Jan Fidrmuc

Economic Reform, Democracy and Growth During Post-Communist Transition

This paper explores interactions between growth, economic liberalization and democratization during transition. The results can be summarized as follows: (1) Liberalization has a strong positive effect on growth during transition (also when controlling for endogeneity of liberalization in growth). (2) Democracy facilitates economic liberalization. (3) Because of its effect on liberalization, democracy has a positive overall effect on growth. Nevertheless, the marginal effect of democracy (after controlling for progress in economic liberalization) is negative during early transition. (4) The progress in democratization in turn depends on past economic performance in a surprising manner-the relationship between past growth and subsequent democracy appears negative. (5) Economic performance is an important determinant of electoral outcomes and, in particular, of support for reforms.

Political support for reforms: Economics of voting in transition countries

I analyze the relationship between economics and politics across eight parliamentary elections in four transition countries, the Czech Republic, Hungary, Poland and Slovakia. I argue that support for reform reflects the balance between positive and negative effects of the reform. Accordingly, I identify economic groups that support or oppose the reform. The former are private entrepreneurs, white collar workers and university educated voters. The latter are the unemployed, retirees, and blue collar and agricultural workers. This general pattern holds both within countries and across countries, and across tenures of different governments. In contrast with the responsibility hypothesis, voters in the transition countries are found to be forward looking, not retrospective.

Economics of voting in post-communist countries

I analyze economic determinants of voting behavior in post-communist elections in the Czech Republic, Hungary, Poland and Slovakia. I argue that election results reflect the voters’ experience with economic reforms: those who benefited from the reforms vote for the right wing pro-reform parties, whereas those who have become worse off vote for the left wing parties. This identifies two categories of voters, the winners and the losers of reforms. The winners are the private entrepreneurs, white -collar workers, and university educated voters. On the other hand, the losers are the unemployed, retirees, and blue collar and agricultural workers. Cross-section patterns of political support are determined by the parties’ association with the reforms rather than their incumbency status. Incumbency only appears significant in explaining the marginal vote gain or loss between elections.

Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia

In 1993, Czechoslovakia experienced a two-step break-up. On January 1, the country disintegrated as a political union, while preserving an economic and monetary union. Then, the Czech-Slovak monetary union collapsed on February 8. This paper analyzes the economic background of the two break-ups from the perspective of the optimum currency area literature. The main finding is that the Czech and Slovak economies were vulnerable to asymmetric economic shocks, such as those induced by the economic transition. In particular, the stability of Czechoslovakia was undermined by low correlation of permanent output shocks, low labor mobility and higher concentration of heavy and military industries in Slovakia.

Anthropometry of Love - Height and Gender Asymmetries in Interethnic Marriages

Both in the UK and in the US, we observe puzzling gender asymmetries in the propensity to outmarry: Black men are more likely to have white spouses than Black women, but the opposite is true for Chinese: Chinese men are half less likely to be married to a White person than Chinese women. We argue that differences in height distributions, combined with a simple preference for the husband to be taller than the wife, can help explain these ethnic-specific gender asymmetries. Blacks are taller than Asians, and we argue that this significantly affects their marriage prospects with whites. We provide empirical support for this hypothesis using data from the Millennium Cohort Study. Specifically, we find that ethnic differences in propensity to intermarry with Whites shrink when we control for the proportion of suitable partners with respect to height.

Unemployment and the dynamics of political support for economic reforms

I analyze the dynamics of political support for economic reforms using a version of Rodriks (1995) two-sector model of the transition economy. The key role is played by the pattern of flows between the state and private sectors and unemployment. It is shown that while the workers in the private sector always support rapid reforms, the workers in the state sector and the unemployed will support rapid reforms only at the outset of the transition. Later, state-sector workers and unemployed vote for a reduction in the speed of reforms.

Formation of Social Capital in Central and Eastern Europe: Understanding the Gap Vis-a-Vis Developed Countries

Recent Eurobarometer survey data are used to document and explain the stock of social capital in 27 European countries. Social capital in Central and Eastern Europe – measured by civic participation and access to social networks – lags behind that in Western European countries. Using regression analysis of determinants of individual stock of social capital, we find that this gap persists when we account for individual characteristics and endowments of respondents but disappears completely after we control for aggregate measures of economic development and quality of institutions. Informal institutions such as prevalence of corruption appear particularly important.

Fire the Manager to Improve Performance? Managerial Turnover and Incentives After Privatization in the Czech Republic

This Paper analyses the effect of the introduction of managerial incentives and new human capital on enterprise performance after privatization in the Czech Republic. We find weak evidence for the presence of managerial incentives: only in 1997, three to four years after privatization, does poor performance significantly increase the probability of managerial change. Nevertheless, replacing the managing director in a newly privatized firm improves subsequent performance. This indicates that the privatized firms operate below potential under the incumbent management. We show that the institutional framework matters as well: managerial turnover improves performance only if the management is closely interconnected with the board of directors and thus holds effective executive authority.

Labor Mobility During Transition: Evidence from the Czech Republic

In this paper, I analyze the development of inter-regional mobility in the Czech Republic during the transition from central planning to a market economy. I show that the intensity of migration is low and even has fallen during the transition regional disparities in unemployment rates and earnings have increased. More importantly, labor mobility is little effective in facilitating labormarket adjustment to employment shocks. Using aggregate inter-regional migration data and survey data on past and prospective migration and the willingness to move. I find that economic factor play little role in explaining migration patterns. There is, nonetheless, some tentative evidence of the greater importance of economic considerations in explaining future migration intentions and the willingness to move. Thus, while at present migration appears more of a social or demographic rather than economic phenomenon, its economic role may strengthen in the future.

Migration and adjustment to shocks in transition economies

Does migration serve as an effective channel of regional adjustment to idiosyncratic shocks in transition economies? If so, one should find a strong relationship between regional unemployment and average wages on the one hand, and migration flows on the other. Yet, the evidence from transition economies indicates that the efficacy of migration in reducing inter-regional unemployment and wage differentials has been low. High wages appear to stimulate overall mobility rather than encourage a net immigration, and the effect of unemployment is statistically weak and not robust. In addition, the effect of unemployment and wages on net migration flows is economically insignificant and the overall level of migration has fallen during transition.