth, which gives solely individual factual knowledge, and thick truth, which produces a public report and searches for a pattern of events. We look at the case of Spain, which long used a “policy of forgetting” to deal with the crimes of the Civil War and Franco dictatorship and where the politics of memory has become a partisan issue, and embed experimental treatments into a representative survey conducted in 2021. Our findings show that restricting truth brings no advantages, as the different designs have no significant impact on the highly polarized reactions. The research has implications for policy by showing how different truth commission formats (fail to) impact on reconciliation.

Population decline: where demography, social science, and biology intersect.

Over the past half century, the world has witnessed an unprecedented decline in human fertility rates. This analysis reviews the various socioeconomic, cultural, and biological factors involved in driving this change and considers whether low fertility rates are a temporary or permanent feature of our future demographic profile. Since the early 1960s, the world has witnessed the spectacular collapse of human fertility. As a result of this phenomenon, several countries are already seeing their population numbers fall and more will follow in the coming decades. The causes of this fertility decline involve a complex interplay of socio-economic, environmental, and biological factors that have converged to constrain fertility in posterity's wake. Since large numbers of offspring are no longer needed to compensate for high infant mortality in contemporary society, couples have opted to have small families in a quality-over-quantity investment in their progeny's future. Simultaneously, increases in female education, the enhanced participation of women in the paid workforce, and a resultant delay in childbearing has placed limits on achievable family size. Progressive urbanization, the improved availability of contraceptives, and the socio-economic pressures experienced by young adults in ageing societies are also contributing to fertility's demise. These factors, together with the individualism that pervades modern society and the increasing social acceptability of voluntary childlessness, have firmly established a low fertility ethos in most post-transition countries. Since none of these forces are about to relent, it looks as if extremely low fertility might be with us for some time to come. This may have long-term consequences. The lack of selection pressure on high fertility genotypes, the ability of ART to retain poor fertility genotypes within the population, and sustained exposure to reproductive toxicants in modern industrialized environments may all contrive to leave a permanent mark on the fecundity of our species.

Financial Performance (Dis)parity in Post-transition Europe

Decades after the transition processes have spread across Central, Eastern, and South-Eastern Europe (CESEE), the former Soviet Union, and the Baltic, it was interesting to perform the post-transition and non-transition advanced European economies comparison to capture the outcomes of the 'catching-up process' . In this analysis, I tried to reach the results of this ‘catching process’ using the firm-level accounting data, namely, enterprises' annual accounts rather than countries' national accounts. The goal was to evaluate if post-tran- sition countries' enterprises have reached the financial performance of non-transition countries' enterprises across Europe, three decades after the transition processes began. The research captured firm-level financial performance aspects revealing some differentiators, namely, financial report indicators that differed for the enterprises belonging to post-transition countries in comparison with the ones belonging to non-transition countries in Europe. The findings related to the liquidity, solvency, indebtedness, profitability indicators, and labor intensity ratio were derived by logit regression models. The observations for 569 European companies were provided by Orbis Europe for the year 2021 annual accounts. According to the results, enterprises in post-transition countries, characterized by lower total assets and working capital scale, were likely to have lower profit margins, share of employees’ costs in operating turnover, current ratio, and gearing, while higher solvency and liquidity ratio. Mild marginal effects indicated the gap narrowed but with still existing significant disparities, particularly in the field of liquidity.

A Comparative Study of Institutional Quality and Economic Performance of Selected Post-Transition Countries from Central and Eastern Europe

This study compares the institutional and economic indicators of selected post-transition countries in Central and Eastern Europe following the transition process. These countries have experienced institutional and economic transformations over the past few decades. They have achieved varying degrees of success in shifting from centrally planned to market economies and adopting democratic institutions. Despite the varying success, each country has significantly improved their economic and democratic institutions. This study aims to compare the progress of the post-transition countries and identify any commonalities or differences in their institutional and economic indicators. Additionally, it provides insight into the effectiveness of the transition process and its effects on the economic performance of the countries in question. It also identifies the key factors that have enabled several countries to succeed more than others in their transition processes. We employ IVGMM to assess the impact of institutional and transitional indicators on economic growth in selected post-transition European countries. Our sample contains data for 15 post-transition countries from Central and Eastern Europe (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, North Macedonia, Poland, Romania, Serbia, the Slovak Republic, and Slovenia) from 2011-2021. The results indicate that in most countries, there is a positive correlation between institutional and transitional indicators and economic growth, suggesting that the countries in the sample have benefited from their transition to market economies. We conclude that the transition to market economies has positively impacted economic growth in the region.

TERRITORY, NETWORKING AND REGIONAL POLICIES: REGIONAL DEVELOPMENT AGENCIES OF THE POST-TRANSITION EU MEMBER STATES

RDAs - regional development agencies have a long development path in Europe since the early 1960s until today. RDAs are directed to the regions of the countries that implement it, but it also applies to the national level as well as to the level of the EU (which comes to the fore with the country's accession to full membership). In addition to the significant differences in the level of development of the regions of the EU Member States, there are also significant differences in the development of the regions of 11 post-transition EU Member States (Bulgaria, Romania, Czech Republic, Slovakia, Hungary, Poland, Slovenia, Estonia, Latvia, Lithuania and Croatia). Because they all belonged to the former "socialist bloc of countries" and broke their state alliances with the former states in the early 1990s, as well as because they did not have the same historical circumstances or the same timing for joining the EU, all this had and still has an important role on the uneven development of their regions. But, RDAs do not play the same role and importance in all post-transition countries, which reflects the specificity of their regional development management systems and makes it necessary to examine the role and importance of RDAs' work. This paper will analyze: 1) the role and development of RDAs in post-transition EU member states, and 2) the institutional framework of RDAs with an attempt to find innovative transformations of the role of RDAs that respect the framework of EU regional policies.

What drives export resilience? The case of post-transition country firms in the context of the COVID-19 pandemic

What drives export resilience? The case of post-transition country firms in the context of the COVID-19 pandemic

Equal Pay and Employment in Serbia During the COVID-19 Pandemic

Introduction and objectives: Before the COVID-19 pandemic, Serbia belonged to the group of post-transition countries that were determined to reduce gender inequalities in the labour market through an improved institutional framework and measures to promote women's employment. However, the gender wage gap remains significant. This paper uses data from the Survey on Income and Living Conditions to examine the gender wage gap in Serbia. Methods: The estimates of the stochastic frontier model were obtained using the maximum likelihood estimation method. Results: The results indicate a statistically significant gender wage gap, showing that women on average have a log hourly wage 0.109 and 0.098 lower than men in 2019 and 2020, respectively. The labour market shows similar efficiency of employees. Conclusion: It is predicted that women are paid less than men, even after controlling for the observed factors. Comparing this with the results of previous studies, it can be concluded that the COVID-19 pandemic has contributed to a slight worsening of gender inequalities in the Serbian labour market. Implications and research limitation: Women's financial vulnerability can be exacerbated by leaving the workforce, taking up part-time employment or working in a job with lower benefits. The latter position of women in the labour market or their recognition as potential beneficiaries by pension and social security systems are two ways in which this has practical implications for the public policy. Similar research using data from the post-COVID-19 period would be of great value in assessing changes in women's position in the labour market.

The role of stakeholders in development of agro tourism in post-transition countries

Agro tourism could have a positive impact on the mitigation of depopulation in most rural areas of post-transition countries. Arguments for promoting the development of agro tourism include changing negative demographic trends in such areas and year-round supply and demand characteristics. As the main stakeholders in agro tourism are rural and family farms, the development of this selective form of tourism has a direct positive impact on the growth of the living standards of the local population in rural areas. The study focused on the role of stakeholders in the development of agro tourism in post-transition societies. The research was conducted by comparing the experiences of the Republic of Croatia and Montenegro. Croatia is strategically oriented towards tourism, but the share of tourism in GDP is obviously high and the share of agro tourism negligible. Montenegro has good experience with the development of agro tourism. Austria’s experience with agro tourism development was analysed as a control variable. The aim of the study is to show the actual influence of the main stakeholders on the development of agro tourism in the post-transition countries.

Does deterioration in rule of law per se create or destroy value?

Abstract We investigate the link between the rule of law and equity returns in post-transitional economies over the period January 2010–December 2020 by using panel data regressions. By applying several rule-of-law proxies for national legal frameworks and justice system quality as proxies for the rule-of-law principle, the data sets from the capital markets of Poland, Latvia, Lithuania, and Estonia showed that country-level judicial system quality is an important driver of company market performance, and that post-transitional countries with lower rule-of-law measures exhibit higher returns on equity than those with better measures. Our results support the idea that since poor governance and country instability increase agency and transaction costs, in addition to decreasing growth prospects and profitable projects available to companies, the risk premium demanded by investors increases, leading to higher equity returns.

Exploring firm performance in Central and Eastern European regions: a foundational approach

Economic development in post-transition countries is dominated by the performance of capital cities, although second-tier cities are also important drivers of development. However, peripheral regions struggle with problems of adaptation and response, often leading to brain drain and economic decline. Industrial strategies highlight those tradable sectors of the economy that favour leading edge KIBS firms and advanced manufacturing, while neglecting the residentiary economy that is more sheltered from competition and provides jobs in local production and services sectors. Our research is inspired by the burgeoning literature of the ‘foundational economy’ approach to economic development, focusing on mundane economic activities providing essential goods and services, and we investigate the differences of economic performance across the NUTS3 regions in selected CEE countries. We study regionally aggregated, firm-level financial and employment data including sectoral classification of the companies with 10+ employees. Our position is that a well-functioning foundational economy is necessary for the whole local economy to work efficiently in the long run. Moreover, increasing productivity in the foundational economy should lead to more regionally balanced growth than an exclusive focus on the ‘frontier firms’ that are highly concentrated spatially as the regional productivity gap in the case of certain foundational activities is not necessarily large.

Multivariate analysis of post-transition OECD countries in the context of inequality measures

The aim of this paper is to classify the post-transition OECD countries according to the Gini coefficient for income inequality, the S80/S20 ratio, the income share of the bottom 40% of the population, educational attainment – tertiary education, and labor force participation rate using factor and cluster analyses. Factor analysis resulted in two extracted factors, and factor scores were calculated. Hierarchical and non-hierarchical cluster analysis was performed on factor scores to classify eight posttransition OECD countries and three candidate countries. The research question of this paper is to investigate whether there are similarities/differences between existing members and candidates for membership in the OECD, among the selected post-transition countries of Europe, in the context of income inequality. Based on the dendrogram obtained by the hierarchical Ward’s method, a three cluster solution was selected. The non-hierarchical k-means method for the three-cluster solution clustered Croatia with Bulgaria and Romania. These three countries are OECD candidate countries. Our findings confirm that the three candidate countries remain behind because of historical reasons and the non-implementation of structural reforms.

Can Credit Related Macroprudential Instruments Be Effective in Reducing the Correlation Between Economic and Credit Growth? Cross-Country Evidence

Abstract The study investigates effectiveness of selected credit related macro prudential instruments in reducing the correlation between economic and credit growth in European emerging countries between 2000 and 2017. Two GMM (Generalized Method of Moments) estimators are used to empirically investigate the validity of tightening policy actions. Although greater attention to MMPs is found in both European regions the study finds some differences as well. On the level of full sample, the findings confirm our expectation about effectiveness of the selected credit related macroprudential instruments in reducing credit growth. More specifically, the European transition countries proved to be more successful in using macroprudential tools in curbing credit growth than European post-transition countries. It is confirmed that all three employed credit related macroprudential instruments play a key role in curbing credit growth in the expansive stage of business cycle in the European transition countries. It means that a lower economic growth leads to lower effects of credit related macroprudential instruments on credit growth. However, empirical evidence from European post-transition countries shows mixed results followed by the lack of robustness of economic results, but with expected theoretical sign. In fact, introduction of CG limits and FC limits reduce the correlation between GDP growth and credit growth only in one step S-GMM estimator, while a variable of caps on debt-to-income ratio (DTI) not.

Financial Constraints of the Pro-environmentally Oriented Firms in the Covid-19 Crisis

Environmentally oriented firms are more pressed for resources in general, especially during periods of economic downturn. Since their business plans are frequently more innovative, they are perceived as riskier by financial institutions. Furthermore, the recent global COVID-19 crisis was not primarily related to financial disruptions, and most governments provided generous and widespread support to different segments of their economies. However, the evidence on the degree to which firms were faced with access to finance problems during this crisis is still scarce. This paper aims to explore the extent to which environmentally-oriented firms in post-transition economies are disproportionally affected by the financial constraints related to the market disruptions caused by COVID-19 pandemics compared to non-environmentally oriented firms. The World Bank Enterprise Survey 2019 has been used to investigate this issue. Based on this data source, an indicator of firm environmental proactivity is developed. The firms’ financial constraints in the pandemic period are evaluated based on the responses from the three survey rounds of the World Bank COVID-19 follow-up enterprise survey, covering different stages of the pandemic. The post-transition countries in the analysis are heterogeneous, consisting of both EU members (Bulgaria, Croatia, Slovakia, and Slovenia) and EU accession countries (Bosnia and Herzegovina and Serbia). The lowest percentage of firms having an environmental strategy was found in Croatia, while the highest percentage is in Slovenia. Based on the results, it can be concluded that firms adopting environmental strategies in analyzed countries mostly follow regulations and/or chose low-cost measures.
 Keywords: financial constraints, pro-environmental orientation, post-transition, COVID- 19

Use of Controlling Instruments in Croatian Companies during the Pandemic

Nowadays, in times of corona crisis, controlling is gaining much attention because it represents an effective internal mechanism that can greatly contribute to a timely and rapid response to changes. Controlling activities reflect the quality of company management at the strategic, tactical, and operational levels. In doing so, controlling uses appropriate instruments and contributes to business efficiency and effectiveness. The research aims to determine the current state of controlling instrument application (operational/strategic) in companies. Further, we examine the role of controlling in stabilizing business operations and adjusting business strategies that affect business performance indicators in the context of the corona crisis. The survey method was used and data were collected from 180 companies of different sizes in the Republic of Croatia. The survey was conducted in 2021. Nonparametric techniques, the Chi-square test and the Kruskal-Wallis test were used for hypothesis testing. The findings show: (1) there is a significant relationship between the role of controlling in business stabilization and business strategy redirection in times of corona crisis and thus affects business indicators measured by liquidity, profitability and indebtedness, (2) there is a statistically significant difference between those companies who established controlling department and those without a controlling department in the application of operational controlling instruments, (3) there is no a statistically significant difference between those companies who established controlling department and those without a controlling department in the application of strategic controlling instruments. The results of the study provide insight into the application of controlling instruments in Croatian companies during the corona crisis and empirical implications for academics and practitioners. <br />Implications for Central European audience: Nowadays, market volatility and external factors significantly influence the business decisions of Central European companies. For managerial decisions to be timely and effective, controlling uses various instruments with the aim of better advising managers. To be more agile, companies have to use a combination of operational and strategic controlling instruments. In the Republic of Croatia, as a post-transition country, companies are more short-term oriented, which is visible in the significant use of operational controlling instruments, and to a lesser extent strategic instruments. In times of pandemic and geopolitical events, the results of the research indicate the need for the strategic orientation of companies through the application of strategic controlling instruments in the practice of Croatian companies to increase the efficiency and effectiveness of operations.

Estimating the size of informal economy in a post-transition country – the case of Poland

ABSTRACT The size of the informal economy in Poland is estimated by means of the Currency Demand Approach (CDA). Using quarterly data for the period 1999–2019, we adopt two separate econometric approaches. First, we specify a single equation model to estimate it with the Fully-Modified OLS method. Second, the CDA coefficients are treated as a cointegrating vector in a cointegrated VAR. The size of the informal economy in Poland is found to have diminished from about 32% of GDP in 2000 to about 12% of GDP in 2019. We provide confidence intervals for our estimates which, to our best knowledge, are rarely presented in the literature; their width ranges from 3 to 7% of GDP.

Fiskalna konsolidacija i ekonomski rast u posttranzicijskim zemljama EU

Concerns about sustainability of public finances during global economic crisis in 2008 resulted in stronger implementation of fiscal consolidation measures. The literature does not offer a consensus on the impact of these measures. Empirical research offers a rationale for both contractionary and expansionary effect of fiscal consolidation on economic activity. Studies that examine the macroeconomic and fiscal effects of consolidation in developed countries are neither frequent nor have a long history, while the same effects in the post-transition countries are un-investigated. This paper tries to shed some light on this relationship. The research results do not support the expansionary fiscal consolidation hypothesis. Therefore, descriptive analysis suggests that, apart from minor corrections of current account of the balance of payment and lower labor costs, fiscal consolidation in post-transition countries did not achieve declared goals such as economic growth. The results of the analysis have to be observed with caution. Namely, this research did not include an econometric estimate of the effects of fiscal consolidation, which would take into consideration other factors (control variables) that affect the observed fiscal and macroeconomic variables.

The Effects of Energy Consumption on Economic Growth in Post-Transition Countries

The Effects of Energy Consumption on Economic Growth in Post-Transition Countries

Polish subsidiaries in Germany – post-transition country firms’ legitimation strategies

Legitimacy in foreign markets, a concept rooted in institutional theory, has traditionally been examined for firms originating from advanced economies. However, it becomes more complex for firms from emerging and post-transition economies. Polish firms began establishing foreign subsidiaries after the accession to the EU, primarily in European markets. In this context, Germany was a key destination for Polish foreign direct investment (FDI). However, scholarly literature about foreign subsidiaries established or acquired by Polish firms is limited. This article presents the analysis of the legitimation strategies employed by post-transition country firms in advanced economies, using Polish subsidiaries in Germany as empirical cases. The empirical context is chosen due to its economic significance and the close linkages between Poland and Germany. With a conceptual framework, the authors synthesise legitimation strategies discussed in scholar literature and highlight some unique challenges for post-transition economy’s firms. The article presents outcomes from a qualitative study, extending the framework and offering some fresh perspectives in the field of international business legitimacy.

Decoupling of CO2, CH4, and N2O agriculture emissions in the EU

This research addresses the problem of CO2, CH4, and N2O emissions in the EU for the 2008–2018 period, and their contributing factors, through extensive and complex analysis. The research incubated in the manuscript answers the question of whether new state members managed to catch up with old state members regarding technology innovation and mitigation of N2O emissions from agriculture activities. The methodology used includes Tapio decoupling index and the metafrontier non-radial Malmquist N2O emission performance index. The research considers short-term, medium-term, and long-term decoupling analyses. Results suggest a shift of decoupling status is worse for the 2013–2018 period compared to the 2008–2013 period which should concern low-carbon agriculture policy-makers. Also, it was noticed an increase in total-factor N2O emission performance for the 2008–2018 period. New state members managed to catch up with old state members regarding technology innovation and mitigation of N2O emissions from agricultural activities; however, not all countries managed to do so. For example, Romania has experienced an efficiency loss due to a technology change and from this perspective, Romania should address first managing N2O and CO2 emissions. The findings extend the traditional framework of investigating the effects of CO2, CH4, and N2O in agriculture and highlight the necessity of addressing environmental aspects from a broader perspective of the policymakers and in developing innovative decoupling indexes. The research investigation is reporting from a post-transition country by prioritizing the measures to be implemented.