Laura D'Andrea Tyson

The Yugoslav inflation: Some competing hypotheses☆

Abstract Various hypotheses about wage and price inflation in Yugoslavia are presented and tested empirically with quarterly data from the 1962–1972 period. Both theoretical literature and empirical evidence on the behavior of the self-managed firm are used to derive different models of wage determination. The wage-equation results indicate that labor-market conditions, inflationary expectations; and labor-productivity variables are significant determinants of the rate of growth of wages. The price equations, based on a modified cost-markup model consistent with the practices of Yugoslav firms, identify labor costs and aggregate demand as significant determinants of the rate of growth of prices. University of California, Berkeley.

American industry in international competition : government policies and corporate strategies

A shortened version of the introductory and concluding chapters of a volume of case studies of American industry in international competition, this article examines the contemporary debate on industrial policy, building on lessons drawn from the case studies. The authors identify several possible economic and political rationales for an industrial policy, as it is one of the instruments with which the government can respond to the competitive difficulties of individual sectors in international trade. They conclude that, in the absence of such a policy, the government will continue to respond to such difficulties with protectionist measures that thwart necessary economic adjustment and reduce our national economic well-being.

Foreign trade, resource allocation, and structural adjustment in Yugoslavia: 1976–1980

The Yugoslav economy has weathered a number of shocks, including two increases in oil prices, two worldwide recessions, changes in the relative prices of both exports and imports, and shifts in major export markets, as well as major institutional reforms. This paper utilizes a multisector, computable general equilibrium simulation model to analyze Yugoslav economic performance during this period. The model is applied to an evaluation of the sectoral investment priorities of the 1976-80 plan; it is used to assess the incentive effects of alternative institutional mechanisms for allocating foreign exchange; and it is used to explore the relative contribution of domestic and external factors to the foreign exchange crisis that began to develop in 1979-80. The methodology is useful for estimating the incentive effects of policy actions on the behaviour of decentralized economic actors and for doing controlled, counterfactual experiments to sort out the individual effects of a number of simultaneous, interdependent factors affecting economic performance.

A Permanent Income Hypothesis for the Yugoslav Firm

Theory suggests that enterprise savings rates are likely to be low or even zero in an economy of self-managed firms where enterprise capital is socially owned and where external sources of investment finance are available. Surprisingly, these predictions are not supported by available evidence about the savings behaviour of Yugoslav firms during the 1965-1971 period when the economy operated with a virtual absence of government control over enterprise savings decisions and when the legal and institutional structure approximated that of an idealized labour-managed system. The apparent contradiction between theory and reality serves as a starting point for the analysis presented in this paper. An attempt is made to model a simple theory of enterprise savings, based on the permanent income hypothesis applied to the enterprise, which explains the actual savings behaviour of Yugoslav industry during the 1965-1974 period. Section I presents a brief discussion of the prevailing theory of the savings-investment behaviour of the self-managed firm. In Section II, empirical evidence about the magnitude of the important variables identified by this theory is considered for the Yugoslav case, and several arguments are offered to explain the persistence of high savings rates in the Yugoslav economy. Section III develops a simple permanent income hypothesis of the Yugoslav firm which relates target earnings and savings rates out of enterprise income to permanent income prospects and to past earnings rates. A single-equation model based on this hypothesis is then applied to data for 16 industrial sectors and the results are presented and discussed in Section IV. In 11 of the 16 sectors the model provides reasonable, statistically significant results; in eight of these sectors equilibrium or target savings rates were positive during the period of observation. Finally, in Section V some indirect empirical evidence supporting the permanent income hypothesis is examined, and avenues for further research are suggested.

Investment allocation: A comparison of the reform experiences of Hungary and Yugoslavia☆

Abstract Both Yugoslavia and Hungary, despite reform efforts, have continued to exhibit investment cycles. An analysis is presented of why the Yugoslav and Hungarian experiences have been so similar despite major institutional differences. An examination of three different capital allocation systems in Yugoslavia identifies both institutional and behavioral factors that undermine reform efforts and reproduce investment cycles not only in Yugoslavia, but also in Hungary and other socialist economies.

Incentives, income sharing, and institutional innovation in the yugoslav self-managed firm

Abstract The incentive properties of income-sharing arrangements are analyzed for situations in which workers are allowed to form group or coalition decisions on effort. Both the feasibility and enforceability of such decisions are shown to depend on a variety of organizational characteristics, including the degree of worker participation and the size and divisionalization of the firm. Finally, the recent decentralization of Yugoslav firms is shown to enhance the incentive effects of income sharing.

Computable General Equilibrium (CGE) Models for Socialist Economies

During the past decade, multisectoral computable general equilibrium (CGE) models have been widely used in developing countries to analyse issues as income distribution and structural adjustment. These models simulate the workings of a market economy, but a suitable adapted CGE model can provide a good framework for policy analysis in a post-reform socialist economy. CGE models have been developed for two Eastern European countries Hungary and Yugoslavia to analyze issues of structural adjustment. In this paper, we describe the basic features of the Hungarian and Yugoslav CGE models, identifying the important similarities and differences between them. We focus the discussion more on the Hungarian model, and also present some results of simulation of it.

The impact of external economic disturbances on Yugoslavia: Theoretical and empirical explorations

Abstract Within the context of the transmission and response framework this paper analyzes the impact of recent international economic disturbances on Yugoslavia. Included are an analysis of the channels through which these disturbances were transmitted to Yugoslavia, the manner in which they altered domestic price and quantity signals, and the reactions of policy makers. Empirical tests of simple Keynesian and monetarist models of the transmission process are presented. These tests provide empirical evidence on the demand effects, the direct and indirect price effects, and the real-balance effects of international disturbances in the Yugoslav economy.

Fair Trade USA: Scaling for Impact:

This case study focuses on Fair Trade USA (the leading third-party certifier of fair trade products in North America) and founder, President, and CEO Paul Rice and his challenges scaling FT USA. The case study covers the growth strategies that he and his team are debating at a key point in FT USAs history amidst increasing competition from other certification organizations like Rainforest Alliance and Utz and general market confusion over consumer packaging labels. Rice and his team are grappling with how to make the Fair Trade USA label more prevalent as well as how to build a viable, long-term business model. The case discusses FT USAs role in helping companies like Hersheys develop sustainable supply chains.

The debt crisis and adjustment responses in Eastern Europe: a comparative perspective

The responses of East European states to changing international economic opportunities and constraints during the 1973–84 period are examined and contrasted with a sample of newly industrializing countries, including Korea, Taiwan, Singapore, Mexico, Brazil, and Yugoslavia. The effects of external economic shocks and internal policy choices on balance-of-payments difficulties and borrowing requirements in the mid-1970s are assessed. With the exception of Korea, all the countries that chose to borrow heavily at this time, including all of the East European countries, confronted a debt crisis by the early 1980s and were compelled to introduce austerity measures. Economic performance under austerity is compared in terms of the policy instruments different countries used and their effects on output growth, distributional goals, the balance of payments, and debt levels. Long-term effects of the debt crisis on development strategy and economic and political structure are also considered.