How Much Restructuring did the Transition Countries Experience? Evidence from Quality of their Exports
- PDF / 228,711 Bytes
- 18 Pages / 441 x 666 pts Page_size
- 95 Downloads / 193 Views
www.palgrave-journals.com/ces
How Much Restructuring did the Transition Countries Experience? Evidence from Quality of their Exports YENER KANDOGAN School of Management, University of Michigan-Flint, 303 E. Kearsley Flint, MI 48502, USA. E-mail: [email protected]
The increase in exports to market economies is a good sign, but it is not conclusive about the extent of restructuring of production technologies experienced in transition countries. This paper explores the source of the increase with an analysis of their exports’ quality, interprets the results for the extent of restructuring, and discusses the potential factors behind them. Changes in factor intensity and unit values of both Central and Eastern European countries (CEEC) and Commonwealth of Independent States (CIS) exports in different manufacturing sectors during 1992–1999 are analysed. Although CEEC are in a significantly better position than CIS due to Europe Agreements, there is still large number of products with structural problems in CEEC. Insufficient foreign domestic investment, the Outward Processing Trade in European Agreements, and not fully exploited human capital are suggested as possible factors. Comparative Economic Studies (2005) 47, 543–560. doi:10.1057/palgrave.ces.8100057
Keywords: unit values, restructuring, Eastern Europe, Commonwealth of Independent States, Europe Agreements JEL Classifications: F14, F15, O19, P27
INTRODUCTION The literature before the collapse of socialism provides numerous accounts for the technological backwardness in Eastern Europe: van Brabant (1988) and Bogomolov (1987) point out that Eastern European manufactured goods lacked sufficient quality and technical sophistication to be marketable in Western markets. Treml (1981) identifies a similar situation in the Soviet
Y Kandogan Extent of Restructuring
544
manufactured goods and machinery. The US-imposed embargo on exports of strategic and high technology goods to communist economies in 1947 can be counted as one of the important causes for this situation (van Brabant, 1980). However, the trade block formed in response among socialist countries in 1949, the Council for Mutual Economic Assistance (CMEA), where there were no incentives for competition or innovation, is considered by many as the primary reason for the low-quality of Eastern European products. After the fall of socialism, these countries have undergone a series of reforms to restructure their production technologies. Most noteworthy reform towards this goal is the extensive efforts to liberalise their international trade. Beside the unilateral removal of quantitative trade barriers, almost immediately after the collapse of CMEA in 1991, 10 Central and Eastern European countries (CEEC) signed the Europe Agreements with the European Union (EU). Five out of 12 Commonwealth of Independent States (CIS) formed a customs union in 1994.1 Initially, the opinion in Europe was that this rapid trade liberalisation would not succeed. They would not be able to export their products to market economies becaus
Data Loading...
