Michael Landesmann

Convergence patterns and switchovers in comparative advantage

Abstract 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 catching-up processes and their links to dynamic comparative advantages and trade structures. In the second part, we present an econometric study of catching-up of wages, productivity, and labour unit costs. The analysis is conducted at the industrial level (ISIC 3-digit) over the period 1965–1992 for a set of catching-up economies compared with more advanced countries.

The Consequences of Mrs. Thatcher for U.K. Manufacturing Exports

This article sets out to study whether the dramatic events that took place in the U.K. economy since 1979 can be shown to have had any effects on certain crucial parameters that determine the export performance of the U.K. manufacturing sector. A number of export models are examined over the post-1979 period and all reveal a certain amount of systematic parameter variation. In particular, estimates of the world income elasticity of demand for U.K. manufacturing exports show an upward drift. When this drift is explicitly modeled using a spline function approach to allow time varying parameters, the data do not reject the hypothesis that this income elasticity has risen from its traditional postwar value of around 0.7 to around unity in 1986. This model is applied to explain export performance of both aggregate U.K. manufacturing, as well as of individual manufacturing industries. Copyright 1989 by Royal Economic Society.

Prospects for Further (South-) Eastern EU Enlargement: From Divergence to Convergence?

This paper looks at the experience of South East Europe which – for the purposes of this paper – includes the former states of Yugoslavia except for Slovenia (i.e. Croatia, Serbia-Montenegro, Bosnia-Herzegovina, and Macedonia), Albania, and the two EU candidate countries, Bulgaria and Romania. For all these economies, accession to the EU will be the overriding driving force of the policy-making agenda for the foreseeable future, albeit with widely different time horizons in the individual economies. In Part One we describe the South East European (SEE) ‘region’ as one which has over the 1990s significantly ‘fallen behind’ in the process of economic development relative to the group of Central and Eastern European (CEE) economies which will join the EU in 2004. While developments are somewhat heterogeneous, there is, in particular, an abysmal employment record which has not even started to turn around, as well as an extremely bad productivity and export performance. In Part Two, we discuss in greater detail the conditions required to move towards a sustained growth and catching-up process. We analyse the problematic states of transition in some of the SEE economies as well as the basic disequilibria (fiscal, external, labour markets) which need to be resolved for sustained development to take place. The prospects of making up for the lost decade and dealing with the unresolved disequilibria will be a crucial issue in evaluating the prospects of EU accession some time in the future. We discuss the stumbling blocks both from the SEE side and the EU side in developing a clear perspective of integration with the EU.

The European economy in an American mirror

Volume 1: Growth, Competitiveness and Employment 1. Economic Institutions and Policies in the US and the EU: Convergence or Divergence? 2. Between Neo-liberalism and No Liberalism: Progressive Approaches to Economic Liberalization in Western Europe 3. Technology Regimes and Productivity Growth in Europe and the United States: A Comparative and Historical Perspective 4. Comparing Welfare in Europe and the United States 5. Long-Term Competitiveness of the Wider Europe 6. American Fiscal Policy in the Post-war Era: An Interpretive History 7. Fiscal Policy in Europe: The Past and Future of EMU Rules from the Perspective of Musgrave and Buchanan 8. Convergence via Two-tier Reforms and Growthless Job Creation in Europe 9. How Well Do the Clothes Fit?: Priors and Evidence in the Debate over Flexibility and Labour Market Performance 10. Employment and Labour Productivity in the EU: Reconsidering a Potential Trade-off in the Lisbon Strategy Volume 2: Corporate Governance, Social Policy and Migration 1. Europes Constitutional Imbroglio 2. European Union Expansion: A Constitutional Perspective 3. The Welfare State and Euro-Growth 4. Is there a European Welfare Model Distinct From the US Model? 5. International Migrations: Some Comparisons and Lessons for the European Union 6. Migration, Labour Markets and Integration of Migrants: An Overview for Europe with a Comparison to the US 7. The Policy of Insolvency EU - US 8. Phases of Competition Policy in Europe 9. From Accidental Disagreement to Structural Antagonism: The US and Europe: Old and New Conflicts of Interest, Identities, and Values, 1945-2005

Trade Integration and Changing Trade Structures of Transition Economies

This paper reviews some of the developments in transition economies of Central and Eastern Europe (CEECs) with regard to international trade specialization and the evolving pattern of the division of labor in an enlarged European Union (EU) and the patterns of interindustry and intraindustry specialization of these transition economies in relation to the EU. It shows that quite significant changes occurred in the patterns of interindustry specialization from 1989 to 1998 with marked differences across the CEECs. This type of analysis is then extended to an examination of the positions of CEE producers in intrabranch “product quality” competition. Again, marked changes are found over time in the quality of their products exported to the EU and, again, marked differences across these countries. The paper then examines possible reasons for the change in international trade specialization of the more successful economies: by looking at the pattern of productivity and wage growth across industrial branches, it finds that the pattern of comparative advantages of some of the CEE economies turns away from the lower-tech/low-wage industries and toward medium-tech to high-tech industrial branches. It shows that the dynamics of comparative advantage, which rely on uneven productivity catching up and a wage drift across branches, were also typical for the pattern of catching up of other successful groups of catching-up economies (southern EU economies and Asian economies).

Commodity Flows and Productive Subsystems: An Essay in the Analysis of Structural Change

The purpose of this paper is to consider alternative clustering criteria, based upon different analyses of commodity flows within the economic system. These may be used in order to group together productive activities that share a number of features distinguishing them from the remaining parts of the economic system.

International Trade in Producer Services: Alternative Explanations

This article,discusses tendencies of trade in producer services amongst advanced economies. A number of theoretical approaches are assessed in their ability to approach the problem of trade specialisation in this fast growing area of international trade. The article advocates an approach which makes use of current concepts of industrial organisation theory, such as economies of scope, organisational economies etc., to explain the complex pattern of trade specialisation in producer services. The link of trade in producer services with internationalisation of goods production and thus with international direct investment and trade in goods is emphasised.

Consequences of EU Accession: Economic Effects on CEECs

This paper discusses the economic effects of EU enlargement for the group of Central and East European accession countries (ACs). It consists of three parts In Part A the financial aspects of accession to the EU are explained. It deals firstly with the outcome of the negotiations at the December 2002 European Council Summit in Copenhagen in relation to the expected flows of net transfers over the period 2004-2006. The most uncertain component of these transfers are related to the project-related funds, their disbursement and fiscal implications because of co-financing requirements. Secondly, we discuss the issue of the longer-run negotiations with respect to the Financial Framework to be decided for the period 2007-2013, here the issue of the formation of likely new coalitions within the enlarged European Union is dealt with and possible winners and losers in such negotiations are identified. In Part B we discuss the difficulties the new members will face upon accession in the conduct of macroeconomic policy. In particular, the crucial issue of fast vs. delayed entry to the European Monetary Union (EMU) will shape the constraints within which the conduct of fiscal and monetary policy will have to take place. It is quite likely that it is this issue which will dominate the medium-run growth prospects of the new members upon accession. Part C explores the longer-run growth and convergence scenarios for the new member states. It describes the relative growth performance of the ACs in relation to the EU so far and discusses the reasons why the growth performances might remain more volatile compared to those of the current EU member countries.

Political Economy of Structural Change

This chapter reviews the contributions on structural economic dynamics and extracts from these to which extent one can use them to understand what we might subsume under the political economy of structural change. It reviews the contributions of classical authors as well as more recent analytical contributions to structural economic dynamics and explores in which way they cover political economic aspects within their frameworks. By political economy of structural change we refer to the entire range of how relationships between social groupings get shaped by the positions of these groups in the context of ‘structural interdependencies’ and how, through their actions, they themselves shape these patterns of interdependencies, and also the dynamics of the economic system as a whole. An important role in this analysis is the identification of ‘forces of resistance’ and ‘forces of change’ and the role they play in shaping patterns of innovation, absorption of and adaptation to ‘shocks’ and thus the evolution of economic and social structures. This is the core of what we refer to as ‘political economy of structural change’.

Correcting external imbalances in the European economy

Summary This paper examines current account developments in different country groups amongst the lower- and medium-income European economies (LMIEs) both prior to the crisis and following it. The Baltic countries, the Western Balkan as well as the Southern EU countries (Greece, Portugal and Spain) showed rather dramatic deteriorations in their current accounts prior to the outbreak of the financial crisis in 2008/2009, while in the Central and Eastern European countries current account deficits never exploded. What drove current account developments before the crisis and have external imbalances been sustainably corrected? We investigate whether and to which extent adjustments took place in terms of trade performance, real effective exchange rates and components of unit labour costs. Finally, we look at developments of the tradable and non-tradable sectors of the economy and find that ‘structural’ current account problems are grounded in persistent weaknesses of the tradable sector. As such, policy implications would entail that countries which suffer from longer-term ‘structural’ external imbalances have to strongly focus their policy attention on a recovery of the tradable sector.