foreign firm entry in an open economy the case of portugal the purpose of this paper is to analyse the entry process of foreign direct investment fdi in portuguese industrial sectors portugal presents an interesting case where firms enter to take advantage of export opportunities the results suggest that foreign firms possess the ability to overcome existing entry barriers that affect domestic firms apparently foreign firms have different expectations about profitability than domestic firms possibly due to foreign firms export orientation to the rest of the european union eu they appear to desire industries where other foreign firms have clustered above all it appears that these foreign firms enter industries to exploit portugal s chief location advantage in western europe low wages portugal s fdi experience is relevant to other countries that have opened their economies to greater trade and investment and attracted export oriented firms

why is china different from eastern europe perspectives from organization theory we draw from recent work in organization theory to explain the differences in reform strategies between china and eastern europe an experimentation approach was adopted in china whereas a big bang approach was more favored in eastern europe the explanation is based on differences in the organizational structure of central planning u form in eastern europe and m form in china the m form is more flexible because it makes local experiments possible contrary to the u form where this would give rise to major complications in coordination

stabilizing a previously centrally planned economy poland 1990 stabilization in poland guillermo a calvo and fabrizio coricelli we examine the dynamics of the january 1990 stabilization programme in poland focusing on the substantial and sudden collapse in industrial output and inflation persistence we discuss three non mutually exclusive explanations of these phenomena 1 excessive initial stocks of inventories 2 an exogenous fall in household demand and 3 tight credit we conjecture that tight credit was at centre stage it helped to magnify the fall in output and to coordinate such a fall across sectors we base such a conjecture on the existence of substantial credit segmentation and on the underdevelopment of private credit markets the latter may explain the substantial shrinkage of interenterprise credit compounding the initial contraction of bank credit they argue that credit tightness is reflected in firms offering wages below the programme s ceilings especially given that firms are controlled by workers councils this conjecture is further strengthened by the fact that wages increased and even went beyond the programme s ceilings as credit expanded during the year we argue that the wage hike may be the reason why credit expansion did not result in a major output recovery and inflation persisted during the year

factors determining the location decisions of spanish mnes an analysis based on the investment development path on the basis of theoretical assumptions approached via the investment development path idp this study examines the most important factors for and against the location decisions in foreign direct investment taken by multinational enterprises considering host countries at very different stages of economic development latin american and european union countries we carry out different kinds of analysis on a sample of 103 firms belonging to a medium sized country that has recently achieved the status of developed country the results reveal that the importance that home country firm managers give to diverse location factors depends to a certain extent on the stage that each group of host countries has reached in the idp in line with prior research we find that firm managers consider mainly the group of factors associated with strategic asset seeking when deciding to locate their investments in the group of more developed countries european union in contrast our results show that when these firm managers choose the group of less developed countries latin america social and cultural factors play a more determinant role thus suggesting the importance of historical and cultural ties between the home and host countries

inflation controlled by energy prices abstract the inflation experienced in the world economy over the last decade could have been considerably reduced if the world had been less dependent upon energy imports reduction of imports by an average of half reduces worldwide inflation by more than 30 countries supplying their own energy may benefit by having lower inflation than energy importing countries a low inflation rate is most easily achieved if the price of domestically produced energy follows the national price index in most countries some alternative energy sources may be competitive to imported energy when all the economic benefits of domestic energy production are taken into consideration

ownership based entry mode strategies and international performance this study examines the relationship between ownership entry modes and performance the ownership entry modes examined are the wholly owned modes of acquisition and new venture entry and the non wholly owned mode of joint venture entry a theoretical relationship is developed for international entry modes that is based on the contingency characteristics of resource requirements and organizational control factors this model suggests that different entry modes have different performance outcomes based upon their resource and organizational control demands the theoretical model although developed using the eclectic theoretical approach is based largely on concepts and relationships previously delineated in contingency theory our hypotheses suggest that new ventures should outperform joint ventures and joint ventures should outperform acquisitions an empirical test using a sample of 321 japanese firms entering the north american market provides supporting evidence

impact of energy price rises on costs a thermodynamic analysis abstract the standard of living in an industrialized country depends on the quantity of energy available and the efficiency with which it is utilized changes in the price of energy will for a time influence the choice of goods and services and so affect the world economy until the balance between prices for goods and energy is restored if we could control the economy during this time interval there is no reason why increases in energy prices should reduce our standard of living if renewable energy sources are to be more expensive than oil today by implication we need to invest much more capital to be able to utilize these sources we should therefore be willing to accept a smaller increase in standard of living and use the difference for investment in equipment to convert renewable energy sources to useful work only through new technology can the price of energy from such sources be reduced relative to the price of energy from oil increases in oil prices will not change the price ratio

the ussr before the fall how poor and why this essay appraises the scholarly findings on the level of consumption and output in the ussr compared with that in the west such aggregative calculations are onerous for any country and not very surprisingly have encountered particular difficulty where such a strange society as soviet communism has been in question predictably the results have been controversial but properly viewed they still provide illuminating perspective on the extraordinary events that have lately transpired in the ussr

stickiness and the adaptation of organizational practices in cross border knowledge transfers the reuse of organizational practices in multiple locations is a fundamental way in which mncs leverage knowledge to seek competitive advantage scholars approaching the issue of adaptation from both a market and an institutional perspective argue that in order to achieve fit with the local environment some degree of adaptation is advisable and the need for adaptation increases as the institutional distance between source and recipient locations increases however arguments to date have examined the effect of adaptation primarily on a subsidiary s long term performance a necessary precursor is to understand the effect of adaptation on the transfer process itself as transfer difficulty or stickiness may preclude the reuse of an organizational practice in the first place in this paper we explore how the adaptation of organizational practices affects the stickiness of cross border transfers we use structural equation modeling to analyze data from 122 internal transfers of best practice contrary to expectation we find that adaptation significantly increases rather than decreases the stickiness of cross border knowledge transfer

a reexamination of the role of thermodynamics for environmental economics abstract as the discussion about the role of thermodynamics in environmental economics has not led to a conclusion yet a more fundamental approach seems to be necessary which also takes into consideration the relationship between economics and the natural sciences in general to this end value theory is chosen as a starting point because it is the centerpiece of every economic theory it is shown that neoclassical environmental economics suffers from serious deficiencies because of its value concept heedlessly copied from classical mechanics thermodynamics can be expected to be helpful to redress these defects because the economy can be thought of as a dissipative structure dependent on its environment the obvious way to integrate thermodynamics consists in the formulation of thermodynamic constraints to complement neoclassical environmental economics but this approach remains unsatisfactory because the neoclassical mechanical hardcore is incompatible with the entropy law and its implications evidently the neoclassical paradigm and its value concept have to be given up but the alternative of the energy theory of value must be rejected because its determinism cannot be reconciled with the richness of human behaviour as thermodynamic analogies offer no solution either there is a dilemma between the necessity and the apparent impossibility of adequately integrating thermodynamic concepts it turns out that a normative inconsistency is responsible which is due to the demand for intergenerational justice therefore the integration of thermodynamics into environmental economics hinges on a meta economic value decision if sustainability is adopted as the guiding principle the insights of thermodynamics call for a macro economic environmental policy setting absolute limits to the economy but this macro policy is incompatible with neoclassical economics so that a social reconstruction of economics based on a social theory of value becomes necessary in sum thermodynamics is important for environmental economics besides fulfilling a general heuristic function it also fulfils a decisive conceptual and an analytical function insofar as it helps to justify sustainability and to operationalize macro economic environmental policy

winners and losers in russia s economic transition the transition to a market economy has produced a substantial and rapid change in the wage structure in russia household surveys taken before and after the transition indicate that overall wage inequality nearly doubled from 1991 to 1994 and has reached a level higher than that in the united states returns to both measured skills education occupation and unmeasured skills within groups have increased considerably skill premiums across experience groups however have become more compressed and relative wages of older workers have declined in addition female wages have declined relative to male wages across all percentiles of the wage distribution copyright 1998 by american economic association

patterns of transition from plan to market patterns of transition from plan to market martha de melo cevdet denizer and alan gelb hungary s bankruptcy experience 1992 1993 cheryl w gray sabine schlorke and miklos szanyi why and when do governments initiate public enterprise reform jose edgardo campos and hadi salehi esfahani roads land use and deforestation a spatial model applied to belize kenneth m chomitz and david a gray industrial centralization in indonesia j vernon henderson and ari kuncoro guidlines on searching for a dalton improving tax reform an illustration with data from indonesia shlomo yitzhaki and jeffrey d lewis a new data set measuring income inequality klaus deininger and lyn squire

the decision to establish a foreign bank branch or subsidiary an application of binary classification procedures this paper has two purposes first we model a key decision for inter national banks using data on the foreign direct investment fdi behavior of foreign banks in japan and california second we examine the utility of linear discriminant analysis and maximum likelihood logit analysis as statistical techniques for relating a qualitative dependent variable to a vector of inde pendent variables we apply these techniques to the decision by parent banks as to whether or not to have a subsidiary branch in california japan we treat the deci sion as a binary choice based on a consideration of various relevant factors the population for each of the countries consists of those foreign to the host country banks that already have a presence in the country the research ques tion then becomes given that a foreign bank is in the country does the extent of the parent bank s experience internationally and in the host country affect the probability that it will deepen its presence the choice of statis tical tools by which to examine this question gives rise to our methodological concerns

circumstance and choice the role of initial conditions and policies in transition economies the experience of countries in transition from a planned to a market oriented economy has varied greatly the clearest differences are between the east asian countries china and vietnam and the countries of central and eastern europe cee and the former soviet union fsu china and vietnam have contained inflation and benefited from continued high growth in gdp since the beginning of their reforms while all cee and fsu countries have experienced large declines in output and most have experienced hyperinflation but even in cee and the fsu differences are marked some countries have lost over half of their gdp and growth performance in a number of countries is still poor while others are growing strongly some are still suffering from high inflation while others have successfully reduced annual inflation what determines this divergence of outcomes across transition countries no study so far has analyzed the interaction of all factors including initial conditions political change and reforms in a unified framework including cee the fsu china and vietnam the authors examine these broader interactions but focus first on the role of initial conditions such as initial macroeconomic distortions and differences in economic structure and institutions which have been emphasized less in the literature they find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth but reform policy choices are not exogenous they depend in turn on both initial conditions and political reform with political reform the most important determinant of the speed and comprehensiveness of economic liberalization other findings provide additional insight into these relationships results show that liberalization has a negative contemporaneous impact but a stronger positive effect on performance over time the results also show that macroeconomic and structural distortions are negatively related to both policy and performance regarding the former unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented the authors find some evidence that the influence of initial conditions diminishes over time this is in part because many of the initial conditions are themselves modified in the course of transition monetary overhangs are dissipated through inflation industrial overhang is eroded as plants shut down and market memory returns through experience

productivity across industries and countries time series theory and evidence the authors examine whether convergence in aggregate productivity is also occurring at the industry level in fourteen oecd countries from 1970 to 1987 using both cross section and time series methods they find convergence in some sectors such as services however surprisingly the authors find that convergence does not hold for the manufacturing sector decomposing aggregate convergence into industry productivity gains and changing sectoral shares of output they find the service sector to be responsible for the bulk of cross country convergence to the united states the authors develop a new result on the asymptotic normality of panel unit root estimators to formally test within sector convergence copyright 1996 by mit press

effects of inward investment on outward investment the venture capital industry worldwide 1985 2007 we identify inward investment as an important impetus to outward investment supplemental to the impetuses depicted in conventional internationalization frameworks by incorporating both the spillover and competition effects of foreign entrants we develop an integrated framework of the inward outward investment relationship for different investment modes and different home country and host country pairs our analysis of venture capital vc investments worldwide from 1985 to 2007 shows a positive spillover effect on outward investment for inward co investments and a negative competition effect on outward investment for inward standalone investments we find the strongest effects when the host country is a laggard in the vc industry and the home country is a leader

oil price and inflation abstract an oil price rise would be expected to result in an immediate reduction by about 20 in the standard of living of the oil importing countries and a corresponding increase in that of the oil exporters since the price rises experienced during recent years have not been reflected in wage reductions the result has been high long lasting inflation which this paper shows will increase in the coming years to more than 20 measures taken by the oil importers include energy saving which results in a still lower standard of living if instead the industrialized countries increase production by increasing energy consumption and improving production efficiency the effect of a rise in oil price will be compensated for in a few years

reform without losers an interpretation of china s dual track approach to transition this paper develops a simple model to analyze the dual track approach to market liberalization as a mechanism for implementing efficient pareto improving economic reform that is reform achieving efficiency without creating losers the approach based on the continued enforcement of the existing plan while simultaneously liberalizing the market can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform the model highlights the critical roles of enforcement of the plan for achieving pareto improvement and full liberalization of the market track for achieving efficiency we examine how the dual track approach has worked in product and labor market liberalization in china

using acquisitions to access multinational diversity thinking beyond the domestic versus cross border m a comparison prior research provides ambiguous results regarding the performance of international acquisitions drawing on a survey of 248 acquisitions we find that acquirers enhance their capabilities when they buy a target with a multinational geographic scope a financial event study uses a subsample of the acquisitions to show that the financial markets also value targets multinational scope both surveys and stock market based studies suggest that targets with access to heterogeneous resource environments provide the acquirer with greater potential for capability enhancement and financial performance in contrast simply acquiring firms across borders has less influence on post acquisition outcomes the study demonstrates greater value of the attributes of the target rather than of international expansion alone thus the multinational scope of the target is more likely to account for the resource diversity provided by the target than the country of origin of the target per se the study changes the emphasis on multinational acquisitions by shifting the focus from foreign market expansion country level emphasis to accessing geographically distributed resources that are embedded in target firms firm level emphasis

the process of socialist economic transformation in this paper we consider the reform process in those central and east european countries that have made the decision to move from a more or a less planned socialist system to a private market economy one in which private ownership predominates and most resources are allocated through markets because the reform process is both complex and intertwined with political factors especially the shift towards representative democracy and because there are substantial differences among the reforming countries no single detailed road map can guide the way to the new systems rather the paper sets out general considerations that provide a framework for reform and relates the choices to some initial conditions of the various reforming countries the framework applies also to the soviet union or in the event of its disintegration to its successor states as they move to market systems

how to reform a planned economy lessons from china the countries of eastern europe and the former soviet union have been flooded with advice from the west on how to liberalize their planned econo mies this advice is unfortunately offered in an empirical vacuum no one knows how these econo mies will react to the proposed liberalization meas ures there exists however a neglected source of information china offers a long time series of data over a decade s worth on the effects of reforms on a planned economy china s reforms were gradual but their cumulative effect has been large and they have been remarkably successful china s experiments provide some practical les sons on what kinds of reforms can work elsewhere the dominant school of thought among economists favours the big bang policy of reforming quickly and according to a comprehensive plan partial reforms in this view are useless they will be negated by the remnants of the planning system the proponents of big bang reform have been influential with poland czechoslovakia and rus sia announcing plans for a rapid transition to capi talism

stabilization and growth in transition economies the early experience this paper analyzes the growth and stabilization experience in 26 transition economies in eastern europe the former soviet union and mongolia for the period 1989 1994 inflation rates have declined significantly in most countries following an inflation stabilization program growth resumes after stabilization occurs typically with a lag of about two years reducing inflation thus appears to be a precondition for growth an econometric analysis of the short run determinants of inflation and growth illustrates the key roles of fixed exchange rates improved fiscal balances and structural reforms in spurring growth and lowering inflation and confirms that inflation stabilization programs have been beneficial for growth even after controlling for structural reforms

credit markets credibility and economic transformation this paper focuses on the special role that capital markets play in the transformation of centrally planned economies into well functioning market economies we demonstrate that underdeveloped credit markets inhibit the effectiveness of price reform monetary and credit policies and trade liberalization we explore various ways to overcome the difficulties associated with the underdeveloped credit markets in this regard we examine the implications of cleaning the balance sheets of enterprises and banks from nonperforming loans as well as ways to enhance credibility the paper concludes with a brief discussion of sequencing of economic reform measures

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

cross border takeovers corruption and related aspects of governance we use a panel of 4979 cross border and domestic takeovers to test the relation between host country corruption and premiums paid for local targets host country corruption is negatively associated with target premiums after correcting for other governance related factors such as political stability legal systems and financial disclosure standards we estimate that deterioration in the corruption index by one point on a 10 point scale is on average associated with a reduction of 21 of local targets premiums our results do not support the notion that local corruption constitutes a significant market barrier to foreign investors rather it represents a discount on local takeover synergies which affects foreign and domestic acquirers alike however we find that the major effects of corruption can alternatively be explained by government effectiveness pointing towards an endogenous relationship between bribery and bureaucracy

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

technological effects of m as in spanish manufacturing this article explores whether mergers and acquisitions m as generate differentiated impacts on the acquiring firms r d expenditures patents granted and product innovations considering m as as a way of foreign expansion we examine whether the technological effects differ between domestic and foreign owned acquirers assuming that the effects on the technological efforts and performance may differ across industries the availability of statistical information for a stable sample of manufacturing companies in spain during the 1990s allows us to follow a dynamic approach to the issue our findings confirm the existence of differentiated effects on technological inputs and outputs across industries as well as diversity between domestic and foreign owned firms involved in m as copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

technological capabilities of countries firm rivalry and foreign direct investment studies on foreign direct investment fdi have concentrated on sectoral effects but rarely on country patterns in this paper we use u s department of commerce data to identify the largest country shares of new fdi entries into the u s and the technological motivations for their investments based on the technological intensities of major investing countries in manufacturing industries we conclude that technological industries attract a disproportionate share of fdi entries however the acquisition of u s technology is not a major motivation the findings indicate that industry rivalry is an important dimension to understanding fdi

fiscal constraints and the speed of transition abstract this paper develops a model of the process of reallocation of resources from a declining state sector to an expanding private sector the transition is shown to be costly in that it entails unemployment and a deterioration of the fiscal balance the interaction of fiscal constraints with the transition process is examined it is shown that fiscal constraints may induce the government to maintain the state sector slowing the speed of transition and could jeopardize the eventual outcome of the process of restructuring

the optimal speed of transition a general equilibrium analysis we present a benchmark model for the optimal speed of transition from a state owned to a private market economy based on the consumption savings decision in a closed economy we abstract from frictions to focus on the macroeconomic conditions for accumulation of private capital and closure or restructuring of state owned enterprises it is shown that hard budget constraints compensate for too slow speed of enterprise closure but that an excess speed of closure may slow down transition because of output contraction effects this will especially be the case if such a deviation occurs at early stages of transition

greenfield vs acquisition the strategy of japanese investors in the united states multinational firms can enter a foreign market by taking over existing local firms acquisitions or by setting up new ventures greenfield investments surprisingly there has been limited empirical work on this topic this paper examines the determinants of this choice by looking at japanese entries into the united states by focusing on firms of one country entering a single market we are able to separate the impact of a firm s strategy from that of the characteristics of the target industry or country this paper tests simultaneously a number of competing hypotheses the results suggest that acquisitions are used by japanese investors with weak competitive advantages while investors with strong advantages find that greenfield investments are a more efficient way to transfer these advantages to the u s acquisitions are also chosen to enter industries with either very high or very low growth rates when entry is at a scale that is large relative to the parent and when entry is into a different industry the japanese investor s previous experience of the u s market its financial situation and its status as a follower in an oligopolistic industry have no statistically significant impact on the entry mode neither do u s stock market conditions

foreign direct investment and the sourcing of technological advantage evidence from the biotechnology industry this paper investigates the proposition that foreign direct investment in a high technology industry is motivated in part by the sourcing of country specific technological advantages embedded in foreign firms the empirical findings show that foreign equity investment is drawn to american biotechnology firms with high levels of patent activity we suggest that in the biotechnology industry foreign direct investment in the form of equity participation can be an efficient vehicle for tapping into country specific firm embodied technological advantages

the impact of iso 9000 diffusion on trade and fdi a new institutional analysis the effects of iso 9000 diffusion on trade and foreign direct investment fdi have gone understudied we employ panel data reported by oecd nations over the 1995 2002 period to estimate the impact of iso adoptions on country pair economic relations we find iso diffusion to have no effect in developed nations but to positively pull fdi i e enhancing inward fdi and positively push trade i e enhancing exports in developing nations

the soviet economic decline soviet growth from 1960 to 1989 was the worst in the world after we control for investment and human capital the relative performance worsens over time there is some evidence that the burden of defense spending modestly contributed to the soviet debacle the declining soviet growth rate from 1950 to 1987 can be accounted for by a declining marginal product of capital with a constant rate of growth of total factor productivity the soviet reliance on extensive growth rising capital to output ratios was no greater than that of market economies such as japan and the republic of korea but a low elasticity of substitution between capital and labor implied especially acute diminishing returns to capital compared with the case in market economies copyright 1995 by oxford university press

growth in transition what we know what we don t and what we should abstract this essay surveys macroeconomic issues that marked the transition from planned to market economy in central and eastern european and former soviet union countries we first establish stylized facts of the transition so far we then critically survey the theoretical literature on transition discussing explanations for the initial output fall and mediumterm issues such as optimal speed of transition disorganization institutions and sectoral reallocation as source of output dynamics we review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts we conclude with suggestions for future research

an institutional approach to cross national distance cross national distance is a key concept in the field of management previous research has conceptualized and measured cross national differences mostly in terms of dyadic cultural distance and has used the euclidean approach to measuring it in contrast our goal is to disaggregate the construct of distance by proposing a set of multidimensional measures including economic financial political administrative cultural demographic knowledge and global connectedness as well as geographic distance we ground our analysis and choice of empirical dimensions on institutional theories of national business governance and innovation systems in order to overcome the methodological limitations of the euclidean approach we calculate dyadic distances using the mahalanobis method which is scale invariant and takes into consideration the variance covariance matrix we empirically analyze four different foreign expansion choices of us companies to illustrate the importance of disaggregating the distance construct and the usefulness of our distance calculations which we make freely available to managers and scholars

mitigating risk in international mergers and acquisitions the role of contingent payouts previous internationalization studies have focused on the entry modes employed by multinational firms but have not considered the contractual heterogeneity that underlies each mode it is important to examine these contractual details as the firm may be able to obtain some of the benefits typically associated with one entry mode while selecting another in the case of international mergers and acquisitions m as a key contractual variable is whether the parties agree to a performance contingent payout structure which can mitigate the risk of adverse selection in this paper we examine the antecedents of contingent payouts in the form of earnouts and stock payments the results indicate that firms lacking international and domestic acquisition experience turn to contingent payouts when purchasing targets in high tech and service industries firms tend to avoid contingent payouts in host countries with problems with investor protection and legal enforceability

redistribution in a decentralized economy growth and inflation in china under reform despite expanding at an annual rate of nearly 9 percent china s economy has exhibited a marked cyclical pattern periods of rapid growth accompanied by accelerating inflation are followed by contractions during which both growth and inflation fall a widening gap also emerged between the output contribution of the state sector and its share of investment and employment in this paper we offer a consistent explanation for this behavior that reflects several key institutional features of china s economic reform i economic decentralization ii the government s commitment to the state sector and iii the credit plan and credit control

structural adjustment and international trade in eastern europe the case of poland poland andrew berg and jeffrey sachs the polish economic programme is important not only in its own right hut as a key example of the benefits and possible costs of a rapid movement to convertibility this paper proposes an analytical framework and new estimates of the costs and benefits the framework shows that convertibility revolves around the relationship of two nominal variables the money supply and the nominal exchange rate return to convertibility is achieved not mainly through a real depreciation but through a nominal depreciation which helps to bring the overall price level back into line with nominal aggregate demand and particularly with the money supply the new estimates show that the costs a drop in living standards and output are less than commonly believed given the extreme inflationary conditions in 1989 and the shock following the disintegration of cmea trade the loss of output was not caused in any important way by the rapid move to free trade

the classical soviet type economy nature of the system and implications for reform i t is increasingly apparent that the traditional soviet type command economy is a catastrophic failure despite the touted statistical gains of real socialism during the last 40 years we now understand that these gains were largely a statistical illusion fostered by mismeasurement faulty methodology systemic incentives for exaggeration and ideologically and politically motivated distortion winiecki 1988 ericson 1990 moreover the economic system of real socialism in each of these states has imposed large negative social political ecological and personal externalities significant economic reform is now generally accepted as an imperative i am however convinced that successful economic reform of the soviet type economy will require a more comprehensive attack than hitherto attempted to understand the immense difficulties facing radical reform in the soviet union and eastern europe one needs to perceive the soviet type economy as a coherent whole a true system with its own inherent logic necessary components and natural interaction of those components it like any other economic system is as much an organism as a mechanism tending to counteract forces impinging frorn outside and to equilibrate the natural forces and tendencies that arise within it the logic and natural equilibrium of a command economy differ qualitatively and significantly from that of a largely private enterprise market economy hence reforms of a soviet type economy that are consistent with the basic nature of the system survive without altering the qualitative characteristics of

the composition of public expenditure and economic growth abstract noting that the literature has focused on the link between the level of public expenditure and growth we derive conditions under which a change in the composition of expenditure leads to a higher steady state growth rate of the economy the conditions depend not just on the physical productivity of the different components of public expenditure but also on the initial shares using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects by contrast the relationship between the capital component of public expenditure and per capita growth is negative thus seemingly productive expenditures when used in excess could become unproductive these results imply that developing country governments have been misallocating public expenditures in favor of capital expenditures at the expense of current expenditures

large firms in the production of the world s technology an important case of non globalisation us patenting by 686 of the world s largest manufacturing firms shows that their share of the world s production of technology is less than their share of r d activities and varies greatly amongst sectors in most cases the technological activities of these large firms are concentrated in their home country the characteristics of which influence the volume and trends in their technological activities much more strongly then the international component of these activities at the same time these large firms are major elements in the volume and the pattern of sectoral specializations in their home countries technological activities

productivity of public spending sectoral allocation choices and economic growth the authors examine the composition of public spending and its implications for economic growth they use a translog production function by treating gross domestic product as the output and labor private capital and several types of public sector capital stocks as the inputs using time series data for 25 countries for 1965 84 the production functions of all but four countries exhibited increasing returns to scale the highest output elasticity was for human resource development capital followed by private capital and labor output elasticity of infrastructure capital was found to be relatively small with the exception of latin american countries where it exhibited relatively high values military capital had negative output elasticity in slightly more than half of the cases considered the results suggest that reshaping public spending priorities in favor of human resource development and away from military spending would positively stimulate world economic renewal

trade reorientation and recovery in transition economies how do we define transition and when can we say that transition to a market economy is complete here we suggest that one way of addressing this issue is to analyse current economic data and ask whether in ignorance of the past we can identify countries in central and eastern europe as being somehow different from comparable western market economies in this paper we focus on international trade and argue that several indicators such as the geographical structure of trade and the undervaluation of the exchange rate cannot distinguish the more advanced countries in central and eastern europe we also seek to explain how the reorientation of trade towards the west has been achieved and in particular assess whether improvements on design and quality are a prerequisite for export expansion copyright 1997 by oxford university press