rural urban poverty differences in transition countries summary this paper uses new poverty data based on household level surveys to analyze changes in rural poverty and rural urban poverty differences in 23 transition countries of central and eastern europe and the former soviet union the paper presents a series of hypotheses to explain differences across countries and changes over time

average cost pricing versus serial cost sharing an axiomatic comparison abstract a finite group of agents share a one output production function a cost sharing rule allocates the total cost among the users for every conceivable profile of output demands we investigate the space of possible cost sharing rules from an axiomatic perspective we provide two characterizations of average cost pricing one based on the axioms of additivity and monotonicity both with respect to the cost function and the other based on the axioms of additivity and a version of consistency we also provide a characterization of serial cost sharing based essentially on additivity and a free lunch axiom journal of economic literature classification numbers d63 d78 c79

structural factors in the economic reforms of china eastern europe and the former soviet union reform in china and russia jeffrey sachs and wing thye woo china s experience does not show that gradual reform is superior to the shock therapy undertaken in eastern europe and the former soviet union eefsu differing performance primarily reflects different economic structures prior to reform china was a peasant agricultural society eefsu was urban and overindustrialized in both jobs in state enterprises were so heavily subsidized that workers refused to move to new industries elsewhere even when productivity in the latter was much higher in eefsu the large state sector impeded structural adjustment curtailing subsidies would have produced many losers who used their power to resist this outcome failure to curtail subsidies then cut off the potential supply of labour and other factors to new emerging firms china s state enterprises have not performed as well as the rest of the chinese economy and do not explain its success rapid growth was possible because the large agricultural sector contained vast surplus labour and did not enjoy subsidies and soft budget constraints once constraints on migration across regions and jobs were removed this labour was available to fuel expansion in new industries unlike the distributional conflict in eefsu in china reallocation of labour allowed all groups to gain in both partial liberalization also unleashed macroeconomic pressures manageable in china because of rapid growth and adequate monetary policy but explosive in much of eefsu because of deeper structural problems and gross monetary mismanagement

gatt and the economics of food safety abstract food safety is of increasing importance in higher income countries where consumers demand higher quality and safer food they will do so through the market when information makes it possible they will demand better assurances of safety through government regulations where externalities and health risks prevail the microeconomics of this demand for increased food safety is discussed in terms of how it can lead to non tariff barriers to trade that might ultimately be regulated by the gatt the public goods nature of food safety is explored along a continuum of food quality characteristics for the purpose of identifying when government regulations are needed

transition economies performance and challenges i present data and assess the first twelve years of the transition from plan to market transformations have taken place but the income gap between the transition and advanced economies has widened transition countries further east have performed worse than those further west but policies matter all countries carried out quickly type i reforms such as macroeconomic stabilization price liberalization small scale privatization and breakup of state owned enterprises they differed in type ii reforms such as large scale privatization and development of banking and legal systems countries that developed a functioning legal framework and corporate governance have performed better than others

collective agreements wages and firms cohorts evidence from central europe using a large matched employer employee data set the authors investigate the impact of company and industry collective bargaining agreements on wages in the czech republic hungary and poland ce3 they also examine the changing characteristics of the union wage premium in different cohorts of establishments their results challenge the common idea of weak unions in the ce3 by revealing a union wage premium whose characteristics depend on the level at which collective bargaining occurs they find that industry agreements increase wages for low skilled workers while company agreements increase medium and high skilled wages their second finding is that the union wage premium is unevenly distributed between cohorts with substantial cross country variation wage premiums are concentrated in the transitional cohorts in the czech republic and poland and to a lesser extent in the pre transitional cohort in hungary

market related reforms and increased energy efficiency in transition countries empirical evidence energy efficiency improvement is a desirable response to growing climate change and security of energy supply concerns this article studies the impacts of a varied set of macro level market oriented reforms as well as structural change on economy wide measure of energy efficiency across a group of the transition countries these countries experienced a rapid marketization process which since the early 1990s transformed their economies from central planning towards market driven models we use a bias corrected fixed effect analysis technique to estimate this effect for the period 1990 to 2010 the results suggest that reforms aimed at market liberalization financial sector and most infrastructure industries drove energy efficiency improvements we find significant differences in improvements in energy efficiency between transitional central european and baltic states south east europe ones and the commonwealth of independent states the reasons for these differences are also discussed

anticipated policy and endogenous growth in a small open monetary economy abstract this paper analyzes the effects of a preannounced change in the growth rate of credit in a small open economy the model based on an endogenous growth model introduces the adjustment costs for investment and the role of money in the production function and highlights the dynamic behavior of an open economy we show that an increase in the rate of anticipated credit growth lowers the steady growth rate of capital real money balances and real output we also find that the rate of depreciation of the domestic currency will rise steadily toward its stationary level the anticipated domestic credit growth hence exhibits monetary nonsuperneutrality in both the rate and the level of output in the intermediate and the long run

the behaviour of state firms in eastern europe pre privatisation in this paper we explore the behaviour of state firms pre privatisation the incentives and the constraints facing managers and the nature and the power of the coalitions within the firms we show that managers on low incentive payment schemes with little formal stake in privatisation and who face possible redundancy have little incentive to embark on restructuring hardened budget constraints career concerns and potential stakes in the privatised firm however may strengthen managerial incentives to restructure we then introduce an influence function which captures how the distribution of winners and losers within the firm and size of their loss and gain affects the probability of restructuring the function illustrates how strong opposition coming from large concentrated losses is likely to dominate diffuse support from small widely distributed gains government measures such as hardening budget constraints financing of severance payments and selective debt writedowns affect the distribution of gainers and losers and may be used to overcome blocking coalitions and increase support for restructuring examination of a range of enterprise case studies vindicates our hypothesis that the structure of control and production strongly affect incentives to restructure centralised management structures the presence of non performing units and a functional division of activities have all acted as serious constraints on the unbundling restructuring process whilst the removal of state subsidies has been critical in forcing firms to rationalise production and unbundle activities

structural convergence under reversible and irreversible monetary unification abstract we explore endogenous monetary unification in the context of a model in which a country with serious structural distortions and hence high inflation is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants if unification is reversible so that the new entrant can always be forced to leave the union again later convergence stops for a while after the high inflation country has joined with irreversible unification in contrast temporary divergence occurs and unification will be delayed

transition and integration in europe implications for agricultural and food markets policy and trade agreements several central and eastern european countries are on their way to becoming members of the european union agriculture and agricultural policy is an important issue in eu enlargement this paper reviews the changes that have occurred in the agricultural and food sector of the ceecs and draws implications for the impact of eu enlargement on agri food markets and policy first those countries which have reformed most rapidly and most thoroughly are now doing best and their reform efforts have resulted in significant recovery and efficiency improvements second the impact of eastern enlargement will be less dramatic than initially feared although some uncertainty remains the possibility that the accession of the ceecs into the cap will cause a conflict with wto commitments has been reduced but cannot be excluded for some specific commodities depending on the ceec supply evolution however the likelihood of a wto conflict and the impact on the cap will depend more on the outcome of the negotiations in the wto millennium round than on enlargement similarly the impact of enlargement on the eu budget depends mostly on the political decision on the allocation of direct payments to ceec farmers and or of the extent of structural funds for ceecs

unemployment and the social safety net during transitions to a market economy evidence from the czech and slovak republics the authors investigate the remarkably short unemployment spells in the czech republic compared to slovakia and other central and east european economies they estimate hazard functions and find that 40 to 5o percent of the difference in unemployment durations between the two republics is accounted for by differences in demographics and demand conditions the remainder is explained by differences in coefficients proxying the behavior of firms individuals and institutions in both republics the unemployment compensation system has a moderately negative effect on the exit rate from unemployment policymakers hence have latitude in providing adequate social safety nets without jeopardizing efficiency copyright 1998 by american economic association

exchange rate based stabilizations a literature review the exchange rate based stabilizations erbss that have been undertaken in chronic inflation countries have generated a controversial body of literature regarding the effects of disinflation programs especially those on real consumption and output this survey provides an extensive overview of the literature on erbs the paper covers various empirical studies that have attempted to document the macroeconomic regularities associated with erbs discussing both their strengths and their weaknesses it analyzes diverse theoretical models that have been put forward to replicate the business cycles associated with erbs and sheds light on which models perform better using real data the results suggest that durables incorporated weak credibility and sticky price model proves to be most compatible with the empirical regularities observed in the course of erbs

a political economy approach to the neoclassical gradualist model of transition a political economy approach to the neoclassical gradualist model of transition requires the exposition of what i define the primary elements of the model which are economic analysis definition of a good society speed political structure ideological structure and whether the initial conditions were incorporated in the model after the identification of the primary elements of the neoclassical gradualist model the next step is to identify secondary elements the desired changes with respect to price liberalization stabilization privatization institutional structure monetary policy and the financial system fiscal policy international trade and foreign aid and social policy the analytical framework developed makes possible to understand the neoclassical gradualist model from a new and more enlightening perspective we are better able to comprehend the complexities involved and the disagreements about the reform process the adoption of a gradual process of transition did not only involve specifying the required policies of a successful transition but also entailed a process a sequence by which the reforms should be introduced as such a process of transition consistent with the policies recommended by the neoclassical gradualists economists is developed the conclusion reveals the inconsistencies in the model copyright blackwell publishers ltd 2005

life after takeover economic consequences of takeovers are investigated by analyzing profitability of enterprises acquired a s a direct or indirect white knight consequence of tender offer s target companies pre tender profitability averaged 0 97 percentag e points below peer industry norms nine years after takeover acquir ed lines of business had operating income assets percentages 3 10 poi nts below those of non tender lines with similar industry bases mark et shares and merger accounting methods most of the targets postta keover profit decline stemmed from asset value writeups there is no indication that on average the acquirers raised their targets operat ing profitability net of merger related accounting adjustments copyright 1987 by blackwell publishing ltd

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

exports inflation and growth abstract this article seeks to identify some of the main determinants of exports and economic growth in cross sectional data from the world bank covering 160 countries for 1985 94 first the linkages between the propensity to export and population per capita income agriculture primary exports and inflation are studied by statistical methods then the relationship between economic growth and some of the above mentioned determinants of exports as well as investment are scrutinized the same way the main conclusion is that in the period under review high inflation and an abundance of natural resources tended to be associated with low exports and slow growth

curbing agricultural exceptionalism the eu s response to external challenge from 1948 to 1994 the agricultural sector was afforded special treatment in the gatt we analyse the extent to which this agricultural exceptionalism was curbed as a result of the gatt uruguay round agreement on agriculture discuss why it was curbed and finally explore the implication of this for eu policy making we argue that in particular two major changes in gatt institutions brought about restrictions on agricultural exceptionalism first the uruguay round was a single undertaking in which progress on other dossiers was contingent upon an outcome on agriculture the eu had keenly supported this new decision rule in the gatt within the eu this led to the macsharry reforms of the common agricultural policy cap in 1992 paving the way for a trade agreement on agriculture within the gatt second under the new quasi judicial dispute settlement procedure countries are expected to bring their policies into conformity with wto rules or face retaliatory trade sanctions this has brought about a greater willingness on the part of the eu to submit its farm policy to wto disciplines

what affects new and established firms expansion evidence from small firms in russia research on financial constraints of very small firms is scarce because it is difficult to observe and measure their transactions previous studies on small enterprises in post communist countries have focused either on the effect of financing constraints on business growth budina et al 2000 economics of transition8 2 453 475 bratkowski et al 2000 economics of transition8 1 101 116 or on the effect of property rights johnson et al 2002 american economic review92 5 1335 1357 this paper provides evidence on both it turns out that financing constraints and property rights considerations affects investment in firms of different age differently younger firms face higher information costs and their expansion is more dependent on the availability of internal funds than is the expansion of older firms this paper also finds that while the financial sector did not channel funds to the most successful businesses there is evidence that loans were given to firms that had more transparent transactions results also indicate that the security of property rights does not influence investment in young firms which is interpreted to mean that only the most efficient entrepreneurs entered the market in older small firms investment is negatively influenced by the index of security of property rights suggesting that these firms might have secured their property rights by bribes improvements in the security of property rights therefore would help more micro enterprises to be born as well as decrease transaction cost of established enterprises

a tale of two reforms i identify the absence of well functioning product markets in transition economies as a sufficient condition under which big bang reduces output initially while a chinese style reform increases output big bang dismantles central planning or centralized organization of production permitting monopolistic and vertically interdependent enterprises to pursue their own monopoly profits by restricting output and inter firm trade to the detriment of the economy as a whole the chinese reform by maintaining central planning but allowing enterprises to produce for the emerging product markets after they have fulfilled their output quotas under planning gives enterprises incentives to expand output beyond planned targets

market reform and mortality in transition economies abstract the striking increase in mortality rates in russia in the early 1990s occurred simultaneously with the government s erratic attempts to introduce market reforms other transition economies such as poland and the czech republic avoided increases in death rates while they implemented rapid and deep reforms is there a link between mortality and the speed or depths of reforms as suggested by other researchers e g sachs 1996 american economic review 86 2 128 233 this paper uses aggregate data on 22 transition economies for 1989 1994 to investigate this question while the relationship between an index of reform progress and death rates is ambiguous death rates in these countries are correlated with measures of reform success such as gdp growth and the inflation rate higher crime rates and higher unemployment rates are also related to larger increases in death rates

dynamics of russian regional clubs the time of divergence carluer f 2005 the dynamics of russian regional clubs the time of divergence regional studies 39 713 726 this paper examines the evolution of russian regional disparities in the light of the theory of convergence clubs the first part presents the limits of the methodology traditionally used in most studies of the convergence process for example the choice of indicators usually per capita income or labour productivity and the statistical test applied beta or sigma convergence strongly influence the results obtained sometimes adversely then following the works of quah and fingleton the superiority of an analysis of distribution dynamics especially one based on markov chains is explained the second part presents the main results based on the per capita regional income of the russian database 88 regions over a fairly long period 1985 99 the key conclusion is the strong diversity of regional evolutions which are characterized by both inertia rich regions remain rich poor regions

an economic assessment of the common market organization for bananas in the european union abstract the main objective of this paper is to provide some estimates of how the world banana market has been affected by the common market organization cmo for bananas established in the european union eu on 1 july 1993 and modified in april 1994 we quantify the effects of the new eu regulation on world and eu prices on the structure of eu imports from latin american countries african caribbean and pacific acp countries and eu regional suppliers on the pattern of consumption in the various eu member states and on consumers and producers welfare using a static partial equilibrium model of the world banana market simulation results suggest that the two key variables in determining the effects of the cmo are the size of the tariff quota on dollar and non traditional acp bananas and the capacity of acp countries to exhaust their acp contingent share

firm turnover restructuring and labour productivity in transition the case of poland this article explores the impact of turnover and restructuring on labour productivity in the polish economy over the period 1988 to 1993 changes in aggregate productivity are decomposed into elements corresponding to productivity growth among survivors market share growth by survivors and the contributions of entering and exiting firms the traditional entry and exit effects begin to work as transition to a market economy progresses however initial productivity improvements are due to changes in market shares of the existing firms following the break up of large enterprises regression analysis shows that changes in the firm level productivity are affected by restructuring and a more competitive economic environment

probing theoretically into central and eastern europe transactions resources and institutions since the 1990s central and eastern europe cee has provided unique societal quasi experiments which represent opportunities to test the applicability of existing theories in international business and management studies and to develop new ones specifically three lines of theorising have been advanced 1 organisational economics theories 2 resource based theories and 3 institutional theories for each of these theories we discuss how they contribute to the understanding of key issues such as entry strategies of foreign investors restructuring strategies of local incumbents and entry and growth strategies of entrepreneurs on this basis we assess how cee research has influenced the overall trajectories of theory development cee research has in particular highlighted the importance of contextual influences such as institutions thus scholars have aimed at incorporating institutions into theories such as organisational economics theories and resource based theories and advancing an institution based view of business strategy as a complementary perspective we outline how future research in cee and other emerging economies may advance this research agenda further

social insurance and transition the authors study the general equilibrium effects of social insurance on transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty as might be expected adding social insurance to an economy without any improves welfare contrary to standard intuition however adding social insurance may slow transition the authors show that this result depends crucially on general equilibrium interactions of interest rates and savings under alternative market structures copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

business cycle convergence in emu a first look at the second moment we analyse the dynamics of the standard deviation of demand and supply shocks as well as of the demand component of gdp across countries in the european monetary union emu this analysis allows us to evaluate the patterns of cyclical comovement in emu and compare them the cyclical performance of the new members of the eu and other oecd countries we make use of sigma convergence methods to identify synchronization patterns in business cycles the eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s the new eu members have also experienced a strong pattern of convergence from 1998 to 2005 when a strong divergence trend appears an enlargement of the emu to 22 members would not significantly decrease its optimality as a currency area there is evidence for some europe specific characteristics as compared to global comovements in business cycles authors abstract

cost sharing under increasing returns a comparison of simple mechanisms a technology with decreasing marginal costs is used by agents with equal rights each agent demands a quantity of output and costs are divided by means of a fixed formula several such mechanisms are compared for the existence of nash equilibrium demand profiles and for the equity properties of these equilibria among three mechanisms average cost pricing the shapley shubik cost sharing and serial cost sharing only the latter two possess at least one nash equilibrium on a reasonable domain of individual preferences only the serial cost sharing equilibria pass the equity tests of no envy and stand alone cost journal of economic literatureclassification numbers c72 d63

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

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

on environmental impacts of market based reforms evidence from the european and central asian transition economies global warming and other adverse climate change impacts induced by anthropogenic carbon dioxide emissions are a major public policy concern around the world including transitional economies this paper therefore examines the impacts of market based economic reforms on per capita co2 emissions in the european and central asian transition economies where environmental degradation was pervasive prior to these reforms a dynamic panel data model is employed for this purpose for 28 countries covering 22 years from 1990 to 2012 our overall results suggest that economic openness may not necessarily result in sustainable development although reforms in competition policy and corporate governance were the significant drivers of emissions reductions in the region hence advances in competition policy and governance reforms are desirable given the available scope to extend these reforms the structural shift to and emergence of light industries also contributed to declining co2 emissions in the transition process the direct impact of the kyoto protocol in reducing emissions is debatable which also raises doubts on the effectiveness of the paris agreements

capping the cap implementation of the uruguay round agreement by the european union abstract this paper considers the detailed implementation of the uruguay round agreement on agriculture by the european union eu and its likely impact on the cap the agreement sets three constraints to agricultural support in developed countries the commitment to reduce domestic support by 20 per cent will have no effect tariffication and the new access provisions will only marginally improve the competitiveness of imports into the eu in the short run but do set the scene for more meaningful tariff cuts in the next round it is the constraints on subsidized exports which will most limit the cap and impact on world markets although even here the effects could easily be exaggerated the export constraints will bite deeper in the longer run particularly in the context of an enlargement of the eu to embrace several states from central and eastern europe which could trigger a more fundamental cap reform despite its limited impact the agreement should be judged a success in that it does impose limits on the cap and sets the scene for the next round of negotiations proposed to begin in 1999

employment determination in enterprises under communism and in transition evidence from central europe the authors present a comparative analysis of employment determination in four transition economies as they moved from central planning to a market economy in the early 1990s they use firm level panel data sets from the czech republic hungary poland and slovakia to estimate dynamic employment equations for the period from immediately before to immediately after the start of transition for the most part firms appear to have been quick to adjust employment to wage levels and there is little evidence of labor hoarding there were important cross country variations in the determinants of employment during the reform process however hungarian and polish firms started the transition already substantially reformed and became even more responsive to market signals as transition proceeded in contrast firms in the czech and slovak republics started in the completely unresponsive mode characteristic of central planning but rapidly caught up with their counterparts in hungary and poland

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

the political economy of transition the overriding importance of political constraints in the transition process has led to developments of the theory of the political economy of reform what are the main insights from that theory how does it reflect the transition reality what have we learned and what do we still need to learn the present article will attempt to answer those questions

impact of the 1996 us fair act on the common agricultural policy in the world trade organisation context the decoupling issue abstract the united states us federal agriculture improvement and reform fair act of 1996 represents a watershed not only from a domestic point of view but also from the perspective of the next round of international agricultural negotiations in particular it will force the european union eu to reform its agricultural policy so that compensatory payments for support price cuts are included in the green box or at least are much more decoupled than at present us exports of several agricultural products including maize pork and poultry meat barring a prolonged global economic downturn should increase substantially over the 7 year period of the act and beyond accordingly the us will certainly attempt to ensure that trade barriers with the eu and subsidised competition from the eu in third markets are kept to a minimum though the 1999 eu proposals for a new reform of the common agricultural policy cap represent a courageous step in the right direction they are likely to be insufficient to comply with future world trade organisation wto commitments in particular with regard to the decoupling of direct aid payments we have made a number of proposals for an internal support policy which explicitly recognises that european farmers have several functions that require specific forms of public intervention and which should comply with future wto requirements

unemployment labour markets and structural change in eastern europe labour markets in eastern europe michael burda unemployment is a major concern in the transforming economies of central and eastern europe the modern flow approach to labour markets suggests both that unemployment is an important component of the transformation process and that the labour market institutions adopted will influence the rate of unemployment in the long run to date eastern european countries exhibit considerable divergences in several of these institutions especially in unemployment benefit systems collective bargaining structures and active labour market policies an aggregate matching function is successfully estimated for data from czech and slovak employment offices emerging labour markets in the east function not so differently from those in the west the implied dynamics make both big bang and benign neglect unattractive strategies for transformation a mixed bang is more appropriate quantitative evidence about the effects on unemployment of different labour market institutions in oecd countries is used to make long term projections of equilibrium rates of unemployment in central and eastern europe given the labour market institutions now in place there with the possible exception of the czech republic high unemployment is likely to be pervasive and persistent

peasants against private property rights a review of the literature land is the main if not the only asset for a majority of people in developing countries the definition and allocation of rights over land are thus naturally essential aspects of individuals daily lives as well as critical determinants of social and economic development the privatization of land rights has long been seen as a necessary process enhancing both efficiency and equity however privatized land rights have not always emerged endogenously while exogenously driven programs of land privatization have not always been successful nor popular this has raised questions about the expected benefits of land rights privatization this paper aims at summarizing the main arguments and studies both theoretical and empirical on this issue with a specific focus on the factors that can make privatization inefficient or detrimental for the most concerned individuals

a dynamic model of privatization with endogenous post privatization performance this paper presents a dynamic model of privatization driven by improved institutional protection of private property rights and constrained by the buyer s financial constraints government ownership is more efficient than private ownership when private property rights are insecure improved institutional protection of property rights over time creates the need to privatize the buyer s financial constraints affect the timing of privatization causing the firm s post privatization performance either to improve or to deteriorate in the short run financial constraints also have the possibility of inducing an underpricing phenomenon during privatization where the firm is priced below both what the buyer is willing to pay and the buyer s ability to pay faster institutional development calls for earlier privatization but it also has the potential to either create or exacerbate deadweight losses associated with inefficient privatization a host of empirically testable implications are derived copyright wiley blackwell

job reallocation in two cases of massive adjustment in eastern europe summary this paper uses worker level data to characterize economy wide job creation and job destruction during periods of massive structural adjustment we contrast the gradualist czech and the rapid estonian approach to the destruction of the communist economy and assess their experience in light of selected theories of reallocation with frictions we find that gradual job destruction combined with job creation support allows extensive reallocation to concur with low unemployment drastic job destruction on the other hand need not slow down job creation as long as unemployment benefits are kept very low

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

women in transition changes in gender wage differentials in eastern europe and the former soviet union under state socialism women fared relatively well in the labor market female male wage differentials were similar to those in the west and female labor force participation rates were among the h

on the uniqueness of equilibrium in cournot oligopoly and other games abstract in an average surplus sharing game such as a cournot oligopoly a group of agents share a production process each contributes an amount of input to the process and output is divided in proportion to the amount of input contributed uniqueness of the equilibrium is needed for any type of comparative static analysis however general uniqueness results for concave games have restrictive assumptions on preferences and technology specifically the conditions needed for uniqueness become more difficult to meet as the number of players increases a new theorem for uniqueness with easily interpretable conditions is given which is independent of the number of players journal of economic literature classification numbers c70 c72 d43

decreasing serial cost sharing under economies of scale we consider the problem of cost sharing in the presence of increasing returns to scale and potential strategic behavior on the part of consumers we show that any smooth and strictly monotonic mechanism for which a nash equilibrium exists for all profiles of convex and monotonic preferences must be dictatorial however we propose a cost sharing mechanism the decreasing serial mechanism for which an interesting domain restriction ensures existence of a noncooperative equilibrium for its cost sharing game a characterization theorem of the mechanism based on the strategic properties of existence uniqueness and efficiency of its noncooperative equilibrium is provided journal of economic literature classification numbers c70 c72 d70 cost allocation is a practical problem that organizations of all kinds face universities allocate computing costs among departments aviation authorities set landing fees for aircraft based on their size regulatory com missions set rates for electricity water and other utilities based on the costs of providing these services the common feature in all of these exam ples is that prices are not determined externally by market forces but are set internally by mutual agreement or administrative decision a simple situation where a cost sharing problem can emerge is when a set of users share a technology that transforms a single input into a single output we study this cost sharing problem when the cost function is increasing and concave examples include the division of costs incurred in setting telephone lines or a water supply system the assessment of fees to pay for a secretary or a gardener s services and so on the situations we have in mind are those of cooperative production or natural nonregulated monopolies for either of these situations there is no obvious answer to the question of how to divide the cost of producing the total output among the users

intertemporal analysis of employment decisions on agricultural holdings in slovenia the article attempts to quantify determinants influencing the dynamics of employment decisions on agricultural holdings in slovenia and to test specific aspects of labor reallocation during the transition period by the application of an agricultural household model through the use of a 1991 2000 longitudinal data set for 22 055 farm households quantitative analysis of intertemporal employment decisions by farm holders is carried out using probit techniques the determinants tested relate to the personal characteristics of farm holders gender age education level and potential off farm income household characteristics size structure characteristics of the agricultural holding economic size labor intensity and local labor market conditions the model results generally confirm existing empirical evidence on asymmetrical and irreversible participation of holders on the labor market despite intensive restructuring of agriculture and profound changes in the nonfarm labor market in the analyzed period labor supply of farm holders remains rigid the mobility of labor supply is lower than expected which can be attributed to the importance of structural problems constraining intersectoral mobility low labor mobility reduces the efficiency of labor allocation on agricultural holdings in slovenia elements of this problem emerge on both supply e g low level of educational and professional attainment of reference persons and demand sides of the labor market e g unfavorable local labor market conditions a marked tendency toward maintaining the same employment status is more distinct in the case of holders employed on farm only

development aid and growth in transition countries empirical studies normally analyze diverse and heterogeneous groups of countries producing very mixed evidence on the effectiveness of development aid in promoting growth we focus on whether aid promotes economic growth in transitional economies we find that aid on average has had a positive impact on growth for this specific group of countries this result is robust to samples estimators and the use of alternate instruments to address endogeneity aid effectiveness is not conditional on good policy and there is little evidence of non linear growth effects arising from aid

the status and prospects for genetically modified crops in europe abstract despite the rapid expansion in the global area planted with genetically modified gm crops there has been resistance to this technology in europe this article considers why molecular technologies used to produce gm crops are reviewed and crops currently and soon to become available listed it is argued that the prospects for gm crops depend on 1 consumer acceptance which depends on the perception of the benefits gm crops offer and on confidence in the legislative framework and regulatory procedures designed to identify and quantify any potential disadvantages 2 further technological advances which might reduce any adverse consequences of and enhance the benefits from gm crops 3 patent law which underpins incentives for private investment and largely determines the development of market structure and 4 the relative profitability of gm crops vis a vis conventionally bred varieties which will be a key determinant of the area planted importantly regulations which increase consumer confidence may also raise the costs of planting gm crops and therefore will act to reduce the area planted

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

theoretical foundations of emerging economy business research in probing theoretically into central and eastern europe transactions resources and institutions we outlined the contributions of research in central and eastern europe cee to theoretical debates in business research in this retrospective we reflect upon the evolution of the field over the past decade with the fading impact of cee s distinct shared history we suggest that cee best be analyzed as emerging economies rather than as a distinct geographic entity emerging economy business research is converging on common themes and shared theoretical ideas while identifying critical variations that constrain generalizations among and beyond emerging economies this research thus highlights the need to develop a better understanding of the boundary conditions of scholarly theories of business knowledge over the past decade the institution based view has emerged from distinct intellectual traditions in institutional economics organizational theory and the analysis of business government bargaining research in these converging lines of theorizing places contextual variations at the center of explanations of business phenomena around the world we suggest that the institution based view is evolving toward a paradigm and offer suggestions on how to advance this research agenda further in particular by exploring how firms engage with different sets of potentially conflicting institutions at multiple levels and locations

restructuring of firms in transition ownership institutions and openness to trade we develop a theoretical framework for defensive and strategic restructuring and provide estimates of restructuring in privatized firms in an advanced transition economy slovenia our rich data point to both types of restructuring as well credit rationing and bargaining with respect to investment privatized firms display profit maximizing behavior and a firm s export orientation and institutional features such as insider vs outsider privatization employee ownership and employee control do not affect the firm s employment and investment behavior the results suggest that a major exposure to world competition induces similar economic behavior in firms with different structural and institutional characteristics

enterprise breakups and performance during the transition from plan to market using firm level data we estimate the effects of the major wave of 1991 breakups of czechoslovak state owned enterprises on the subsequent performance of the master enterprises and spun off divisions we estimate the performance effects of spinoffs by comparing the performance of enterprises that remained intact throughout the 1990 1992 period to the performance of the master enterprises that experienced spinoffs and the newly spun off subsidiaries our estimates suggest that the breakups had a significant immediate effect on the productive efficiency and on the profitability of industrial firms in 1991 and that the effect became much less significant in 1992 the effect is a negative function of the size of the spinoff being positive for small to slightly above average sized spinoffs and negative for very large ones we cannot reject the hypothesis that the estimated effect was identical for the spun off subsidiaries and the master enterprises that experienced the spinoffs our 1991 estimates sugges

data watch research data from transition economies ten years into the transition from communism in the countries of the former soviet union and central and eastern europe a cursory search of the econlit database turns up hundreds of empirical studies published in refereed journals that deal with various issues in transition economies even so we suspect that many economists are prevented from making full use of the possibilities offered by the transition by the difficulties of obtaining and interpreting data from the region the purpose of this brief essay is to indicate some possible sources for data that can be used for economic analysis as well as some cautions regarding the use of these data

macropolicies in transition to a market economy a three year perspective countries in transition to market economies have had to implement macroeconoimic stabilization programs at the same time that they were engaged in massive changes of their political institutions and the systemic framework of their economies what has been the interaction of stabilization with economic liberalization and deep institutional reform in the countries of eastern europe in particular the relations among initial conditions political developments reform strategies and outcomes experience in eastern europe suggests that when there is a political breakthrough as in the countries under review a radical stabilization liberalization stragety is probably the least risky approach to reform and will not constrain output or structural reform over the medium term even stabilization that is initially successful in containing inflation will later come under pressure because of social policies and the structural transitions impelled by reform several factors are identified that affect the credibility of reforms and lessons are derived for countries that have stabilized and those that yet face this task

the state led transition to liberal capitalism neoliberal organizational world systems and social structural explanations of poland s economic success neoliberals argue that rapid liberalization and privatization can transform postcommunist economies into western style capitalist systems organizational sociologists argue that these policies produce a unique variety of capitalism while world systems theorists argue that they lead to underdevelopment this article advances a social structural alternative in a crucial case poland s relative economic success resulted from prolonged state ownership and an interventionist state employing various industrial policy tools that facilitated efficiency enhancing market oriented restructuring before ushering in beneficial foreign direct investment the resulting capitalist system closely resembles the typical pattern found in most late industrializers

welfare bounds in the cooperative production problem a general model of lower bound individual rationality and upper bound axioms for fair allocation is proposed the unanimity welfare function associates to each individual utility function the highest equal utility feasibile when all agents share this utility if this function is a feasible lower bound resp upper bound then it is the highest lower bound of all resp the lower upper bound applying this to cooperative production of private goods we characterize when the unanimity welfare is a lower upper bound function and when the stand alone welfare is an upper or lower bound our approach unifies several familiar fairness properties

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

the great divide and beyond financial architecture in transition a growing and deepening divide has opened up between transition countries where economic development has taken off and those caught in a vicious cycle of institutional backwardness and macroeconomic instability this great divide is visible in almost every measure of economic performance gdp growth investment government finances growth in inequality general institutional infrastructure and increasingly in measures of financial development strategies for financial development have differed dramatically across countries and over time offering interesting opportunities to study the links between real and financial sector development

credible commitment and property rights evidence from russia most managers said that state arbitration courts did not work badly in disputes with other businesses but few expected these courts to protect their rights in disputes with state officials more importantly managers who expressed confidence that state arbitration courts could constrain state officials invested at higher rates even controlling for the perceived effectiveness of state institutions thus tightening constraints on state agents can increase the security of property and bolster state capacity these results generate insights into debates on the role of state in the economy the origins of secure property rights the nature of state capacity the importance of informal institutions and the process of legal reform

the perils of polarization economic performance in the postcommunist world perhaps the most striking feature of the postcommunist transformation is the tremendous variation in rates of economic growth across countries to account for these differences this article develops an alternative to the j curve and partial reform views that currently dominate discussions of the politics of economic reform this approach treats economic performance as a political struggle between ex communist and anticommunist factions engaged in a war of attrition over economic and political resources using a pooled time series analysis of economic growth across twenty five postcommunist countries for the period 1990 98 it finds that political polarization between ex communist and anticommunist factions has had a devastating effect on economic growth where these competing factions have had roughly equal power and have struggled over the economic rules of the game as in bulgaria or ukraine economic growth has been slow in contrast where either ex communist or anticommunist factions have dominated the political scene as in estonia or uzbekistan economic performance has been much better in addition economic growth has followed the electoral calendar in polarized countries as elections approach and the odds of a change in economic policy increase growth rates have plummeted in polarized countries these findings have implications for studies of the postcommunist transformation the political business cycle and the politics of economic reform more generally

profit sharing in unique nash equilibrium characterization in the two agent case abstract two agents jointly operate a decreasing marginal returns technology to produce a private good we characterize the class of output sharing rules for which the labor supply game has a unique nash equilibrium it consists of two families rules of the serial type which protect a small user from the negative externality imposed by a large user and rules of the reverse serial type where one agent effectively employs the other agent s labor exactly two rules satisfy symmetry a result in sharp contrast with moulin and shenker s characterization of their serial mechanism as the unique cost sharing rule satisfying the same incentives property moulin h shenker s 1992 serial cost sharing econometrica 60 5 1009 1037 we also show that the familiar stand alone test characterizes the class of fixed path methods under our incentives criterion friedman e j 2004 strong monotonicity in surplus sharing econ theory 23 643 658

the impact of the gatt agreement on eu fruit and vegetable policy abstract this paper examines the eu s plans for implementing the uruguay round gatt agreement on agriculture with respect to fresh fruits and vegetables it considers the import access export subsidy and domestic support commitments in particular the eu has decided to retain a minimum import price regime for fresh fruits and vegetables the new entry price system displacing the old reference price system is to apply on a consignment basis the entry price and reference price systems are compared and some conclusions drawn about the likely impact of entry prices on potential third country suppliers of the eu market