Transcript WIIW Data - Univerzita Karlova v Praze

Structural Changes in CEE Countries
Vilém Semerák
Institute of Economic Studies
Charles University, Prague
November 24, 2006
Outline of Presentation

Background
The need for structural changes in CEE
countries
 Structural problems and their symptoms

Overall structural changes
 Structural changes in industry
 Impact on the economies

Background Information


“Work in progress”, cooperation with ECNU
Shanghai
Questions:




Future role of CEE economies in the EU
Type of structural changes and “rationality” of the
changes
Possible policy implications and implications for
welfare
Analyzed countries:


New member states + other former CPEs
Here data just for the CR, Hungary, and Poland
CEE Countries at the End of 1980s


Centrally planned economies with very weak
economic performance
Economies with obsolete economic structures

Macro level




Disproportionately high share of industry and agriculture, low share of
services (both in GDP and employment)
Within industry – too high share of heavy industry and traditional
industries (textile), low share of advanced, knowledge-based sectors
(both in GDP and trade)
Specific pattern of trade flows – reliance on trade with countries of
the soviet block
Micro level - Inefficient structures at the firm level
Large firms with oligopoly or monopoly positions
 Vertical and horizontal integration – but often not on sound economic
foundations
 Low productivity of labor, low quality of produce, low efficiency, low
competitiveness

Structural Changes in CEE Countries

Three important motives:

Transition


European integration




Changes necessary to turn the countries into developed
competitive economies
Changes induced by the need to adopt European legislation and
integration into the common market
Adjustment to changes in the world economy
Problem: the three phases overlap in time, it is not
possible to delineate exact borders between them
and their effects
Countries analyzed:

Czech Republic, Poland, Hungary
NMS 8
Old EU
Rest of the World
Causes of the Changes

Demand side

Changes in the export demand



Changes in domestic demand




Income effects
Supply side


Reorientation to western markets
Changing real incomes in the East
Changing structure of domestic relative prices/costs
Changes in real exchange rates (relative prices at
home/foreign market)
Changes in regulation
Uncertainty, noisy information
Sectors and Changes

Impacts of the changes are differentiated:
Non-tradables
 Tradables

 Differentiated

Two-way trade
 More

commodities
homogeneous products
Volume of investment (and perceived risk)
Costs of the Changes

“Costless” structural change

“Statistical” structural change caused by
 Changes
in statistical methodology
 Break-up of large industrial firms

“Costly” change

Decline of non-performing sectors
Expected Future Structure
Detailed economic structure of the CEE
countries does not have to mimic the
structure of other EU members
 While convergence in real income is likely to
lead to convergence in the structure of
individual demand, this does not have to
hold for supply
 Economic geography models


Geographical distribution of industrial activities
sensitive to real barriers to mobility of goods and
services
Macroeconomic Structures
CEE used to have very high share of
Agriculture and Industry in both their GDP
and employment
 Structural changes

Decreasing share of agriculture
 Decreasing share of industry
 Increasing share of services

Economic Structures in 1990
Germany
Austria
Agriculture
Industry
Services
CR
Poland
Hungary
0%
Source: WDI (2006)
20%
40%
60%
80%
100%
CR: Changes in the Structure of GDP
Relative shares of the sectors in the total value added
100%
80%
60%
Services
Industry
Agriculture
40%
20%
0%
1990 1992 1994 1996 1998 2000 2002 2004
Source: WDI (2006)
Poland: Changes in the Structure of GDP
Relative shares of the sectors in the total value added
Source: WDI (2006)
20
04
20
02
20
00
19
98
19
96
19
94
Services
Industry
Agriculture
19
92
19
90
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Hungary: Changes in the Structure of GDP
Relative shares of the sectors in the total value added
100%
80%
60%
Services
Industry
Agriculture
40%
20%
Source: WDI (2006)
20
02
20
00
19
98
19
96
19
94
19
92
19
90
0%
Structural Changes in Industry

Overall trends



Sectors with highest growth



Electrical and optical equipment
Transport equipment
Sectors with fastest decrease



Dramatic changes in the structure of production and employment
Changes seem to be positive, i.e. they seem to follow differences
in growth of productivity of labor in the sectors
Textiles and textile products
Leather and leather products
Note: Growth/decline measured by the share in the total
production of manufacturing industry
Changes in Degree of Industry Specialization
measured by Herfidahl index
1600
1500
CR
Hungary
Poland
Bulgaria
Slovakia
1400
1300
1200
1100
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
1000
Source: Based on data from WIIW Handbook of Statistics 2005
Czech Manufacturing – Winners and Losers
%
Relative Changes in the Importance of Sectors 1990-2004
-100
-50
0
50
100
Electrical and optical equipment
Rubber and plastic products
Transport equipment
Manufacturing n.e.c.
Pulp, paper & paper prod; publishing & printing
Other non-metallic mineral products
Chemicals, chemical prod. & man-made fibres
Wood and wood products
Basic metals and fabricated metal products
Coke, refined petroleum prod. & nuclear fuel
Machinery and equipment n.e.c.
Food products, beverages and tobacco
Textiles and textile products
Leather and leather products
Source: Based on data from WIIW Handbook of Statistics 2005
150
200
Hungarian Manufacturing – Winners and Losers
%
Relative Changes in the Importance of Sectors 1990-2004
-100
-50
0
50
100
Transport equipment
Electrical and optical equipment
Rubber and plastic products
Pulp, paper & paper prod; publishing & printing
Manufacturing n.e.c.
Coke, refined petroleum prod. & nuclear fuel
Machinery and equipment n.e.c.
Chemicals, chemical prod. & man-made fibres
Other non-metallic mineral products
Food products, beverages and tobacco
Basic metals and fabricated metal products
Wood and wood products
Textiles and textile products
Leather and leather products
Source: Based on data from WIIW Handbook of Statistics 2005
150
200
Polish Manufacturing – Winners and Losers
%
Relative Changes in the Importance of Sectors 1990-2004
-100
-50
0
50
100
Rubber and plastic products
Manufacturing n.e.c.
Pulp, paper & paper prod; publishing & printing
Transport equipment
Wood and wood products
Electrical and optical equipment
Other non-metallic mineral products
Food products, beverages and tobacco
Coke, refined petroleum prod. & nuclear fuel
Chemicals, chemical prod. & man-made fibres
Basic metals and fabricated metal products
Machinery and equipment n.e.c.
Textiles and textile products
Leather and leather products
Source: Based on data from WIIW Handbook of Statistics 2005
150
200
CR, Hungary and Poland - Winners and Losers
%
Relative Changes in the Importance of Sectors 1990-2004
-100
-50
0
50
100
Electrical and optical equipment
Transport equipment
Rubber and plastic products
Manufacturing n.e.c.
Pulp, paper & paper prod; publishing & printing
Wood and wood products
Other non-metallic mineral products
Chemicals, chemical prod. & man-made fibres
Coke, refined petroleum prod. & nuclear fuel
Basic metals and fabricated metal products
Food products, beverages and tobacco
Machinery and equipment n.e.c.
Textiles and textile products
Leather and leather products
Simple average used
Source: Based on data from WIIW Handbook of Statistics 2005
150
200
CR – Structure of Production and Productivity
y = 0.8975x - 47.799
R2 = 0.5002
Change in Relative Share
200
150
100
50
0
-100
-50
0
50
100
150
-50
-100
-150
Total change in productivity, % (1990-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
200
250
CR – Structure of Employment and Productivity
Change in Relative Share
200
150
100
y = 0.1955x + 2.9703
R2 = 0.0362
50
0
-100
-50
0
50
100
150
-50
-100
Total change in productivity, % (1990-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
200
250
Hungary – Structure of Production and Productivity
y = 0.3275x - 82.981
R2 = 0.9616
Change in Relative Share
350
300
250
200
150
100
50
0
-50
0
200
400
600
800
1000
1200
-100
Total change in productivity, % (1993-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
1400
Hungary – Structure of Employment and Productivity
Change in Relative Share
120
y = 0.4248x - 27.824
R2 = 0.3767
100
80
60
40
20
0
-100
-50
-20 0
50
100
150
-40
-60
-80
Total change in productivity, % (1990-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
200
250
Poland – Structure of Production and Productivity
Change in Relative Share
200
150
100
y = 0.0182x + 6.2788
2
R = 0.0141
50
0
0
200
400
600
800
1000
1200
-50
-100
Total change in productivity, % (1993-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
1400
Poland – Structure of Employment and Productivity
Change in Relative Share
120
100
80
60
y = 0.0383x + 5.0372
2
R = 0.0042
40
20
0
-100
-50
-20
0
50
100
150
-40
-60
Total change in productivity, % (1990-2004)
Source: Based on data from WIIW Handbook of Statistics 2005
200
250
Macroeconomic Aspects of Structural
Changes

Distribution of impacts in time = basic
problem of structural changes
Succesful structural changes will stimulate
growth of GDP and welfare in the long run
 But there may be substantial costs in the short
run

Further Extensions

Econometric analysis of determinants of
structural changes

Use of firm-level data for the Czech
Republic