(Reprint from: WIFO-Monatsberichte, Vol. 86, No. 5, May 2013) Zusammenfassung 2012 entwickelte sich die Wirtschaft in den Ländern Mittel-, Ost- und Südosteuropas insgesamt enttäuschend. Aufgrund der Stagnation der Exporte und der gedämpften Binnennachfrage gerieten acht Länder der Region in die Rezession (Tschechien, Ungarn, Slowenien und die meisten Westbalkanländer). In den anderen Ländern wuchs das BIP zwar, aber allgemein nur schwach. Auch in Ländern, deren Wirtschaft bisher von der Krise im Euro-Raum nicht betroffen gewesen war (z. B. Russland, Polen, Ukraine, Türkei), verlangsamte si...more

(Reprint from: WIFO-Monatsberichte, Vol. 86, No. 5, May 2013) Zusammenfassung 2012 entwickelte sich die Wirtschaft in den Ländern Mittel-, Ost- und Südosteuropas insgesamt enttäuschend. Aufgrund der Stagnation der Exporte und der gedämpften Binnennachfrage gerieten acht Länder der Region in die Rezession (Tschechien, Ungarn, Slowenien und die meisten Westbalkanländer). In den anderen Ländern wuchs das BIP zwar, aber allgemein nur schwach. Auch in Ländern, deren Wirtschaft bisher von der Krise im Euro-Raum nicht betroffen gewesen war (z. B. Russland, Polen, Ukraine, Türkei), verlangsamte si...more

In the course of tapping into external funding sources, innovators frequently encounter binding and insurmountable financing constraints, prompting them to discontinue, postpone or altogether abandon some of their innovative efforts, a key source of their growth and survival. This is even more so during economic crises, when profits collapse, internal resources dwindle and external sources risk drying up altogether. Against that backdrop, the analysis identifies the effects of prevailing credit constraints on innovative efforts of both formal R&D innovators as well as non-R&D innovators, which...more

This paper aims to complement work done within the WIOD project (the ‘World Input Output Database’ project financed by the EU’s Seventh Framework Programme), which compiled supply and use tables for 40 countries, covering about 85% of the world economy. The paper describes the derivation of international trade and transport margins (TIR services) together with a consistent and balanced system of supply and use tables at the world level. As a by-product, this also yields supply and use tables including valuation matrices for the Rest of the World, the approximately 15% of the world economy not ...more

Summary This paper looks at the changing role of the EU-27-based multinational companies in the global economy as compared with the main regions of the world. It makes conclusions reflecting on the framework conditions of various global development scenarios defined in the framework an international research project of the Seventh Framework Programme of the EU, ‘AUGUR’ (http://www.augurproject.eu/). First we summarize the findings of recent research on corporate internationalization and international sourcing strategies. Then we turn to the analysis of FDI balance of payments statistics, ma...more

Introduction Reflecting the diversity of countries in its neighbourhood, the European Union (EU) has established different cooperation processes, institutional arrangements and forums for its discussions with these countries. Each form of cooperation is characterized by its own dynamics, institutional set-up and instruments, procedures, long-term objectives and problems. The various forms of cooperation between the EU and its neighbouring countries also reflect the importance of those countries for the competitiveness of the EU and its Member Sta...more

(Report based on Background Study for European Competitiveness Report 2012, see http://ec.europa.eu/enterprise/policies/industrial-competitiveness/competitiveness-analysis/european-competitiveness-report/index_en.htm) Summary The ongoing internationalization of production has altered the economic landscape. Many products used to be produced locally using inputs drawn largely from the domestic economy, which implied that most of the value chains or production processes used to be located in the country where a firm had its headquarters. Technological development has facilitated the geogra...more

It is textbook knowledge that economic crises are in most cases associated with the accumulation of macroeconomic imbalances. In turn, macroeconomic imbalances emerge as the result of imbalanced growth. In the ideal world of equilibrium, all macroeconomic variables change at the same, equilibrium growth rate. The real world is one of disharmony and disequilibria, when there are significant divergences in the rates of growth of economic variables. When speed differentials are within certain limits, the resulting macroeconomic imbalances are manageable through the instru...more

(Report based on Background Study for European Competitiveness Report 2012, see http://ec.europa.eu/enterprise/policies/industrial-competitiveness/competitiveness-analysis/european-competitiveness-report/index_en.htm) Summary Countries belonging to the European neighbourhood are highly diverse. Their diversity is multidimensional (geographical, socio-economic, political, cultural, religious, etc.) and the individual dimensions all have important implications for EU policies towards the region(s), for EU institutional relations with individual neighbourhood countries and for these countri...more

A multi-level approach to test for the determinants of income polarization both at the household as well as the country level is applied to a panel of about 300,000 households in EU countries over the period of 2003-2009. Among the policy relevant macro variables, higher progressive labour taxation and to a certain extent capital taxation is positively correlated with lower levels of income polarization. Also public expenditures on social protection, education and economic subsidies are related to a lower degree of polarization. Finally, lower unemployment, a stronger industrial base and more ...more

Innovation is considered to be an important determinant of performance at the firm, industry and country level. This view is supported by empirical evidence showing the importance of innovative activities on firm and industry performance and country growth rates. The majority of the world’s R&D is concentrated in a handful of countries however, meaning that domestic innovation is of little importance for most countries. Such countries can benefit from innovation conducted elsewhere however, if knowledge and technology is diffused across borders. In this paper we survey existing literature on innovation and technology diffusion and discuss descriptive statistics on the extent of innovation and technology diffusion across countries to provide insights into the likely developments in innovation and diffusion....more

The recent economic downturn The decline in GDP during the recession has been concentrated in manufacturing and construction and triggered significant (though smaller) declines in basic services (distribution, hotels and restaurants, and transport). The decline in manufacturing production was particularly strong in Germany, while in Spain and Ireland as well as the Baltic states there was a pronounced decline in construction, which had expanded markedly in these countries over the years preceding the recession. Just as in previous economic downturns in the EU, the recent recession has h...more

German manufacturing firms increasingly engage in service trade activities. Micro-level data show that producer service exports of German manufacturers amounted to EUR 30 billion in 2005. In particular, construction, engineering and R&D services are exported. The machinery industries and automobile and chemicals producers dominate the overall pattern. The types of services exported vary strongly across industries. Furthermore, export activities are concentrated on a few large exporters. Service exports of advertising, data processing and R&D services are found to likely support foreign affiliat...more

While up to the 1990s, R&D was still ‘an important case of non-globalization’ (Patel and Pavitt 1991), the internationalization of business R&D activities has accelerated significantly during the past two decades. R&D activities of foreign affiliates have become one of the most dynamic elements of the process of globalization. Until recently, the main recipients of cross-border R&D expenditure were developed countries, though new players have emerged lately, particularly in Asia. Against that backdrop, the paper applies a recently compiled novel data set on R&D expenditure of foreign-owned fir...more

(Reprint from: WIFO-Monatsberichte, Vol. 85, No. 5, May 2012) Zusammenfassung Die gegenwärtige Wirtschaftskrise weist alle jene Merkmale auf, die mit finanziellen, verschuldungsbezogenen und strukturellen Aspekten von Leistungsbilanzkrisen verbunden werden. Daraus ergeben sich dauerhaft dämpfende Effekte für die Entwicklung der Gesamtnachfrage in den mittel-, ost- und südosteuropäischen Ländern, sodass sich eine nachhaltige Erholung verzögert. Die vorübergehende Belebung 2010/11 war insbesondere vom Export getragen. Deutliche Entwicklungsunterschiede zwischen den einzelnen Ländern Ostmitte...more

This paper examines the impact of offshoring on labour elasticities for a sample of 40 countries over the period 1995-2009 using the recently compiled World Input-Output Database (WIOD). Including measures of narrow and broad offshoring, as well as indicators of manufacturing and services offshoring, in conditional and unconditional labour demand equations we find that offshoring has an overall neutral or slightly positive effect on employment. This result hides differences across industry types and across employment types however, with additional results indicating a negative effect of services offshoring in many industry types. Positive effects of other offshoring measures are found in high-tech manufacturing and for high-educated employment in particular....more

This report describes the migration patterns of Romanian migrants in Italy before and after the accession of Romania into the European Union (EU). The findings and the main results presented throughout the report were collected by carrying out a survey in three main cities of Italy: Milan, Turin and Rome which are recognized as the main destination regions of Romanians who have migrated to Italy since free visa liberalization in May 2004. The report focuses on four broad areas: the profile and migration plans of migrants, regional differences and basic characteristics; labour market pattern...more

A major international transmission channel of productivity increases is trade in intermediate products and services. This paper analyses international rent spillovers at the industry level and for the first time investigates effects from the service sector in this international framework. The World Input-Output Database (WIOD) allows us to improve over the traditional approach of using trade in intermediates in the estimation of international spillovers by making use of input-output linkages between industries in different countries. Our results using this novel approach confirm the productivi...more

Following the conclusion of the TRIPS Agreement, much has been written on the potential costs and benefits of stronger Intellectual Property Rights (IPRs) protection in terms of its impact on innovation and technology transfer, as well as economic growth and welfare. This paper documents the development of IPR regimes within countries and internationally, before surveying the theoretical and empirical literature linking the protection of IPRs to economic growth, innovation and technology diffusion....more

This paper examines the development of exports within the expanded European Union over the period 2000-2007. The paper addresses the issues of how and why within-bloc exports have developed following accession. The paper shows that exports within CEFTA and within other accession countries have grown more quickly than those between old EU members, but that after accounting for traditional gravity determinants there has been no significant change in this behaviour following accession in 2004. As such, this is likely to reflect a natural realignment of trade patterns following the communist era, as well as the relatively stronger performance of the new entrants when compared with existing EU members. The results also indicate that much of the increase in exports within the accession countries has been due to an increase in the variety of products traded, rather than an increase in the volume of existing products....more

In this paper we examine the link between international outsourcing – or offshoring – and the skill structure of labour demand for a sample of 40 countries over the period 1995 2009. The paper uses data from the recently compiled World-Input-Output-Database (WIOD) to estimate a system of variable factor demand equations. These data allow us to exploit both a cross-country and cross-industry dimension and split employment into three skill categories. Our results indicate that while offshoring has impacted negatively upon all skill levels, the largest impacts have been observed for medium-skilled (and to a lesser extent high-skilled) workers. Such results are consistent with recent evidence indicating that medium-skilled workers have suffered to a greater extent than other skill types in recent years....more

Similar to other countries in the European periphery, Kosovo lacks competitiveness, has adopted the euro as its national currency and started an integration process with the EU. The next milestone in this process is the signing of an FTA with the EU. We simulate full trade liberalization vis-à-vis the EU, using the Global Simulation Model. Our results suggest a slight output loss in almost all industries in Kosovo due to a drop in prices. Moreover the government budget is expected to lose about 5% of its revenues due to the tariff cut. A shift towards more direct taxation and measures aimed at improving the investment climate in Kosovo are recommended....more

During economic downturns, labour hoarding becomes an attractive human resource strategy if sizeable search and training costs render hiring and training new workers too costly. The paper sheds light on the prevalence and extent of labour hoarding in five New EU Member States and Turkey during the global financial crisis, which spread quickly like wildfire after the bankruptcy of Lehman Brothers in September 2008. It applies a unique firm-level panel, constructed by merging the World Bank Financial Crisis Survey (FCS) with the Business Environment and Enterprise Performance survey (BEEPs) and ...more

We study the labour market effects of bilateral exchange rate realignment. We place emphasis on the composition of trade, the role of intermediates, and the underlying conditions of the labour market. Employment effects hinge on the fraction exported to and imported from the trading partner. A larger fraction exported to and a smaller fraction imported from the trading partner make it more likely that appreciation has beneficial effects. Furthermore, more sticky price expectations in wage formation, a smaller fraction of intermediates in the production process, and a lower rate of importer pas...more

We compare three theoretical explanations for the positive empirical relationship between importer income per capita and traded goods prices. A first explanation is that consumers with higher incomes demand higher quality goods with higher prices. A second explanation is that wealthier people exhibit an increased willingness to pay for necessary goods as more goods enter the consumption set in a hierarchic demand system, and can thus be charged higher markups. A third explanation is that consumers with higher incomes are more finicky regarding their preferred variety in an ideal variety framew...more

This paper discussed two measures of value added flows between countries: ‘Trade in value added’ accounts for value added of one country directly and indirectly embodied in final consumption of another country. ‘Value added in trade’ measures the value added embodied in gross trade flows. The paper shows that both measures result in the same overall net trade of a country which equals its trade balance in gross terms which however does not hold for bilateral relations. These value added flows can further be broken down by various production factors including capital and labour income by educat...more

Based on recent approaches measuring the factor content of trade when intermediates are traded this paper provides an approach to decompose the value added and factor (capital, high, medium and low educated labour) content of trade into foreign and domestic components. This adds to the literature by simultaneously considering both exports and imports allowing a focus on the patterns and changes of net trade and its components and generalizes the commonly applied vertical specialization measures based on exports only. It is further pointed out that a country’s trade balance in terms of value ad...more

Technology is a key element for long-term growth and economic development. Given the stark concentration of innovation activities in a few countries most countries have to rely on the international diffusion of newly developed technologies. Some countries may fail to successfully perform the task of technology adaption leading to a tripartite segmentation of countries into an innovation club, an imitation club whose members are capable of absorbing technologies developed by the former and a stagnation group that lack the capability to absorb foreign technologies. We test the role of the techno...more

The share of knowledge-intensive services and products in total output and demand and in the production of advanced, but also less advanced or emerging economies, has steadily increased over time and especially so for the knowledge-intensive services. This ‘quaternization’ of the economies not only points towards the rising shares of services but also stresses the role of knowledge-intensive services and their growing importance as sources of innovation and technology and as inputs into the manufacturing process. First the study documents the important role played by services in the EU as comp...more

Once the model economy of transition, Hungary has been struggling with much higher public and private debt and a significantly worse growth performance than its peers in the region. A deteriorating exchange rate, increasing yields on government securities and soaring CDS spreads have recently forced the Hungarian government to seek financial assistance from the IMF and the European Union. This research note has the intention to discuss the current problems of the Hungarian economy from a historical perspective....more

In 2009, Latin America was sucked into the financial crisis which, following the bankruptcy of Lehman Brothers, echoed around the globe and shook and shocked the entire global financial system. As a consequence, Latin America experienced a slump in real GDP growth, a drop in exports and a collapse in inward FDI flows. Against that backdrop, the paper sheds light on the effects the global financial crisis had on firms’ access to financing as well as on their funding strategies of investment projects. The analysis uses data collected as part of the World Bank Enterprise Survey (WBES) component o...more

One year after the onset of the Arab Spring, the transition is clearly at its very beginning. In that, it does not compare with the onset of transition in Central, East and Southeast Europe (CESEE) in 1989 or 1990, which was a kind of breakthrough and provided a clear discontinuity with the past in almost all respects. In the majority of cases this has been one more step in the process of systemic change in the CESEE that will take some time to unfold. This Policy Note compares changes in the Middle East and North Africa (MENA) with the processes of reforms and change that took place in the so...more

We study firm heterogeneity in a specific factors model to address the effect of factor mobility on reallocation gains from trade. A model is proposed with Melitz-type firm heterogeneity with two sectors, two countries and two fixed factors and one factor mobile across sectors. Equilibrium in each sector can be concisely represented by a demand and supply equation and an FE and ZCP condition. Varying the substitution elasticity between the fixed and mobile factor, we show that the welfare gains from trade liberalization are larger in countries with lower substitution elasticity. Furthermore, i...more

The main objectives of this study are the assessment of activation policies in the Western Balkan countries in the light of the EU policy frameworks and the capacity and effectiveness of the Public Employment Services (PES) to implement modern labour market services. The general strategy of the research is to examine the existing activation policies against the background of labour market developments in the Western Balkan countries. In a further step the study identifies opportunities for regional cooperation among the individual countries of the region. ...more

This paper aims to identify formal and informal institutional factors in customs procedures and their impact on the performance of small and medium-sized enterprises (SMEs) involved in international trade in Kosovo based on a questionnaire conducted in 2009. The econometric findings show that one of the most important obstacles encountered by SMEs are regular appeals against customs decisions that are assumed to be inter alia a consequence of frequent changes in over-complicated laws and regulations. However, there is a positive and significant effect of the formal customs institutions that fa...more

In the wake of the ‘Arab Spring’ several observers compared the changes in the Middle East and North Africa (MENA) to the transition of the former communist countries in Central, East and Southeast Europe (CESEE) to parliamentary democracy and market economy starting two decades ago. Relying on the wiiw’s long standing experience in analysing both the centrally planned economic systems and the institutional and economic aspects of transition, the following Policy Note attempts – without claiming to have a detailed knowledge regarding MENA countries at the moment - to find poss...more

Economic outcomes before and after the break-up of Yugoslavia What are the costs of nationalistic policies? The expectations may be more optimistic than is warranted as the example of the breakup of Yugoslavia suggests. Assuming that nationalists expected that economic results would be better than in federal Yugoslavia, it makes sense to get some idea of what an alternative to a nationalistic strategy would have achieved in the last 20 years. The alternatives are nationalism vs. integration, not necessarily independence vs. federal Yugoslav state. That allows Slovenian deve...more

(Reprint from: WIFO-Monatsberichte, Vol. 84, No. 5, May 2011) Zusammenfassung Das Wirtschaftswachstum belebt sich in den mittel- und osteuropäischen Ländern (MOEL) langsam, bleibt jedoch schwächer als vor der Wirtschaftskrise. Einige der kleinen, offenen Volkswirtschaften der Region wahrten durch Abwertung oder auch Produktivitätssteigerung ihre preisliche Wettbewerbsfähigkeit. Der überwiegend starke Exportaufschwung trug zur Erholung der Industrieproduktion bei. Aufgrund der dynamischen Ausfuhrentwicklung und der Schwäche der Inlandsnachfrage verringerten sich die Leistungsbilanzdefizite ...more

In the period after the political changes in the year 2000, GDP growth in Serbia was rather rapid and compares favourably with other transition countries in Southeastern Europe. It was driven mainly by the expansion of services, with industrial production and agriculture basically stagnating over the whole period. The labour market effects were similar to those in other countries going through transition: employment declined in the public sector and increased in the private sector, with the overall number of employed declining and those unemployed increasing, and also with strong increases in the number of pensioners....more

Timeliness has gained growing importance in international trade. This paper provides empirical evidence on the significant cost of time in trade by exploiting the quasi-experimental nature of the European Union (EU) enlargement in 2004. It applies a difference-in-difference-in-differences econometric strategy on a European industry-level database of bilateral trade barriers, where industries are differentiated according to their time sensitivity. The use of a treatment intensity indicator that captures the decline in the waiting time at borders supports the identification. Results are cross-ch...more

The objective of this study is to analyse employment developments in the gas and electricity sectors in seven Western Balkan Contracting Parties of the Energy Community. These are Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Kosovo under UNSCR 1244/99. In addition, the impact of the liberalization of the respective markets is examined (quantitatively and qualitatively) and the most likely trends for the future development are identified....more

Inequality is a multidimensional phenomenon though it is often discussed along a single dimension like income. This is also the case for the various decomposition approaches of inequality indices. In this paper we study one- and multidimensional indices on inequality on data for three large Southeast European countries, Bulgaria, Romania and Serbia. We include four dimensions in our measure of multidimensional inequality: income, health, education and housing. We apply various decomposition methods to these one- and multidimensional indices. In doing so, we apply standard decomposition techniq...more

Where is your mobile coming from? This simple question is not easy to answer as the mobile has been assembled using components from different countries (including the domestic) and by using services from the domestic and foreign economies. This multi-country nature of products is not only a feature of more complex high-tech products (such as mobile phones, cars, etc.) but in almost all cases a product is not made up entirely of components or inputs from the country where it is finally assembled or sold. At least some of the components and services (e.g. transport services) necessary to bring t...more

This paper looks at the influence globalization exerts on wage negotiation processes and outcomes. Specifically, it establishes whether, compared to their purely domestically oriented counterparts, exporters share a higher fraction of the rents they generate with their employees. The analysis uses a panel of Austrian manufacturing firms between 2002 and 2006 and demonstrates that, in general, Austrian exporters do not share a higher part of their rents with their employees. Moreover, the analysis also takes into account that exporters are a very heterogeneous group, broadly differing in terms ...more

Romanian SMEs can directly benefit from the Sectoral Operational Programme ‘Increase of Economic Competitiveness’ (SOP IEC) and some parts of the Regional Operational Programme (ROP) in the period 2007 2013. Research commissioned by the Directorate General for Regional Policy of the European Commission made a strategic evaluation of SMEs’ experience with these support programmes and their needs for support in general. This paper is the summary of the final report of the project carried out in the first half of 2010. In the context of the research underlying this paper, a standardized sur...more

This paper attempts to shed new light on the effect innovation has on employment. Specifically, it identifies the net employment effects of technological product and process innovations as well as complementary non-technological organizational innovations which have so far mostly been bypassed in comparable analyses. The analysis applies the 4th Community Innovation Survey and determines and compares innovation-induced employment effects in both manufacturing and service sectors across three country-groups: i) a set of Central and Eastern European transition countries, ii) a group of Southern ...more

Das im Rahmen des Kompetenzzentrum "Forschungsschwerpunkt Internationale Wirtschaft" (FIW) erstellte Jahrbuch "Österreichs Außenwirtschaft 2010" steht hier zum freien Download zur Verfügung. Die aktuellen makroökonomischen und institutionellen Herausforderungen für den Euro-Raum angesichts der Krise und die Wechselkursentwicklung des Euro sind heuer zentrale Themen im Jahrbuch "Österreichs Außenwirtschaft 2010". Darüber hinaus finden sich darin Beiträge zu einer ganzen Reihe weiterer interessanter Themen wie die Erholung der Weltwirtschaft und des Handels von der globalen Wirtschaftskrise, ...more

The literature on international migration has repeatedly emphasized that the extent and structure of migration has an important impact on the competitiveness of regions and countries. This report provides an overview of the extent and the potential effects of high-skill migration to the EU27. It shows how many high-skilled migrants live in the EU, where these migrants come from, and how the European Union is positioned in the international competition for talent. Second, we examine how high-skilled migrants fare in European labour markets. Finally we address the issue of the effects of high-sk...more

In this report, wiiw researchers Vladimir Gligorov and Michael Landesmann and their co-authors Torbjörn Becker, Zsolt Darvas, Daniel Daianu, Pavle Petrovic, Jean Pisani-Ferry, Dariusz K. Rosati, Andre Sapir and Beatrice Weder di Mauro argue that in view of the depth of integration in Europe, the development model of the central, eastern and south-eastern Europe (CESEE) region, despite its shortcomings, should be preserved. But it should be reformed, with major implications for policymaking both at national and EU levels. If so, what are the required changes? The European think tank Bruegel and...more

The paper analyses the joint determinants of inequality and growth with a special emphasis on public spending structures in transition. The mutual benefit of low real interest rates, to both equity and economic development is a major result of this paper. In terms of public spending items we find a positive correlation with equity and a negative one with growth as several of the government expenditure items seem to act counter-cyclically. In the late 1990s and early 2000s the European integration process allowed most of the transition economies to aim for the best of both worlds: equity and ec...more

In this paper we consider the trade creating effects of Preferential Trade Agreements (PTAs) for a large sample of countries over the period 1960-2000. The paper builds upon the existing literature by examining whether any significant effects of PTAs occur through a change in the variety of exports (i.e. the extensive margin) or through a change in the volume of existing products (the intensive margin). To address this issue we employ the commonly used gravity equation as well as a matching approach to deal with potential self-selection problems. Our results indicate that exports respond posit...more

European Comparison Project data (years 1999-2008) are used for an estimation of cross-country systems (AIDS) of consumer demand functions defined over durable and non-durable tradable goods and non-tradable services. General exchange equilibrium models of inter-EU trade generate equalized relative prices of tradable goods. But domestic relative prices of services become more dispersed and can move the PPP/ER ratios away from unity. PPP/ER discrepancies may be sustained even when there are no impediments to free trade. ...more

What are the economic effects of redistributing one dollar from profits to labour income? We address this question for the post-World War II economies of the United States and Canada within a structural VECM procedure allowing for up to two breaks of unknown timing. In the United States the short-run spending effect on growth, set in motion by higher labour income, is strong enough to make such a redistribution an attractive, maybe provocative, policy alternative. Across the border in Canada, however, the negative medium-run capacity effect, brought about by diminished profits, dominates the p...more

(Reprint from: WIFO-Monatsberichte, Vol. 83, No. 5, May 2010) Zusammenfassung Die Wirtschaft dürfte sich in den mittel- und osteuropäischen Ländern (MOEL) beleben, allerdings länderweise in unterschiedlichem Ausmaß. Zwischen September 2008 und März 2009 hatte sie teilweise einen schweren Rückschlag erlitten. Polen und Albanien waren die einzigen MOEL, deren Wachstum sich nur verlangsamte, während die Wirtschaftsleistung der baltischen Länder und der Ukraine drastisch schrumpfte. Eine Rückkehr zu den kräftigen Wachstumsraten der Jahre vor 2008 ist kurz- und mittelfristig nicht sehr wahrschein...more

This paper analyses empirically the danger of a Dutch Disease Effect in tourism-dependent countries in the long run. Data on 134 countries of the world over the period 1970-2007 is used. In a first step the long-run relationship between tourism and economic growth is analysed in a cross-country setting. The results are then checked in a panel data framework on GDP per capita levels that allows to control for reverse causality, non-linearity and interactive effects. It is found that there is no danger of a Beach Disease Effect. On the contrary, tourism-dependent countries do not face real excha...more

Three interrelated aspects typical of most financial crisis of domestic origin are brought together in a model in this paper. The first aspect is debt financed consumption boom supported by rising asset prices which ultimately leads to credit crunch and debt deflation as lenders lose confidence in borrowers. This is related to the second aspect tracing gradual evolution towards Ponzi finance. This is accompanied by fragility of the financial sector itself and its insolvency as an inevitable outcome of unregulated economic expansion. The paper concludes with comments on how these three aspects ...more

The paper starts with examining the standard concept of government expenditure multiplier and finds that in a model of open economy with government revenues and expenditures the multiplier definition is incorrect in so far as the import intensity component relates total imports to GDP, whereas part of imports serves as inputs in exported output. Therefore the value of imports should be related to the value of final output, which is the sum of domestic absorption and exports. Since for most countries final output is significantly larger than GDP, the value of the multiplier is correspondingly l...more

This paper presents a number of extensions to the theory of profit- and wage-led growth by integrating selected aspects of asset markets and housing markets. Theoretical results from comparative statics are then presented and discussed, notably with reference to recent housing market bubbles. The exposition incorporates distributional aspects relating to different classes of economic agents and how those differences relate to wage income versus profit income. ...more

As the economic recession in the EU seems to be drawing to a close, there is inevitable interest in what the effects on employment in different sectors of activity and occupations have been, or are still likely to be once all the repercussions have materialized. Indeed, given the lags in both the collection of data and, more importantly, in the effect of a downturn in output on employment, it is likely to be only some time after the recession comes to an end and economic growth gets back close to its trend rate that the consequences for jobs will be apparent in the official statistics. Althoug...more

In this paper we examine the impact of membership in Preferential Trade Agreements (PTAs) on trade between PTA members. Rather than considering the impact of PTA membership on the volume of trade we consider the impact of membership on the structure of trade. For a large sample of countries over the period 1962-2000 we find that membership in a PTA is associated with an increase in the extent of intra-industry trade. In addition, we find that the effect of PTA membership on IIT is larger when a PTA is formed between two developed countries....more

For the English synopsis click HERE. Das im Rahmen des Kompetenzzentrum "Forschungsschwerpunkt Internationale Wirtschaft" (FIW) erstellte Jahrbuch "Österreichs Außenwirtschaft 2009" steht hier zum freien Download zur Verfügung. Das österreichische Außenwirtschaftsjahrbuch ist eine kompakte und informative Zusammenstellung der wesentlichen globalen und öterreichspezifischen außenhandelsrelevanten Entwicklungen. Es wird heuer zum dritten Mal vom Kompetenzzentrum "Forschungsschwerpunkt Internationale Wirtschaft" (FIW), einem Kooperationsprojekt von WIFO, wiiw und WSR, herausgegeben. Auftragg...more

Since the mid-1980s a substantial body of research has taken shape on trade in services. Much of this is inspired by the WTO and regional trade agreements. However, an increasing number of papers focus on the impacts of unilateral services sector liberalization. The literature touches on important linkages between trade and FDI in services and the general pattern of productivity growth and economic development. This paper surveys the literature on services trade, focusing on contributions that investigate the determinants of international trade and investment in services, the potential gains f...more

On a global level, the EU emerges as the most important foreign direct investor, also if considering extra-EU investments only. This reflects the capability and propensity of EU firms to internationalize their business activities. A joint analysis of two methodologically very distinct databases - Eurostat FDI data for FDI flows and stocks, and the FDI Intelligence from Financial Times Ltd. for the number of investment projects - made it possible, for the period 2001-2007 and 2003-2008 respectively, to reveal several facts and trends concerning the competitive position of EU firms in the BRICs ...more

This paper addresses the link between productivity and labour mobility. The hypothesis tested in the paper is that technology is transmitted across industries through the movement of skilled workers embodying human capital. The embodied knowledge is then diffused within the new environment creating spillovers and leading to productivity improvements. A theoretical framework is presented wherein productivity growth is modelled through knowledge acquisition with respect to labour mobility. The empirical estimates confirm the existence of positive cross-sectoral knowledge spillovers and indicate ...more

We use Bayesian Model Averaging (BMA) to evaluate the robustness of determinants of economic growth in a new dataset of 255 European regions in the period 1995-2005. We use three different specifications based on (i) the cross-section of regions, (ii) the cross-section of regions with country fixed effects, and (iii) the cross-section of regions with a spatial autoregressive (SAR) structure. Our results indicate that the income convergence process between countries is dominated by the catching-up process of regions in Central and Eastern Europe (CEE), whereas convergence within countries is mo...more

In this paper we study the employment effects of changes in the levels and patterns of trade integration and outsourcing in the Austrian economy over the periods 1995-2000 and 2000-2005. Based on an input-output framework, we apply a hierarchical decomposition analysis to disentangle the employment effects of changes in labour productivity, technical input coefficients and final demand components. Outsourcing is modelled as changes in the shares of domestically produced intermediates. For this some further details can be derived by distinguishing between intermediate imports according to educa...more

This paper uses the adaptive Lasso estimator to determine the variables important for economic growth. The adaptive Lasso estimator is a computationally very simple procedure that can perform at the same time model selection and consistent parameter estimation. The methodology is applied to three data sets, the data used in Sala-i-Martin et al. (2004), in Fernandez et al. (2001) and a data set for the regions in the European Union. The results for the former two data sets are similar in several respects to those found in the published papers, yet are obtained at a negligible fraction of comput...more

We analyse the robustness of potential determinants of the differences in the long-run growth rate of GDP per capita across EU regions using quantile regression. We propose using Bayesian Model Averaging (BMA) methods on the class of quantile regression models in order to assess the set of relevant covariates in cross-regional growth regressions allowing for different effects across quantiles of the growth variable. The results indicate that the set of robust growth determinants differs across quantiles. The set of robust variables includes skill endowment and initial GDP per capita when not a...more

(Reprint from: WIFO-Monatsberichte, Vol. 82, No. 5, May 2009) Zusammenfassung Die mittel- und osteuropäischen Länder (MOEL) sind spätestens seit September 2008 von der Krise der Weltwirtschaft ebenfalls betroffen. Vor allem die Industrieproduktion und der Außenhandel leiden unter den Folgen des Nachfrageeinbruchs. Das reale BIP-Wachstum verlangsamte sich zunächst deutlich und dürfte mittlerweile in fast allen Ländern von einem Rückgang abgelöst worden sein. Die Verschlechterung der Wirtschaftslage bewirkte eine deutliche Erhöhung der Arbeitslosigkeit. Die öffentlichen und die privaten Hausha...more

The purpose of this paper is twofold. First, we explore empirically to what extent the determinants of trade in services differ from those of trade in goods. Second, by the use of instrumental variables, we explore potential complementarities between bilateral trade in goods and bilateral trade in services. Using a gravity framework, the main results show that bilateral trust and contract enforcement environment, networks, labour market regulations and variables denoting technology of communication have a higher impact on services trade than on goods trade. Finally, after using instrumental va...more

Literature review (Details) Tito Boeri, Herbert Brücker, Anna Iara, Peter Huber, Pavel Kaczmarczyk, Richard Upward and Hermine Vidovic Free Download Analysis of the scale, direction and structure of labour mobility (Details) Herbert Brücker and Andreas Damelang Free Download Forecasting potential migration from the New Member States into the EU-15: Review of Literature, Evaluation of Forecasting Methods and Forecast Results (Details) Herbert Brücker, Andreas Damelang and Katja Wolf Free Download The macroeconomic consequences of labour mobility (Details) Timo Baas, Herbert Brucker, An...more

This literature review is part of the study "Labour mobility within the EU in the context of enlargement and the functioning of transitional arrangements" (VC/2007/0293). The purpose of this very brief review is to prove an overview on the literature relevant to this study. More detailed discussions of the literature will be included in the background reports to the individual deliverables. This review has two sections. In the first section we consider the determinants and forecasts of migration following the recent EU enlargement and associated transition arrangements. In the second section w...more

This background report is part of the study "Labour mobility within the EU in the context of enlargement and the functioning of transitional arrangements" (VC/2007/0293). The objective of this report is to provide an overview on the main patterns of labour migration in the context of the EU Eastern enlargement and on the fundamental economic forces which cause these patterns. The income gap between the EU-15 and the new member states from Central and Eastern Europe is larger than in previous enlargement rounds. In particular, the nominal gap in per capita GNI and wage levels is high, reflect...more

In this background report we review the literature on migration forecasts, evaluate different methods for forecasting migration and present a new approach to forecast the migration potential from the new member states (NMS) into the EU-15. There has been a large literature attempting to forecast the migration from the NMS before enlargement. At a long-run migration potential of about 3 to 5 per cent of the population and an influx of between 200,000 and 300,000 persons, the mainstream of these forecasts is by and large consistent with the actual migration movements from the NMS-8 into the EU-1...more

This deliverable examines the impact of the EU Eastern enlargement on wages, unemployment and other macroeconomic variables. For this purpose we employ two general equilibrium models which both analyse the economic consequences of labour mobility in the context of the EU Eastern enlargement in a setting of imperfect labour markets. The first model is based on a nested production function, which enables us to examine the migration effects for the different cells of the labour market. The second model is based on a CGE-framework, which allows us to consider the links between labour migration, tr...more

Despite a rapidly growing scholarly interest in skilled migration generally, there is as yet only limited evidence on the extent and effects of the outflow of skilled workers from the New Member States (NMS), the so-called "brain drain". Economic theory predicts that a brain drain can have positive or negative impacts on the sending country, and so any assessment of the actual effect remains but an adverse impact of skilled migration upon the sending country cannot be ruled out a priori. The assessment of its effects becomes an empirical issue. Drawing robust conclusions from the empirical evi...more

This deliverable analyses the regional impact and distribution of migration and crossborder commuting in the EU27 using European Labour Force data. Furthermore a case study of migration and commuting potentials in one of the border regions, which can be deemed to be most affected from these flows (the border region of the new member states to Austria) is conducted by using the first two waves of the LAMO household survey conducted in the CENTROPE region in 2004-2005 and 2006-2007. With respect to the regional structure of migration in the EU we find the largest local clusters of migrants in ...more

Austria (Details) Peter Huber and Klaus Nowotny, Austrian Institute of Economic Research / WIFO Free Download Bulgaria (Details) Iskra Beleva, Institute of Economics with the Bulgarian Academy of Sciences Free Download Croatia (Details) Hermine Vidovic, The Vienna Institute for International Economic Studies Free Download Denmark (Details) Artjoms Ivlevs, Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) University of Nottingham Free Download France (Details) Laetitia Duval, Université de Nantes Free Download Germany (Details) Timo Baas and Herbert Brücke...more

We survey the economic and labour market developments of Austria in the years since enlargement to identify noticeable shifts in economic development, which can be causally linked to the enlargements of the EU in 2004 and 2007. Since the public policy debate before enlargement expressed concerns about the potential effects of enlargement on migration, the labour market position of the less skilled and foreigners as well as potentially asymmetric impacts on regions, we pay particular attention to these four aspects of economic development. We find rather ambiguous evidence. Economic developmen...more

This study presents an overview of labour mobility in Bulgaria in the context of the significant socio-economic transformation after 1990 and the enlargement process. It describes the steps in the institutional setting of labour migration and its main patterns, outlining the changes in the stocks and flows of migration before and after the enlargement. Based on the existing literature the study summarizes the effects of migration on the national economy and labour market. The study emphasized that the design of an effective national migration policy needs a clear distinction between the short-...more

Denmark applied gentle transition rules on migration from the NMS in May 2004 and further eased the access to its labour market in 2006 and 2007. We summarise the available evidence on the extent, composition and effects of migration from the NMS to Denmark after 2004. While the inflows from the NMS increased substantially in 2006 and 2007 with respect to their initial levels, the share of the NMS workers in the Danish labour force remains relatively low. Most migrants come from Poland and the Baltic States, are relatively young and many are employed in the construction and agricultural sector...more

Ireland, along with the UK and Sweden, announced an immediate opening of its borders to nationals of the NMS that became part of the EU in May 2004. In the last decade the proportion of foreign born residents in Ireland has doubled to 15%. Many of these migrants come from the new member states. They tend to be relatively young and relatively well educated. However, at present they tend to work in low skilled employment in hotels, restaurants and manufacturing. The benefits that accrue to the Irish economy and the immigrants themselves should increase as they become more fully integrated and mo...more

This study analyses the implications for the Italian labour market of the recent dramatic upsurge in immigration from the New Member States and the Candidate Countries after the 2004 and 2007 enlargement within the context of the current Italian immigration policy. The study documents the most salient features of the immigrant population before and after the enlargement with respect to demographic characteristics, skill structure, labour market participation, occupational sector, underscoring the main differences and similarities within immigrants subgroups (New Member States vs. Candidate Cou...more

This study provides a summary on the extent and structure of Romanian permanent and temporary emigration since 1989, its institutional framework, and its economic consequences in Romania. Romanian out-migration has evolved dramatically in the past fifteen years, starting from low levels and the predominance of permanent migration, to assume diverse forms and targeting new destination countries, particularly Italy and Spain, by the new millennium. The stocks of Romanian nationals in these countries increased considerably between 2001 and 2003 in particular. The characteristics of the migrants h...more

We summarise the available evidence on the extent, composition and effects of migration from the NMS to Sweden after 2004. Sweden was the only EU State which in 2004 introduced the full Community rule on the free movement of labour for NMS nationals with no restrictions regarding access for social benefits. Despite this, the inflows from the NMS to Sweden, while increasing relative to their initial levels, have been lower than to other European countries (the UK, Ireland, and Norway). Most NMS migrants come to Sweden from Poland and the Baltic States. Compared to the pre-transition levels, the...more

The UK has experienced unprecedented flows of migration from the New Member States since 2004. We survey the available evidence on: the size of these flows (gross and net), the characteristics of the migrants, and the impact that they have had on the UK labour market and on UK public services at a local level. We also show that recent migrants from the NMS are employed overwhelmingly in occupations which are less-skilled, and lowerpaid, then equivalently education UK-born workers. ...more

This piece argues that three specific policy issues need to be addressed urgently in Central, Eastern and Southeastern Europe in order to avoid a sustained period of recession or depression: (i) orderly exchange rate adjustment (ii) fiscal stress and (iii) financial sector vulnerability. The G-20 Declaration supports significantly the role of the IMF in the current crisis, but there is a need for an additional determined effort by the EU....more

We offer a duality-based methodology for incorporating multi-sector effects of international trade into open economy macroeconomic models, developing the concepts of the dynamic factor price equalization set and the integrated intertemporal equilibrium. Under this approach, the aggregate production function depends on output prices and factor endowment stocks. It preserves all of the structure of a standard GDP function from the trade theory literature. In a two-country version of the model considered below, we examine the properties of the dynamic factor price equalization set. If the global ...more

This policy note argues that the current global economic crisis enforces an adjustment process in the countries of Central, Eastern and Southeastern Europe (CEE and SEE) in the form of real exchange rate depreciation. Because of the weakness of financial institutions and built-up foreign currency debt such a process has inherent dangers to lead to overshooting and a possible capital flight out of these economies. In such circumstances the economies are severely constrained in putting the types of policies in place which are currently pursued in most of Western Europe, the USA and Japan, that i...more

This paper focuses on the increasing role played by lower- and medium-income countries in the global economy. In particular we look at the role of outsourcing in the process of trade integration of these countries. Further we discuss the impact of these integration patterns upon labour markets with a focus on the position of different skill groups of workers. The paper provides descriptive evidence on the changes in trade patterns over the past decades, distinguishing between product types (primary, processed, parts and final goods) and the sectoral structure (i.e. industry groups according to...more

Working with a panel dataset of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the services sectors. We first develop a consistent analytical framework for the application of the gravity model to both services trade and commercial presence (i.e. FDI), using a composite model of delivery that offers testable hypotheses about the roles of different modes of services supply as complements or substitutes. We further link our estimates to policy variables measuring market regulations that may act directly or implicitly as barriers to trade. We fi...more

The main question addressed in this study is the performance of the labour markets in the Western Balkans. The aim is to find out whether they can deliver growth of employment and decline of unemployment in the medium run and whether they can withstand short-term shocks due to changes in demand or supply. These questions are particularly pressing in view of the monetary policy based on fixed exchange rates which is followed by the majority of the countries in this region. In terms of the theory of optimal currency areas, if the exchange rate is fixed, labour markets have to be flexible if ther...more

In this paper we extend the agglomeration model of Ciccone (2002) to the level of industry. We then test this model using panel data for six sectors on regional level data for 27 EU member states. Our results for the aggregate economy confirm the estimates of Ciccone (2002). For our full sample of countries the sectoral level results also indicate significant agglomeration effects, with the exception of agriculture. Considering differences in the extent of agglomeration effects between new and old EU member states, however, leads to the conclusion that agglomeration effects tend to be stronger...more

This study provides an overview of the most important economic and trade policy impacts of high oil prices in the European Union. The potential reasons for recent oil price increases are briefly discussed, followed by a review of the macroeconomic effects of higher oil prices, namely on growth, inflation and trade balances. Industry-specific effects are then assessed, offering both a historic perspective and descriptive elements regarding possible future developments. Price effects are also assessed, covering final energy product prices, industrial commodity prices and agricultural and food pr...more

The collapse of communist regimes in Central and Eastern Europe marked a historical event for the countries on both sides of the iron curtain. Using the recently released EU KLEMS database on detailed sectoral growth and employment measures, we analyse the productivity performance in the period after 1995 for five transition economies, i.e. the Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia, and compare their performance with a group of European core economies and partly Austria as a neighbouring small open economy. Our analysis reveals a strong catching-up process with the ...more

In this paper we test the hypothesis that the sector bias of skill-biased technical change is important in explaining the rising relative wage of skilled workers in the manufacturing sector in three Central and Eastern European transition countries. The evidence for Hungary and Poland is consistent with the sector bias being important in explaining the rising wage premium; the hypotheses is however not confirmed for the Czech Republic. ...more

This paper examines how variable output and profit share jointly determine investment and saving, while the difference between investment and saving determines the changes in output and profit share. Analysis of the resulting pair of differential equations yields novel implications for the multiplier process. In this more general framework a number of separate strands of the Keynesian inspired literature can be understood. In particular the model incorporating both forced saving and profit squeeze analyses stability of the dynamical system to bring out the complex relation between in- and out-...more

For about a decade, GDP growth in Central European countries has been consistently faster than in the 'old' EU-15. As a first approximation, one can expect a growth differential of about 2 percentage points to prevail also in the future. This practical rule-of-thumb is broadly consistent with the outcomes of some early attempts at a formal estimation of the longer-term growth rates for the countries considered. The early models underlying those attempts were inspired by the 'New Growth Theory' (NGT) approach (exemplified by Barro and Sala-i-Martin, 1995). This study reviews the available estim...more

The paper originates from the casual observation that the application of the Devereux and Griffith methodology to calculate bilateral effective average tax rates (BEATRs) leads to results indicating that BEATRs for German outbound investment increased sharply from 1999 to 2001, despite a marked reduction of the statutory corporate tax rate in Germany and more or less unchanged tax systems in the other EU countries. In reviewing the Devereux and Griffith methodology we find that this inconsistent result is due to the way split-rate corporate tax systems are accounted for. Thus, in the original ...more

This paper attempts to reconcile the often inconclusive evidence on the impact of FDI on growth by taking into account the heterogeneity both among industries and among countries. Using a comparable database at the industry level for 35 countries of the OECD, Asia and Eastern Europe from 1987 to 2002, we test both the stage of development and the FDI industrial pattern for the economic impact of FDI on growth. In certain industries and for the catching-up countries, a significant and positive relationship emerges when FDI interacts with investment or export orientation. ...more

This paper employs smooth transition models to investigate the GDP series of ten CEECs. Allowing for a transition in both trend and intercept we examine the response of GDP to reforms in CEECs. Our results indicate that in only a small of number of countries is there evidence to suggest that the impact of the reforms on long-run growth has been positive. In most cases there has been no significant impact of the transition on the trend growth rate. There also appears to be little difference in terms of the depth of recession, speed of adjustment and the impact of reforms on GDP growth depending...more

Relative to non-food items, food tends to be cheaper in rich, as compared with poor European countries. This tendency cannot be explained in terms of cost developments or foreign-trade considerations. A positive explanation proposed focuses on demand-income-supply interaction. An analysis of a cross-country price-augmented modification of Engel's Law, econometrically specified, indicates that the relative price of food is related positively to the supply of food items and negatively to that of non-food items. This finding is consistent with ¿agricultural price scissors' and also casts a differ...more

In the trade-technology-wage debate, the effects of the various forms of technical progress on relative factor prices have been addressed in a number of contributions over the past decade. However, the existing literature is far from conclusive. The various contributions either relied on specific assumptions, such as Leontief technologies or Cobb-Douglas demand, that were decisive for the respective conclusions, or they used a more general framework, arriving at ambiguous results in many cases. In this paper we analyse a general equilibrium framework with CES production and CES demand function...more

The paper starts with a discussion of the development of the number of manufacturing sector jobs in the framework of economic transformation and industrial restructuring in Central and Eastern Europe. Over the past decade, domestically-owned manufacturing companies reduced the number employed while foreign-owned enterprises expanded that number. Job losses due to FDI have resulted from restructuring of privatized state-owned companies. A reduction of employment has also resulted from foreign companies cutting domestic supplier linkages after taking over state-owned enterprises. A database with...more

Summary · Grouping the regions of the EU-15 and the new member states (NMS, including Bulgaria and Romania) into five clusters according to the relative importance of broad sectors of activity reveals marked differences in the regional economic structure and development. · In capital cities throughout the EU, GDP per head is significantly higher than in other regions. Regional disparities in GDP per head have widened markedly in the NMS in recent years, though not in the EU-15. · There is no close association across regions between GDP per head and the employment rate, though the capital...more

This paper applies a set of indicators of tax compliance to the household sector in Albania. These estimates are performed using available data for the years 1996 to 2003. Estimates of income declaration rates and of corresponding undeclared household income are computed using household final consumption data from national accounts and household survey data as well as detailed data on household taxation. Specific aspects such as remittances and the role of agriculture are explicitly taken into account and discussed. Our results show that household tax compliance in Albania is low by European s...more

This paper introduces a model for forecasting changes in employment levels and structures by sectors, occupational categories and educational attainment levels which is then applied to the new EU member states (NMS) and Bulgaria and Romania. The model is based on the following ideas: As these countries face lower productivity levels as compared to the EU-15, the scope for technical change and catching up is quite large. Thus, if these countries converge to the EU-15 productivity levels at given trajectories, real income levels are also changing, which implies changes in demand and thus output ...more

This paper provides an overview of longer-term structural developments in the new EU Member States from Central and Eastern Europe (NMS). It analyses structural changes in the NMS' economies and patterns of productivity catching-up both at macro level and within the individual industries. With the transformational recession of the early 1990s left behind, the majority of the NMS embarked on a path of rapid economic growth during the past decade. They have experienced an impressive productivity catching-up, both at the macroeconomic level and in the manufacturing industry in particular. Yet in ...more

The very basis of macroeconomics is the circular flow of expenditures and incomes. From this follows the conclusion that it is demand which determines supply and not vice versa. The most paradoxical result of this approach is the hypothesis that investment finances itself: by quantity adjustment, if capacity and labour are not fully employed (a typical feature of a capitalist economy) or by price adjustment, i.e. by demand-pull inflation (if capacity and labour force are underemployed). ...more

This paper explores the link between trade structure, trade specialization and per capita income growth. It is argued that industrial upgrading in export specialization patterns has a positive long-run growth effect, while the effect of structural change in industrial import patterns is in principle ambiguous. A standard empirical growth model is augmented by various measures of structural change. The hypothesis that not trade per se matters, but that various types of trading activities impact differently on economic growth is tested on a sample of 45 countries (OECD members and selected Asian...more

We describe concentration tendencies in individual manufacturing industries in Central and Eastern European countries and identify relevant factors causing these patterns. Using output and employment data for 14 manufacturing industries over the years 1993-2002, we observe an increase in concentration of industrial activity (both in output and employment terms). This is opposed to the general trend prevailing in Western Europe over the same period. Using panel estimation techniques, we explain these developments by factors derived from traditional trade theory (differences in endowments or tec...more

Analysing the evolution and determinants of foreign direct investment (FDI) in Estonia, Latvia and Lithuania, this paper argues that sound economic policies have created an environment conducive for FDI. Overall, FDI has contributed to economic growth in the Baltic economies, having financed around one-fifth of fixed investment. However, their small size makes the Baltic countries relatively less attractive for market-seeking FDI in manufacturing. Moreover, at the outset of transition, their economies were dominated by relatively uncompetitive low-technology industries, which made them less in...more

Zusammenfassung Das Wachstum beschleunigte sich in den neuen EU-Ländern, sodaß sich das BIP pro Kopf an das Niveau der EU 15 etwas annäherte. In allen Ländern (mit Ausnahme Lettlands und Litauens) hat das Bruttoinlandsprodukt sein Niveau vor Beginn der Transformation mittlerweile überschritten. Die langsame Konjunkturbelebung in der EU 15 wird künftig eine Ausweitung der Nachfrage nach Produkten aus den neuen EU-Ländern mit sich bringen, die zudem allmählich an Wettbewerbsfähigkeit gewinnen. Eine zusätzliche Stütze des Wachstums wird eine Zunahme der Investitionstätigkeit etwa in Polen und Ts...more

There is evidence that the skilled to unskilled wage rates were rising in the 1980s and at the beginning of the 1990s. This can potentially be explained by a Heckscher-Ohlin framework where economic integration implies that the advanced countries specialize in skilled-labour-intensive industries and developing countries in unskilled-labour-intensive industries. However, actual trade figures show that import penetration was particularly high in the skill-intensive industry segments also for trade integration with developing economies, which would imply a falling relative wage rate of skilled wo...more

This paper applies a gravity model to foreign direct investment (FDI) stocks in five countries of Southeast Europe from nine selected Western European source countries, using five countries of Central Europe as a control group. Basic elements of the economic theory on FDI are shortly reviewed, then the discussion shifts to recent empirical work and the various issues surrounding estimates using the gravity equation. FDI to Central Europe is mainly of the horizontal, market-seeking type. The evidence for Southeast Europe is less clear. Both types co-exist and, if we exclude Croatia, we are led...more

This paper uses data on consumption expenditure and price levels from the European Comparison Project (ECP) 1996 for the analysis of demand structures in a cross-section of 52 countries. The paper describes the patterns of consumption expenditures, price levels and relative prices for four groups of countries (ranked by their expenditure levels). This is done at different levels of aggregation for three, six, and eight groups of consumption goods. This descriptive analysis shows, first, the dependence of consumption patterns on the level of expenditures and, second, broad patterns of price lev...more

Central and East European Economies: Moderate Slowdown After the Boom in 2000 In the year 2000, for the first time since the beginning of transformation the economy grew in all Central and East European countries (CEECs). All countries managed to accommodate the shock of high oil prices - no currency, current account, or banking crisis occurred. Croatia, the Czech Republic, Romania and Ukraine pulled themselves out of recession, and so did the Federal Republic of Yugoslavia, under very special conditions. The CEECs gained from the business climate in the European Union and in the USA, but this...more

The issue of the impact of trade on economic performance and labour markets has been intensively discussed in the recent literature on trade liberalization and globalization where the debate was mainly about identifying the relative impact of trade and technology. The bulk of the existing literature in this area employs almost without exception a static Heckscher-Ohlin framework which seems not to be a suitable tool for analysing the ongoing dynamics. This paper presents a dynamic multi-sectoral framework with heterogenous labour to explore the issue of trade liberalization and sectoral catchi...more

Although there exists a vast literature on convergence and divergence of income levels across countries or regions at the aggregate level, there is only little work on convergence and / or divergence processes of productivity and wage levels at the more disaggregated industrial level. These are especially important in the context of international trade as these determine the dynamics of comparative advantages and the resulting trade structures between developing and developed countries. In the first theoretical part, we discuss some theoretical aspects of uneven sectoral productivity and wage ...more

CEECs on Track for Economic Growth More or less all Central and East European transition countries (CEECs) experienced an economic downturn in 1998, which bottomed out in the winter of 1998-99. Year-on-year GDP data point to decelerated growth in the fourth quarter 1998 and in the first quarter 1999 in a smaller subgroup (Hungary, Poland, Slovakia and Slovenia) and GDP decline in others (the Baltic states, Bulgaria, Croatia, the Czech Republic, Romania, Russia). In nearly all CEECs the situation improved in the course of 1999. In Russia, the currency crisis of August 1998 led to substantial de...more

Die russische Wirtschaft hat im vergangenen Jahr die Folgen der Finanz- und Währungskrise vom August 1998 weitgehend überwunden. Dazu trugen bessere äußere Bedingungen bei, wie insbesondere die Beseitigung der Überbewertung des Rubels, der Anstieg des Rohölpreises und die Belebung der Weltkonjunktur. Aber auch die binnenwirtschaftlichen Rahmenbedingungen haben sich verbessert; die meisten makroökonomischen Indikatoren signalisieren ein deutlich abnehmendes Krisenpotential der Volkswirtschaft. Das Bruttoinlandsprodukt (BIP) wuchs im vergangenen Jahr um 3,2%, nachdem es im Krisenjahr 1998 um nah...more

Discussion on “Non-price Competitiveness of Exports from emerging countries” Exports from emerging countries” by Junko Shimizu (Gakushuin University, Japan) Download   Global value chains: a view from the euro area by João Amador, Rita Cappariello & Robert Stehrer (Banco de Portugal / Banca d'Italia / wiiw) Download   Competitiveness, Productivity, and Industry-Specific Effective Exchange Rate of Asian Industries by Keiko Ito & Junko Shimizu (Senshu Univer...more

Main messages: Differentiated economic development in CESEE countries Strength/weakness of export sector is crucial External demand and deleveraging depress domestic demand Labour market problems increase SEE: Persistent solvency and liquidity problems Growth remains below potential absent external and policy improvements ...more

Main messages: Differentiated economic development in CESEE countries Strength/weakness of export sector is crucial External demand and deleveraging depress domestic demand Labour market problems increase SEE: Persistent solvency and liquidity problems Growth remains below potential absent external and policy improvements ...more

Distribution services and the impact of trade on producer and consumer prices by Joseph Francois, Miriam Manchin & Hanna Norberg (wiiw/University College London/University of Lund) Download   International fragmentation of production and employment by Robert Stehrer (wiiw) Download   Crowding-Out or Mutual Co-Existence? Crowding Out or Mutual Co Existence? Competitive Position of EU Members and China in the Global Market by Konstantins Benkovskis, Mar...more

Historical statistics (look good), The Fall, Roots of the crisis Mismanagement of the crisis How to get out of the mess? Can we make it? ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Fasting or Feasting? Europe - Old and New - at the Crossroads, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. For the CESEE countries, wiiw expects 2012 to be a rather disappointing year. GDP growth will be rather slow – at least when judged by the past standards and the ambitions harboured only a few years ago. Some countries (Czech Republic, Hungary, Slovenia, Bosnia and Herzego...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Fasting or Feasting? Europe - Old and New - at the Crossroads, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. For the CESEE countries, wiiw expects 2012 to be a rather disappointing year. GDP growth will be rather slow – at least when judged by the past standards and the ambitions harboured only a few years ago. Some countries (Czech Republic, Hungary, Slovenia, Bosnia and Herzego...more

The financial crisis since 2008 has made clear that the EU’s and Eurozone’s “stability orientation” is an insufficient economic policy direction. Troubled banks which had lent excessively were saved by massive infusions of taxpayer money – which drove up government debt levels and, eventually, interest rates. Private debt became public debt, government debt redemption increased dramatically. Bank finance dried up, in spite of being flooded by 1 trillion € medium-term ECB money and nearly unlimited liquidity infusions. EU policy demanded ever stronger government budget consolidation, both from ...more

The Vienna Institute for International Economic Studies (wiiw) presents an analysis of foreign direct investment (FDI) in 22 Central, East and Southeast European countries based on the latest update of its database. FDI continues to be of great significance for the development of the former transition economies. The domestic engines of economic growth are still weak, and fiscal consolidation provides a drag on the economies. The short-lived recovery in 2011 was based mainly on external demand, which upgraded the importance of foreign investors, as they generate a major part of exports. ...more

Franz Fischler, President, European Forum Alpbach, Vienna Apart from the broad discussion about the economic and public debt crisis, Europe is also facing a severe political crisis. It seems that further deepening of the European Union becomes more and more impossible and that the risk of disintegration is growing. The populist forces who try to destruct the Union with democratic methods compete with those in favour of more Europe. The root of Europe’s political crisis is the necessity and impossibility of integration (Mark Leonard). The dilemma lies in the development of common policy-ma...more

László Halpern (Research Centre for Economic and Regional Studies, Hungarian Academy of Sciences) and Gábor Békés (Central European University, Budapest) What impact has the Great Recession had on European firms? In 2008 and 2009, the European Union experienced a 14 percent decline in industrial production, and a 15 percent decline in trade. Companies were hit hard, going through an average 10 percent sales decline, and reducing their workforces by 6 percent. But the unique firm-level dataset compiled from the EFIGE survey shows that not all firms were affected in the same way. Exporters ...more

Prof. Charles Goodhart was born in London in 1936. He obtained the Bachelor of Arts Degree from Cambridge in 1960 and a Ph.D. in 1963 from Harvard University. Prof. Charles Goodhart, CBE, FBA is Professor emeritus of Banking and Finance at the London School of Economics. Before joining the London School of Economics in 1985, he worked at the Bank of England for seventeen years as a monetary adviser, becoming a Chief Adviser in 1980. During 1986, Prof. Goodhart helped to found, with Prof. Mervyn King, the Financial Markets Group at London School of Economics. In 1997, he was appointed one of the outside independent members of the Bank of England’s new Monetary Policy Committee until May 2000. For details go to the event: wiiw Spring Seminar...more

This presentation is part of the wiiw Spring Seminar, which discusses perspectives for the European economy and presents the new short- and medium-term economic forecast of the Vienna Institute for the CESEE countries. For details go to the event: wiiw Spring Seminar...more

This presentation is part of the wiiw Spring Seminar, which discusses perspectives for the European economy and presents the new short- and medium-term economic forecast of the Vienna Institute for the CESEE countries. For details go to the event: wiiw Spring Seminar...more

Prof. Pekka Sutela is a specialist in Russian and Soviet economic thought, policies and developments. He worked in the Bank of Finland Institute for Economies in Transition (BOFIT) since 1990, initially as a senior researcher and later as an Adviser to the Board and Acting Head of Department. From 1998 to 2009 he served as Head of BOFIT, and was appointed Principal Adviser, Monetary Policy and Research as of September 2009 until his retirement in February 2011. Prior to that Mr. Sutela pursued a teaching career at the Department of Economics of the University of Helsinki as a tenured lecturer in 1973-1990. He held a researcher's position with the Academy of Finland in 1981-1984 and 1987-1989. In the middle of his central bank career, he returned to the academia as full-time professor in the economics of transition at the University of Helsinki in 1995-1997. For details go to the event: wiiw Spring Seminar...more

This presentation is part of the wiiw Spring Seminar, which discusses perspectives for the European economy and presents the new short- and medium-term economic forecast of the Vienna Institute for the CESEE countries. For details go to the event: wiiw Spring Seminar...more

Macroeconomic imbalances and crises The “Alert Mechanism” of the EC and how different member states fared according to it Bulgaria’s economic performance during the crisis and why there was no destabilization despite the “alerts” Some lessons and conclusions For details go to the event: wiiw Public Panel Discussion: Crisis in the Eurozone and Europe's Emerging Economies: Any Chance to Resume Convergence?...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled New Divide(s) in Europe?, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. The present economic crisis bears all the familiar hallmarks of the financial, debt-related and structural aspects of current account crises. All these aspects have lasting level effects and recovery can be very protracted. Export-led growth was an important feature of the recovery period 2010-2011, yet signi...more

Karl Pichelmann, European Commission The EU is being mired in the most serious economic crisis since its creation. The euro area, in particular, has found itself in the middle of an almost perfect storm: (i) A vicious circle of government debt crisis, banking instabilities and weakening economic activity, each feeding each other in a dangerous feed-back loop; (ii) This downward spiral comes on top of probably long-lasting deleveraging needs of both public and private economic actors following the financial crisis of 2008/2009; (iii) But already before the crisis, the euro area ...more

Neil Foster, wiiw with Rod Falvey, School of Business, Bond University In this paper we extend recent work using the Gravity Model to estimate the trade and price effects of Preferential Trading Arrangements (PTAs), by explicitly taking into account the extent of the preferential access being provided by the importer. This involves specifying a trade model, deriving appropriate PTA variables, appending them to a gravity-type equation and estimating it. Estimates of the relative price effects of PTAs are derived and a range of PTAs are considered. ...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

The current social and political turmoil in the Middle East and North Africa (MENA) is an indication that this region is entering a process of transition with far-reaching political, economic, social and institutional consequences whose outcomes are far from certain. A careful analysis of socio-economic starting conditions in the region, similarities and distinct features of individual countries, are highly relevant for the adoption of appropriate policies both within and without the MENA region. The outcome of the processes of democratization and economic transition will crucially depend upon...more

Harald Badinger, WU, WIFO with Jesus Crespo Cuaresma, WU, IIASA, WIC, WIFO In many econometric applications, inference about bilateral relationships across economic units is desired, but only aggregated data exist for the variable of interest. In particular, often bilateral explanatory variables are available but the dependent variable is collected at an aggregated level. Such settings are common in econometric applications related to international trade (where certain variables may be observed at the country level but inference on bilateral country relationships is of interest) and reg...more

Presentation of wiiw's latest growth forecast for the countries of Central, East and Southeast Europe for the period 2010-2013. Presentation of the new wiiw Handbook of Statistics 2011. ...more

Harald Fadinger, (with Karin Mayr), University of Vienna We develop a general equilibrium model of technological change and migration to examine the effects of a change in skill endowments on wages, employment rates and emigration rates of skilled and unskilled workers. We find that, depending on the elasticity of substitution between skilled and unskilled workers, an increase in the skill ratio can increase the expected wage of the skilled and decrease the brain drain. We provide empirical estimates and simulations to support our findings and show that effects are empirically relevant an...more

In this paper we provide a new decomposition method for global value chains. Based on an analysis of vertically integrated industries, we trace the flow of final expenditures to factor income around the world. Using a new world input-output database, we find that in 38 out of the 40 countries the degree of vertical integration has increased between 1995 and 2006. We also find strong trends in regional value added shares in worldwide manufacturing expenditure. China was capturing about 11% in 2006, up from 5% in 1995, mainly at the expense of Japan, while the shares of the EU and NAFTA declined only marginally. In China and other developing regions low-skilled workers increased their shares, but not so much as medium-skilled workers and capital. Compensation shares for high-skilled workers have gone up around the world, in particular in the EU and NAFTA. ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery: Limp and Battered, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. In 2011 the recovery will encompass all countries in the CESEE region – even the laggards that did not grow in 2010. However GDP growth will not accelerate much in countries where the recession ended already in 2010. Later on, GDP growth rates will stabilize throughout the whole region at around 4 to 5 pe...more

In a special chapter ("Debt dynamics, flow of funds and deleveraging") of the wiiw Forecast "Recovery: Limp and Battered", the debt developments of the private (households, corporate) and public sectors before and after the start of the financial crisis are examined and compared with those in the GIPS countries (Greece, Ireland, Portugal, Spain). The burden of the build-up of private sector debt before the crisis has important consequences for spending and savings behaviour of households and enterprises and hence for the development of domestic demand (consumption and investment). In this resp...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery: Limp and Battered, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. In 2011 the recovery will encompass all countries in the CESEE region – even the laggards that did not grow in 2010. However GDP growth will not accelerate much in countries where the recession ended already in 2010. Later on, GDP growth rates will stabilize throughout the whole region at around 4 to 5 pe...more

In einem speziellen Kapitel („Debt dynamics, flow of funds and deleveraging“) des Konjunkturberichtes "Recovery: Limp and Battered" wird die Verschuldungsdynamik nach Sektoren (Haushalte, Unternehmen, Staat) vor und nach dem Ausbruch der Finanzkrise untersucht und mit den GIPS-Ländern (Griechenland, Irland, Portugal, Spanien) verglichen. Die Last der privaten Verschuldung hat wichtige Konsequenzen für das Ausgaben- und Sparverhalten des Haushalts- und Unternehmenssektors und damit für die Entwicklung der Inlandsnachfrage (Konsum und Investitionen). Dabei zeigen sich sehr unterschiedliche Muste...more

The rapid growth of China in the last thirty years has had a very strong impact on the world economy. Having gone through a rapid process of structural transformation as well as international integration, China has recently improved quantity and quality of its exports. Its market share has increased dramatically, so that in 2009 China overtook Germany to become the first world exporters of goods. A recent ample literature has been discussing the likelihood of this upgrade resulting in a change in Chinese comparative advantage towards more sophisticated productions and therefore whether there are countries/sectors more subject to increased Chinese competition. ...more

The Vienna Institute for International Economic Studies (wiiw) presents an analysis of foreign direct investment (FDI) in 20 Central, East and Southeast European countries based on the latest update of its database. FDI is still of great importance for the development of CEECs especially as the domestic engines of economic growth are still weak, and fiscal consolidation drags on many of the economies. The economic recovery that has started in the region is mainly based on external demand, which has upgraded the role of foreign investors whose subsidiaries produce the main part of exp...more

Based on recent approaches of measuring the factor content of trade when intermediates are traded we decompose value added trade and its components like capital and labour and further subcomponents (ICT and Non-ICT capital, educational attainment categories) distinguishing between direct, indirect and re-imports and –exports of value added and trade in factors. This adds to the literature by simultaneously considering both exports and imports allowing to focus on patterns and dynamics of net value added trade and its components rather than vertical specialisation patterns based on exports. As an extension we differentiate net value added trade flows resulting from trade in intermediate and final goods. The analysis can further be broken down to the industry level and bilateral trade relations. Empirically we present results of an application of the proposed decomposition method based on the recently compiled World Input-Output Database (WIOD) covering 40 countries and 35 industries over the period 1995-2006. We show that direct value added exports and imports dominate but the indirect part was increasing over time. This also holds for trade in factors with for example higher increases observed for high-educated labour. Patterns of trade in net value added closely resemble net trade flows but there are distinct patterns when looking at individual factors. For example, NAFTA countries are net exporters of high-educated labour mostly to EU-15 but have increasingly become net importers of low-educated labour from China. ...more

The free movement of persons is a fundamental right guaranteed to European Union (EU) citizens which is about to change not only the size of migration flows but also the behavior of migrants regarding the duration of stay. In our empirical analysis we show that migrants who intend to live only temporary in Germany are more likely to remit a higher amount of money. As we have seen in the UK, strong remittances flows provoke fears among natives of a loss in domestic purchasing power. Using a general equilibrium model with altruistic households and imperfect labor markets, we show that Germany wi...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery – in Low Gear across Tough Terrain, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. All Central, East and Southeast European (CESEE) countries will return to growth in 2011. The post-crisis GDP growth will be slower than before and not suffice to generate additional jobs. The role of external demand gradually weakens, while both household consumption and gross fixed inves...more

According to trade theories, the average quantity of exported goods is not the only parameter of export performance – the variety and quality of exports also play an important role. The goal of this paper is to evaluate the variety and quality of exports from the new EU member states in 1999-2009. Beside unit values, which play an important role in defining export quality, our calculations also take into account market shares and the level of monopoly power of firms in a particular market. We found that all NMS significantly increased their average number of brands exported to the EU market; moreover, all NMS were able to increase the average quality of their exports during the 10-year period....more

According to trade theories, the average quantity of exported goods is not the only parameter of export performance – the variety and quality of exports also play an important role. The goal of this paper is to evaluate the variety and quality of exports from the new EU member states in 1999-2009. Beside unit values, which play an important role in defining export quality, our calculations also take into account market shares and the level of monopoly power of firms in a particular market. We found that all NMS significantly increased their average number of brands exported to the EU market; moreover, all NMS were able to increase the average quality of their exports during the 10-year period....more

In the process of catching up to the EU income levels, emerging European economies built up external imbalances and attracted large capital inflows prior to the global financial crisis. Many attribute the severity of the crisis to excessive capital inflows. This paper examines the effect of structural distribution of FDI on external vulnerability - trade account balance in particular - to see if a concentration in FDI in nontradables leads to large external imbalance as is often perceived. Our study finds that this is indeed the case: trade account deficit is reduced by 0.1-0.2 per cent of GDP when a share of tradable FDI to total FDI increases by 1 per cent. We also study what determines the pattern of sectoral distribution of FDI across countries, and draw policy implications for more stable and sustainable growth strategy. ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Will exports prevail over austerity?, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe, and China The Central, East and Southeast European (CESEE) economies will experience on average a minor rebound of economic growth to 1% in 2010 which will speed up to 2.5% in 2011 and 3.5% in 2012. GDP growth will be higher in the CIS countries and in Turkey, about average in the Central European N...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Will exports prevail over austerity?, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe, and China. ...more

In line with previous literature we find that strict employment protection deters foreign direct investment. This finding is consistent with the view that rigid labor markets result in high adjustment and exit costs which discourage firm investment. Moreover, our results also show that the deterrent effect of rigid labor markets depends on the skill-intensity of a location, a result which has not been established empirically so far. ...more

As of 2008, an estimated twelve million immigrants live illegally in the United States, and large numbers of undocumented foreigners reside also in other advanced destination countries. If governments are not able or willing to stick to their official immigration policy, why do they set such a policy in the first place? The purpose of this paper is to address this apparent puzzle, by developing a political agency model, in which there is uncertainty on the potential supply of immigrants, and politicians - who face a re-election - can either share the preferences of the median voter or be captured by a pro-business lobby. We show that, if a pro-median politician is in power, illegal immigration can only occur as a result of uncertainty. If a pro-business politician sets instead the migration policy, he might find it optimal to announce a binding quota in order to be re-elected, and not enforce it in order to favor a business lobby. Thus, strategic considerations by elected politicians might play an important role in explaining the apparent inability of governments to implement o±cial immigration policies and the large resulting number of illegal immigrants....more

Bart Los, University of Groningen, Groningen Growth and Development Centre R&D activities by one industry can have positive effects on the productivity performance of other industries, as a consequence of technology spillovers. As revealed by Wolfgang Keller in the late 1990s, severe multicollinearity problems have precluded the identification of industries that have generated the most productive technology spillovers, despite a number of sophisticated attempts. Consequently, we do not know which industries should be targeted for technology policy. This paper proposes an alternative estimat...more

Doris A. Oberdabernig, University of Innsbruck The focus of this work is to measure the effects of Structural Adjustment Programmes (SAPs) of the International Monetary Fund (IMF) on poverty and income distribution. This study tries to estimate the impacts of SAPs on a variety of poverty indicators controlling for nonrandom selection. We make use of the matching method to test for differences in poverty indicators and GINI coefficients for countries participating in IMF agreements and countries which do not. Performing Heckman regressions we study the effects in more detail. We control for ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Crisis Is Over, but Problems Loom Ahead, analyses recent economic developments and short- and medium-term prospects of the countries of Central and Eastern Europe, Southeast Europe including Turkey, as well as Kazakhstan, Russia, Ukraine and China. Most countries in Central, East and Southeast Europe have emerged from the trough of the crisis already at the end of 2009. Several leading indicators point to a modest upswing. All countries in the regio...more

Cyrille Schwellnus, OECD (with Jens Arnold) This paper uses a stratified sample of firms across Western Europe over the period 1996-2004 to test for the existence of a link between corporate taxation and productivity. Corporate taxes may reduce incentives for productivity-enhancing innovations by reducing their post-tax returns, and may reduce incentives for risk taking by firms. In addition, corporate taxes can increase the user cost of capital and reduce incentives to invest in physical capital, which may affect productivity through technological progress embodied in new physical capital...more

Christian Busch ETH Zurich This paper investigates the contributions of institutions and export concentration in determining aggregate volatility. Geographically disadvantaged countries often experience a concentrated export structure which makes them more vulnerable to external shocks. Based on a gravity regression, a measure of export concentration is constructed which is based entirely on geographical characteristics. However, since export concentration ratios are not additively separable across countries we use an inequality decomposition method in order to obtain an aggregate measure o...more

Octavio Fernández Amador (with Jesús Crespo Cuaresma) University of Innsbruck We analyse the dynamics of the standard deviation of business cycles across euro area countries in order to evaluate the patterns of cyclical convergence in the European Monetary Union (EMU) for the period 1960-2008. Based on SVAR models à la Blanchard and Quah (1989), we study the pattern of cyclical synchronization by applying the methodology put forward by Crespo-Cuaresma and Fernández-Amador (2009), which makes use of sigma-convergence methods to identify synchronization patterns in business cycle data. This a...more

Christian Hepenstrick, University of Zurich (UZH) This paper develops a Ricardian trade model that accounts for the empirically observed positive relation between the extensive margin of a bilateral trade flow (measured as the number of goods categories with positive volumes) and the per-capita incomes of the trading partners. The central mechanism is that richer agents consume a wider set of varieties, which leads to a positive relation between per-capita income of the importer and the extensive margin. The positive effect of exporter per-capita income, corresponding to the standard model,...more

Alex Mourmouras, IMF (with Steven H. Russell) Seminar organized in cooperation with the Joint Vienna Institute We study a simple neoclassical model of investment in a developing country, modified to allow for long-term projects and short-term debt. Early signals indicating low productivity of investment may lead creditors to call loans in early. In such a crisis, firms protected by limited liability default and liquidate capital, even though they do so at a loss (a "fire sale"). We show that short-term debt financing is beneficial in good (normal) times: when there is no adverse signal, ...more

The presentation will focus on the key factors that contributed to the financial crisis in the United States, the sequence of events that transformed the global economy into a house of cards, the policy responses under the Bush administration and the Obama administration to date, and the challenges that lie ahead. Peter Isard has his PhD in Economics from Stanford University. He held research and management positions at U.S. Federal Reserve Board during 1972-1985, then various managerial positions with the International Monetary Fund during 1985-2008, primarily in the Research Department. He ...more

wiiw presents its new analysis of FDI developments in 20 Central, East and Southeast European countries, based on the latest update of the wiiw FDI Database. German: Das wiiw präsentiert seine aktuelle Analyse der Entwicklung der Auslandsinvestitionen in Zentral-, Ost- und Südosteuropa, sowie den Update der "FDI Database" mit detaillierten Statistiken über Auslandsinvestitionen in 20 Ländern....more

The recent changes in the IMF approach to crisis management suggest a change in the theoretical model on which operational programmes are to be based. In the programmes negotiated with the Central, Eastern and South-Eastern European (CESE) countries this model change cannot be easily detected, at least not so far. This leads to two questions: how are new ideas and instruments related to the underlying IMF model and what are the assumptions on which the recent programmes with the CESE are based? In the context of these questions, the surveillance criteria are of particular interest; i.e., the r...more

The current global economic crisis is affecting the countries of Central, Eastern and Southeastern Europe (CEE and SEE) in some ways more severely than other European countries. Moreover these economies face more con-straints in putting the types of policies in place which are currently pursued in most of Western Europe, the USA and Japan. However, policies designed to stabilize the banking system and provide fiscal stimulus have as much justifi-cation to be pursued in these economies as in the higher-income countries. Therefore a coordinated approach by EU institutions and EU governments (in ...more

Current financial developments and global imbalances of savings and investments are increasingly affecting economic developments. The panel will discuss the consequences for transition countries in Central, East and Southeast Europe. Many of these countries exhibit high credit growth with current account deficits. That raises concerns about the soundness of their financial systems and of other vulnerabilities with important policy implications. There are concerns that some of these economies are overheating and that risks to macroeconomic stability are increasing. Speakers will address the ris...more