Emerging economic systems in Central and Eastern Europe [Elektronische Ressource] : a qualitative and quantitative assessment / Clemens Buchen. Dominique Demougin. Bruno Deffains

Clemens Buchen

Informations

• Publié par: ebs_universitat_fur_wirtschaft_und_recht_wiesbaden
• Publié le: 01 janvier 2010
• Nombre de lectures: 19
• Langue: English
• Poids de l'ouvrage: 4 Mo

Extrait

Emerging economic systems in Central and Eastern Europe – a
qualitative and quantitative assessment
Dissertation
zur Erlangung des akademischen Grades
doctor rerum politicarum
eingereicht bei der EBS Universität für Wirtschaft und Recht
Wiesbaden
von Dipl.-Vwt. Clemens Buchen
Geboren am 15.11.1977 in Düsseldorf
Gutachter
1. Prof. Dominique Demougin, Ph.D.
2. Prof. Dr. Bruno DeffainsContents
1. Introduction 1
1.1. From Neoclassical economics to the New Institutional Economics 1
1.2. New Institutional Economics – three levels of analysis 6
1.3. Comparing institutions 7
1.4. Determinants of institutions 15
1.5. Contribution
17
2. Comparative Institutional Advantage as a determinant of FDI? 19
2.1. Introduction 19
2.2. Comparative institutional advantage and foreign direct investment 21
2.2.1 Type of institutions: Varieties of Capitalism 22
2.2.2 Determinants of foreign direct investment 28
2.3. Methodology 30
2.4. Data 31
2.5. Results 35
2.6. Conclusion 39
3. East European Antipodes: Varieties of Capitalism in Estonia and Slovenia 41
3.1. Introduction 41
3.2. Estonia and Slovenia as LME and CME 42
3.2.1 Industrial relations 45
3.2.2 Corporate governance 47
3.2.3 Inter-firm relations 52
3.2.4 Social security systems 53
3.2.5 Vocational training 57
3.3. Emerging comparative institutional advantages 57
3.4. Conclusion 63
4. Law, Politics and Culture: Lessons from Eastern Europe 65
4.1. Introduction 65
4.2. The determinants of institutions 67
i4.2.1 Legal origin 67
4.2.2 Political Economy 69
4.2.3 Culture 71
4.3. Institutional diversity 73
4.4. The transition from socialism to capitalism 75
4.5. The determinants of institutions in Central and Eastern Europe 77
4.5.1 Dependent variables 77
4.5.2 Legal variables 78
4.5.3 Political variables 78
4.5.4 Cultural variables 79
4.5.5 Control variables 80
4.5.6 Cross-country dataset 80
4.5.7 Panel estimation 87
4.6. Conclusion 91
5. Conclusion 96
References 99
iiList of Figures
Figure 2.1: Marginal effect on FDI 36
Figure 2.2: Marginal effect of value-added 39
Figure 3.1: Real GDP (1989 = 100) 43
Figure 3.2: Unemployment 43
Figure 3.3: Employment Protection Legislation (regular employment) 55
Figure 3.4: Contributions to the trade balance (Lafay-Index) 59
Figure 4.1: Coordination Index 74
iiiList of Tables
Table 2.1: Stylized institutional complementarities in CMEs and LMEs 24
Table 2.2: Coordinated, mixed and liberal market economies 25
Table 2.3: Industry specialization of Germany and the USA 26
Table 2.4: Prevalent innovation patterns per industry 31
Table 2.5: Summary statistics 33
Table 2.6: Results of OLS regressions 35
Table 2.7: Robustness Checks 38
Table 3.1: Coordinated versus Liberal Market Economies 44
Table 3.2: Corporate Governance features 51
Table 3.3: Employment protection 54
Table 3.4: Unemployment protection 56
Table 3.5: Foreign direct investment stocks per selected activities 61
Table 3.6: Foreign direct investment stocks by geographical origin 62
Table 4.1: Predominant privatization strategies 76
Table 4.2: Factor loadings of cultural values dimensions 80
Table 4.3: Estimation results - Proportionality 82
Table 4.4: Estimation results - Legal Origins 83
Table 4.5: Estimation results - Culture 85
Table 4.6: Estimation results - Law, Politics and Culture 86
Table 4.7: Results of dynamic panel estimation 89
Table 4.8: Estimation results - EU member states and non-EU members states 91
iv1
1. Introduction
Comparative institutional analysis has increasingly gained interest from economists in the
recent decade. Globalization, European integration and the dual transition of a host of
countries from authoritarian and socialist systems to democracy and capitalism have drawn
attention to the divergent ways to organize market economic systems. Most importantly, the
new institutional economics pinpointed the importance of written and unwritten institutional
rules for the formation of incentives in an economy (Coase 1937; Coase 2005, North 1990).
This dissertation examines the type of institutional systems that emerge in Central and
Eastern European transition countries. The introduction serves to set the three separate
1articles of the thesis into their broader context . To do so, it will provide a brief overview of
the development of the new institutional economics out of questioning a number of
assumptions in the neoclassical economic framework of a general equilibrium. A distinction
of the New Institutional Economics according to several levels of analyis provides a useful
backdrop to discuss a number of approaches to compare institutions and their determinants.
The influential approach to compare market economies of the varieties-of-capitalism
framework is then introduced as a synthesis of New Institutional Economics approaches and
political science interest in comparative capitalist systems. The contribution of the three
articles will be briefly sketched.
1.1 From Neoclassical economics to the New Institutional Economics
The central tenet of neoclassical equilibrium theory is expressed in the First Fundamental
Theorem of Welfare Economics about the existence of an equilibrium, which was proven by
Kenneth Arrow and Gerard Debreu (1954). It states that under the assumption of complete
markets all competitive exchange equilibria are Pareto-optimal. The market completeness
assumption entails several crucial assumptions regarding actual exchange:first, the law of the
single price means that both producers and consumers face the same prices. Moreover, they
are price takers. This is meant when the Walrasian process is characterized as competitive.
Second, no disequilibrium trading is allowed meaning that no trading at any but the
equilibrium prices can happen. A different definition of competitive markets assumes large
numbers of anonymous market participants with negligible entry and exit costs, in which case
1. Since the three articles are self-contained, some repetition of concepts in the introduction and the articles is
unavoidable.INTRODUCTION 2
the assumptions above do not need to hold. This entails also the assumption of complete
market transparency meaning that all market participants know the relevant prices. It is
irrefutable that Walrasian equilibrium theory is a powerful tool to point out economically
efficient allocations and the strong role of relative prices for reaching them. In this respect it
was adequate for neoclassical economic theory, for one of its main focuses was the proof of
Adam Smith’s famous notion of the invisible hand. The allocational power of decentralized
exchange, in which no actor needs to know more than market prices, was rigorously proven.
Also the way the firm is characterized gave some important insights. It stressed the role of
returns to scale. Very generally, it allows to analyze how optimal production choices vary
with prices. Furthermore, continuative models relaxing the assumption of perfect competition
help to understand aggregate industry behaviour (Hart 1995: 16-17). However, Walrasian
competitive equilibrium and the firm as a production function as sketched here have been
criticized both for conceptual weaknesses and more generally for the strong assumptions
accompanying the crucial market completeness assertion. The long list of implicit and
explicit assumptions for the general equilibrium is aptly summarized by Blaug 1997: “…
perfectly rational, omniscient, identical consumers; zero transaction costs; complete markets
for all time-stated claims for all conceivable contingent events, no trading at disequilibrium
prices, no radical, incalculable uncertainty; (…) only linearly homogeneous production
functions; no technical progress requiring capital investment ….” The fact that further
questions were raised by the Walrasian notion of competitive equilibria and its assumptions
was the main reason for the further development of economic theory beyond the competitive
equilibrium perception and particularly the incorporation of transaction costs and institutional
analysis. The fact that goods and factors in the Arrow-Debreu world are homogenous
precludes any kind of longer-term relationships between market participants, since singular
contracts are reached on spot markets. Issues such as reputation and trust, which seem
important for business relations cannot be modelled. Absence of spatial preferences rules out
transaction costs including such costs as search costs and informational costs. Complete
market transparency also implies that all relevant information is costless and all participants
must be capable of processing information instantly and correctly. While the neoclassical
theorists acknowledged the existence of transaction costs and institutions, they treated the
former mostly as negligible and the latter as “allocationally neutral” (Furubotn and Richter
2005: 12). In fact, Furubotn and Richter (2005: 12-13) summarize a number of incidences,
which allow to point out an implicitly accepted neutralism regarding actual institutional set-
ups in the allocational mechanism in the neoclassical world.
With respect to production, institutional neutrality manifests itself most importantly in the
distinction of markets and hierarchies. Ronald H. Coase asks in