Explaining participation in the undeclared economy in Central and Eastern Europe: a demand-side approach

To explain participation in the undeclared economy, the conventional supply-side approach evaluates the reasons people work in this sphere. This article, for the first time in Central and Eastern Europe, explains the undeclared economy using a demand-side approach which evaluates citizens’ motives for purchasing undeclared goods and services. Here, three potential explanations for purchasing undeclared goods and services, grounded in rational economic actor, social actor and institutional imperfections theoretical perspectives, are evaluated. Reporting data from 11,131 face-to-face interviews conducted in 11 Central and Eastern European countries in 2013, the main finding is that all three explanations are used by consumers, demonstrating the need for a synthesis of these approaches. A multinomial regression analysis identifies the specific groups variously using the undeclared economy to obtain a lower price, for social or redistributive rationales, or due to formal institutional imperfections. The implications for theorising and tackling the undeclared economy are then explored.     

Environmental Liability and Privatization in Central and Eastern Europe: Toward an Optimal Policy

It has been estimated that the costs of remediating contaminated sites in Central and Eastern Europe (CEE) will be very high. These contingent environmental liabilities have emerged precisely at the time CEE countries are attempting to privatize their capital stocks, creating major challenges for privatization agencies. It is also generally agreed that an inadequate handling of these liabilities in the past has reduced sales of state-owned enterprises in Central and Eastern Europe.This paper uses an analytical model to identify optimal policies for minimizing the damage to privatization processes from environmental liabilities. Policy simulations are conducted which evaluate the effects of the use of liability indemnifications and environmental audits on privatization sales, prices and government revenues net of environmental costs. The major finding of the paper is that goals to mitigate the effects of environmental liability on privatizations and maximize government net revenues from privatization sales require equivalent environmental liability policies. Both goals require optimal provision of information and indemnifications to investors, and moreover it is found that the two policies are complementary rather than substitutes.     

Explaining regional disparities in Central and Eastern Europe

The paper analyses the determinants and the evolution of income disparities across regions within Central and Eastern European Countries (CEECs) over 1991–2011. We add to the literature in different ways. First, we adapt the categories that Rodriguez‐Pose used for studying convergence among old EU members to CEECs regions. This allows us to assess the relevance of geo‐sectoral groups (urban areas, old industrialized areas and peripheral areas) for newcomer regions. Second, we introduce a new category, that of ‘successful Foreign Direct Investment (FDI)‐based restructuring’ in order to capture regions that, often through considerable FDI, manage to reconvert their old industrial base. We then analyze whether this group helps understand catching‐up/falling behind processes in CEECs. We test the relevance of these groups by means of both non‐parametric and spatial regression analyses. We find that they help explain the increase in within‐countries’ regional disparities especially after the turn of the century.     

中东欧经济转型的成就与挑战

文章对中东欧经济转型进行了回顾,指出了中东欧经济转型的特点。在此基础上,文章分析了中东欧经济转型的成就,强调中东欧国家在建立市场经济体制和经济发展上取得了重大进展。与此同时,目前遭受全球金融危机冲击的中东欧国家也面临着许多挑战,需要推动许多领域,特别是社会领域的改革。     

Asymmetric information and contract design for payments for environmental services

In contractual relationships involving payments for environmental services, conservation buyers know less than landowners know about the costs of contractual compliance. Landowners in such circumstances use their private information as a source of market power to extract informational rents from conservation agents. Reducing informational rents is an important task for buyers of environmental services who wish to maximize the services obtained from their limited budgets. Reducing informational rents also mitigates concerns about the “additionality” of PES contracts because low-cost landowners are least likely to provide different levels of services in the absence of a contract. Paying low-cost landowners less thus makes resources available for contracts with higher opportunity cost landowners, who are more likely to provide substantially different levels of services in the absence of a contract. To reduce informational rents to landowners, conservation agents can take three approaches: (1) acquire information on observable landowner attributes that are correlated with compliance costs; (2) offer landowners a menu of screening contracts; and (3) allocate contracts through procurement auctions. Each approach differs in terms of its institutional, informational and technical complexity, as well as in its ability to reduce informational rents without distorting the level of environmental services provided. No single approach dominates in all environments. Current theory and empirical work provides practitioners with insights into the relative merits of each approach. However, more theoretical work and experimentation in the laboratory and the field are necessary before definitive conclusions about the superiority of one or more of these approaches can be drawn.     

Politics and privatization in Central and Eastern Europe

This article examines how government ideology influenced privatization efforts in Central and Eastern Europe after the transition from socialism. We analyse a dataset of privatization indicators covering small‐ and large‐scale industries in 19 transition countries over the period 1990–2007 and introduce a government ideology index. The results suggest that market‐oriented governments promoted the privatization of small‐scale industries more than that of large‐scale ones. In the rapid transition process in the early 1990s, leftist governments stuck to public ownership more strongly than in the following period from the mid‐1990s to 2007. The remarkable differences between leftist and right‐wing governments concerning both the role of government in the economy and the basic elements of political order are in line with developments in OECD countries, and may also hold further implications for transition and democratizing countries outside Central and Eastern Europe.     

Uncovered interest parity in Central and Eastern Europe: Expectations and structural breaks

This paper examines the empirical validity of the hypothesis of uncovered interest parity (UIP) using data from five Central and Eastern European countries with floating exchange rates for the period 2003 to 2014. The analysis includes forward‐looking as well as static expectations and allows for different types of structural break. The variable depicting the deviation from strict UIP is stationary when expectations are forward looking, suggesting that it is not possible to reject the UIP hypothesis with a constant risk premium. The deviation from strict UIP is however typically not stationary when expectations are static, even when structural breaks are incorporated, leading to the rejection of the UIP hypothesis with a constant risk premium. The results underscore the central role of expectations for the UIP hypothesis.     

A sequential approach to regional integration: The European Union and Central and Eastern Europe

This paper develops a theory of optimal sequencing of regional integration and applies it to the specific question of Central and Eastern European countries (CEECs) and the EU. We show that the timing of transition and integration has implications for the long-term trade structure of Europe. In this model the interest to integrate the CEECs comes from harmonization of policies to attract industries. Without integration, European countries will try to inefficiently protect their industries. Because of the transfers implied by the CAP and the Structural Policies, the EU delays enlargement until the CEECs have sufficiently converged. CEECs might at this point prefer to stay outside the EU and attract industries by offering them more generous protection than the EU. Such timing may be inefficient ex ante for all countries because it may prevent full European integration in the long run, inducing firms to relocate outside of the EU and governments in the EU and the CEECs to inefficiently protect industry. During the transition, all countries benefit from regional integration among the CEECs.     

The economic performance of state-owned enterprises in Central and Eastern Europe

This article explores the economic performance of state ownership in the largest non-financial enterprises operating in 13 post-socialist Central and Eastern European (CEE) countries over the period 2007–2013. The largest state-owned enterprises (SOEs) are selected based on the ‘Coface – 500 Top Companies in CEE’ list in 2013. Of these 500 enterprises, 69 were identified as state-owned. All originated in the socialist period. The majority of them are from Poland and Ukraine. SOEs hold a dominant position in energy supply, the oil and gas sector, and transport. We find that the persistence of state ownership in post-socialist countries is caused by incomplete privatisation and the presence of SOEs within strategic sectors. The economic performance of the largest state-owned companies is, on average, comparable to their private counterparts.     

Orchestrating knowledge-creating networks: lessons from Taiwan's health services sector

The purpose of this study is to integrate transaction cost theory and the knowledge-based view of the firm to explore why and how a network's hub organisations orchestrate their members to create knowledge in the health services setting. Guided by organisation theory, this study examines a theoretical model at the organisation level, through a qualitative case study of Taiwan's health services sector. In addition to the discovery of a new sub-construct, the findings provide preliminary evidence that, both, transaction cost and knowledge-based factors influence the health services network as per the study's propositions. This study contributes to strategic technology management research by providing a conceptual model to describe and evaluate health services networks' orchestrating process for knowledge creation. The framework also provides a better understanding of, and a practical approach to managing networks to improve knowledge creation.     

Privatization and contaminated site remediation in Central and Eastern Europe: Do environmental liability policies matter?

This paper examines the effects on site remediation decisions after state-owned firms have been privatized of providing environmental information to potential investors and undertaking site remediation planning prior to privatization. The literature suggests that to minimize distortions created by uncertain environmental problems, governments should invest in environmental information for potential investors, inventory problems and develop plans for remediation. One of the believed benefits is a higher probability of site remediation, because with uncertainty resolved potential conflicts after privatization are less likely. Few countries in Central Europe, which has experienced both environmental problems and privatization on enormous scales, have adopted this advice. Using firm-level data, empirical analysis is presented, which suggests providing only information to investors is insufficient to spur remediation. Inventorying site contamination and planning remediation prior to privatization is a much more effective measure. Combining provision of information with remediation planning is found to be the most powerful policy package for encouraging remediation.     

Designing payments for environmental services in theory and practice: An overview of the issues

Payments for environmental services (PES) have attracted increasing interest as a mechanism to translate external, non-market values of the environment into real financial incentives for local actors to provide environmental services (ES). In this introductory paper, we set the stage for the rest of this Special Issue of Ecological Economics by reviewing the main issues arising in PES design and implementation and discussing these in the light of environmental economics. We start with a discussion of PES definition and scope. We proceed to review some of the principal dimensions and design characteristics of PES programs and then analyze how PES compares to alternative policy instruments. Finally, we examine in detail two important aspects of PES programs: their effectiveness and their distributional implications.PES is not a silver bullet that can be used to address any environmental problem, but a tool tailored to address a specific set of problems: those in which ecosystems are mismanaged because many of their benefits are externalities from the perspective of ecosystem managers. PES is based on the beneficiary-pays rather than the polluter-pays principle, and as such is attractive in settings where ES providers are poor, marginalized landholders or powerful groups of actors. An important distinction within PES is between user-financed PES in which the buyers are the users of the ES, and government-financed PES in which the buyers are others (typically the government) acting on behalf of ES users. In practice, PES programs differ in the type and scale of ES demand, the payment source, the type of activity paid for, the performance measure used, as well as the payment mode and amount. The effectiveness and efficiency of PES depends crucially on program design.     

Retirement and health services utilization in a low-income country*

We estimate the causal effects of retirement on health services utilization in Vietnam. Using authorized retirement ages as instruments for exogenous changes in retirement, we find positive and strong effects of retirement on outpatient health services in the public health sector. Retirement increases the probability of an outpatient visit by 51 percentage points for males and 36 percentage points for females, and the frequency of outpatient visits by 1.4 times for males and 2 times for females. However, we find no effect on the use of public inpatient services as well as private health services.     

Taking stock: A comparative analysis of payments for environmental services programs in developed and developing countries

Payments for environmental services (PES) are an innovative approach to conservation that has been applied increasingly often in both developed and developing countries. To date, however, few efforts have been made to systematically compare PES experiences. Drawing on the wealth of case studies in this Special Issue, we synthesize the information presented, according to case characteristics with respect to design, costs, environmental effectiveness, and other outcomes. PES programs often differ substantially one from the other. Some of the differences reflect adaptation of the basic concept to very different ecological, socioeconomic, or institutional conditions; others reflect poor design, due either to mistakes or to the need to accommodate political pressures. We find significant differences between user-financed PES programs, in which funding comes from the users of the ES being provided, and government-financed programs, in which funding comes from a third party. The user-financed programs in our sample were better targeted, more closely tailored to local conditions and needs, had better monitoring and a greater willingness to enforce conditionality, and had far fewer confounding side objectives than government-financed programs. We finish by outlining some perspectives on how both user- and government-financed PES programs could be made more effective and cost-efficient.     

Fiscal policy in Central and Eastern Europe with real time data: cyclicality,inertia and the role of EU accession

This article evaluates the cyclicality, inertia and effect of EU accession on fiscal policy in Central and Eastern Europe (CEE) using a real time dataset. Budget balances are found to react in a stabilizing way to economic activity – every extra percentage point of economic growth is associated with an improvement in the budget balance of 0.3 percentage points of Gross Domestic Product (GDP) – and there is no evidence of an asymmetric reaction to the cycle. Balances are much less inert than is typically found in Western Europe. However, there is clear evidence of a fiscal loosening in the run-up to EU accession. This began in 1999 in larger central European countries, often identified as ‘front-runners’. The other seven began loosening in 2001, after the Nice Treaty was agreed. For both sets of countries, this loosening cumulatively amounts to some 3% of GDP.     

The effects of prudential policies on bank leverage and insolvency risk in Central and Eastern Europe

This paper analyses the effects of prudential policies on leverage and insolvency risk in eleven Central and Eastern Europe banking systems in the 2005–2014 period. It explores the relationship between leverage, insolvency risk and regulation variables, and the temporal patterns of this relationship. It also examines whether the effects of prudential policies on leverage and insolvency risk are influenced by bank ownership structure and financial cycle. The paper finds a consistent link between prudential regulation and leverage, which varies over the sample period. Conversely, the insolvency risk shows a stronger relationship with macroprudential policies. The estimates reveal that prudential policies work better on leverage and z-score for foreign banks. Both leverage and insolvency risk are better mitigated over booms. Finally, prudential policies have similar effects on both domestic and foreign banks' stability in normal times, while the effects are opposite during turbulences. These dissimilarities are raising challenges to the conduct of prudential policies.     

Wealth inequality in Central and Eastern Europe: Evidence from household survey and rich lists’ data combined*

We study how the problem of the ‘missing rich’, the underrepresentation of the wealthiest in household surveys, affects wealth inequality estimates for the post‐socialist countries of Central and Eastern Europe (CEE). The survey data from the second wave of the Household Finance and Consumption Survey (HFCS) are joined with the data from the national rich lists for Estonia, Hungary, Latvia, Poland and Slovakia. Pareto distribution is fitted to the joined survey and rich lists’ data to impute the missing observations for the largest wealth values. We provide the first estimates of the top‐corrected wealth inequality for the CEE region in 2013/2014. Despite a short period of wealth accumulation during the post‐1989 market economy period, our adjustment procedure reveals that wealth inequality in the Baltic countries is comparable to that of Germany (one of the most wealth‐unequal countries in Europe), while in Poland and Hungary it has reached levels observed in France or Spain. We discuss possible explanations of these findings with reference to the speed and range of privatization processes, extent of income inequality, and the role of inheritances and wealth taxes in the region.     

Selling two environmental services: In-kind payments for bird habitat and watershed protection in Los Negros, Bolivia

Marketing several environmental services from a single area can help access diverse sources of funding and make conservation a more competitive land use. In Bolivia's Los Negros valley (Department of Santa Cruz), bordering the Amboró National Park, 46 farmers are currently paid to protect 2774 ha of a watershed containing the threatened cloud-forest habitat of 11 species of migratory birds. In this payment for environmental services (PES) scheme, annual contracts prohibit tree cutting, hunting and forest clearing on enrolled lands. Farmer-landowners as service providers submit to independent yearly monitoring, and are sanctioned for non-compliance. Facilitated by a local NGO, Fundación Natura Bolivia, one service buyer is an international conservation donor (the US Fish and Wildlife Service) interested in biodiversity conservation. The second service users are downstream irrigators who likely benefit from stabilized dry-season water flows if upstream cloud forests are successfully protected. Individual irrigators have been reluctant to pay, but the Los Negros municipal government has on their behalf contributed ~ US$4500 to the scheme. The negotiated payment mode is annual quid pro quo in-kind compensations in return for forest protection. Predominantly, payments are made as “contingent project implementation”, transferring beehives supplemented by apicultural training. With regard to service provision, environment committees and education programs have increased awareness in downstream communities of the probable water-supply reduction effect of continued upstream deforestation. External donors have funded subsequent studies providing basic economic, hydrological and biodiversity data, and covered PES start-up (~ US$40,000) and running transaction costs (~ US$3000 per year over the last three years). The greatest challenges in the development of the PES mechanism have been the slow process of building trust between service buyers and providers, and in achieving clear service-provision additionality.     

Total factor productivity growth in Central and Eastern Europe before,during and after the global financial crisis

This article presents growth accounting results for 11 EU countries from Central and Eastern Europe for the years 1996–2016. Its contributions include the estimation of new capital stock series and adjustment for the utilisation of capital stock. Before the crisis, growth in total factor productivity (TFP) was the main contributor to output growth in Slovenia, Hungary and Slovakia, while capital deepening was more important in the Czech Republic, Croatia and Poland. During the global financial crisis the contributions of TFP and capital growth differed markedly across the countries, reflecting the very diverse dynamics of the crisis. After the crisis the contribution of TFP growth has been negligible in all of the sample countries coinciding with generally weak output growth. The results are generally robust to changes in estimation methods and parametrisations, but some assumptions regarding the construction of the capital stock series are critical for the results.     

Gender diversity,cash holdings and the role of the institutional environment: empirical evidence in Europe

While substantial evidence is emerging internationally on higher risk aversion among women than among men, there is less evidence on women’s business choices. We explore some of the reasons for the relationship between gender diversity and cash holdings. Specifically, this paper focuses on the choices involving the stock of cash held by firms in which women have executive roles and can consequently exert a crucial influence on the firms themselves. We estimate our proposed empirical models using a dataset of 12,466 observations from 18 European countries. We find a positive relationship between the presence of women with executive roles in the firm and cash holdings. Women tend to make more conservative choices probably because they are more risk averse than men are. This propensity has a relevant impact on the financial choices of firms when women play a leading role. Notably, the study demonstrates that the institutional environment and industry differences moderate our baseline relationship.