The "Soaring Eagle": Anatomy of the Polish Take-Off in the 1990s.I. Introduction
Poland's growth record through 1998 stands out on two counts. Following a sizable siz·a·ble also size·a·ble
Of considerable size; fairly large.
siza·ble·ness n. contraction contraction, in physics
contraction, in physics: see expansion.
contraction, in grammar
contraction, in writing: see abbreviation.
contraction - reduction around the turn of the decade, from 1992 Poland enjoyed seven years of uninterrupted growth at an annual rate averaging over 5 percent. This expansion has been remarkably vigorous and resilient See resiliency. compared with performance during the 1980s, outstripping even the more optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op forecasts. It has also been far more impressive than what has been observed in other countries in transition, and on average over twice as rapid as in EU countries or as in OECD OECD: see Organization for Economic Cooperation and Development. countries at large. This economic revival has earned Poland some flattering flat·ter 1
v. flat·tered, flat·ter·ing, flat·ters
1. To compliment excessively and often insincerely, especially in order to win favor.
2. metaphors, in particular those of "East-European Tiger" and "Soaring soaring: see flight; glider.
Sport of flying a glider or sailplane. The craft is towed behind a powered airplane to an altitude of about 2,000 ft (600 m) and then released. Eagle".
This paper documents the key dimensions of Poland's growth performance in the 1990s. Rather than introducing a new formal framework of analysis or engaging in econometric e·con·o·met·rics
n. (used with a sing. verb)
Application of mathematical and statistical techniques to economics in the study of problems, the analysis of data, and the development and testing of theories and models. testing, it draws on a wide range of relevant statistics and along the way discusses to what extent they square with common stylized styl·ize
tr.v. styl·ized, styl·iz·ing, styl·iz·es
1. To restrict or make conform to a particular style.
2. To represent conventionally; conventionalize. views of transition. The paper first puts the country's overall growth performance in perspective, asking how remarkable it really is. It then turns to the sectoral, ownership, and regional patterns of growth, with a view to discovering how broad-based broad-based
Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased the expansion has been; particular attention is devoted to the performance of industry, which accounts for a large chunk of total value-added. The dynamics of the recovery and take-off take-off
part of the horse's jumping gait, the lifting of the forequarters off the ground and the thrust from the hindlegs at the beginning of the jump. are then discussed, to determine to what extent they reflected improved resource use versus factor accumulation. The concluding sections look ahead by discussing the prospects for medium-term growth and convergence towards EU per capita income Noun 1. per capita income - the total national income divided by the number of people in the nation
income - the financial gain (earned or unearned) accruing over a given period of time levels.
II. Poland's Growth Performance in Perspective
The stabilization Stabilization
The action undertakes a country when it buys and sells its own currency to protect its exchange value.
Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders and liberalization lib·er·al·ize
v. lib·er·al·ized, lib·er·al·iz·ing, lib·er·al·iz·es
To make liberal or more liberal: "Our standards of private conduct have been greatly liberalized . . . of the economy initiated in 1989 was associated with a sizable contraction (Balcerowicz, 1995). While the contraction was deeper than any earlier post-World War II recession in Poland, it was shallower and shorter than in most other transition countries. The recovery started around late 1991, with growth gradually spreading from industry to other sectors and remaining at or above 5 percent per annum Per annum
Yearly. between 1994 and 1998, while investment boomed. During 1992-98, real GDP Real GDP
This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP". increased at an average rate of 5.2 percent per annum, and over the five years to 1998, the annual growth rate averaged 6.0 percent. In cumulative terms, the Polish economy thus expanded by 42 percent between 1991 and 1998 (and by over one third between 1993 and 1998).(2) By several measures, this performance is enviably en·vi·a·ble
So desirable as to arouse envy: "the enviable English quality of being able to be mute without unrest" Henry James. good.
Firstly, these outcomes were consistently better than anticipated. At the onset of the transition in 1989, Poland was considered to be in a deep crisis and to be facing more difficult economic challenges than such neighboring neigh·bor
1. One who lives near or next to another.
2. A person, place, or thing adjacent to or located near another.
3. A fellow human.
4. Used as a form of familiar address.
v. countries as Czechoslovakia and Hungary. Ill-conceived partial reforms undertaken in the final years of the old regime had resulted in major macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. imbalances, weak corporate governance Corporate Governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and a lack of wage discipline, and asset stripping asset stripping
The sale of selected assets of an acquired company generally for the purpose of raising money to pay off some of the debt incurred in financing the acquisition. by insiders.(3) From 1993 and except in 1998, growth systematically and significantly exceeded the official one-year-ahead projections embedded Inserted into. See embedded system. in the budget laws. Likewise, growth turned out to be stronger than projected in the 1994-97 Strategy for Poland medium-term framework of the government, which ex ante was generally considered as rather optimistic. Growth was also distinctly higher than what most observers foresaw: for instance, in what they described as their optimistic long-run scenario, Czyzewski et al. (1994) showed an average annual growth rate of 4.5 percent for the period until 2005; subsequent IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). simulations also pointed to a medium-term equilibrium equilibrium, state of balance. When a body or a system is in equilibrium, there is no net tendency to change. In mechanics, equilibrium has to do with the forces acting on a body. growth potential on the order of 4 [degrees] to 5 percent per annum (IMF, 1996).
Secondly, this growth spell contrasts with the lackluster lack·lus·ter
Lacking brightness, luster, or vitality; dull. See Synonyms at dull.
Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" record of the previous fifteen years.(4) Since the early 1970s, Poland had not witnessed this long and forceful force·ful
Characterized by or full of force; effective: was persuaded by the forceful speaker to register to vote; enacted forceful measures to reduce drug abuse. an expansion and had been underperforming the other planned economies planned economy n → economía planificada
planned economy n → économie planifiée
planned economy n → in central and eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. In this context, the historical peak level of measured real GDP of 1989 was already exceeded by 1995 (Figure 1).(5) In fact, to the extent that even the revised official series may still understate un·der·state
v. un·der·stat·ed, un·der·stat·ing, un·der·states
1. To state with less completeness or truth than seems warranted by the facts.
2. GDP GDP (guanosine diphosphate): see guanine. and that the composition of output improves under market-based rules, the recovery was actually even swifter.(6)
Thirdly, Poland's growth record over the seven years to 1998 compares very favorably fa·vor·a·ble
1. Advantageous; helpful: favorable winds.
2. Encouraging; propitious: a favorable diagnosis.
3. with that of its relatively successful neighbors in central and eastern Europe (Figure 1) and the Baltics, and a fortiori [Latin, With stronger reason.] This phrase is used in logic to denote an argument to the effect that because one ascertained fact exists, therefore another which is included in it or analogous to it and is less improbable, unusual, or surprising must also exist. with developments in Romania, Bulgaria, and countries of the Commonwealth of Independent States Commonwealth of Independent States (CIS), community of independent nations established by a treaty signed at Minsk, Belarus, on Dec. 8, 1991, by the heads of state of Russia, Belarus, and Ukraine. Between Dec. 8 and Dec. (De Broeck and Koen, 2000). It is also more impressive than Slovenia.
Poland's earlier, more sustained, better balanced and stronger growth was related to a combination of relatively favorable fa·vor·a·ble
1. Advantageous; helpful: favorable winds.
2. Encouraging; propitious: a favorable diagnosis.
3. initial conditions and external factors. Poland had made significant progress toward price and trade liberalization during the 1980s. At the outset of the transition, the share of private sector activities was sizable, in particular in agriculture. The quality of the country's public sector institutions and legal system was relatively high, and indicators of educational attainment Educational attainment is a term commonly used by statisticans to refer to the highest degree of education an individual has completed.
The US Census Bureau Glossary defines educational attainment as "the highest level of education completed in terms of the and the quality of schooling suggested high levels of human capital. In combination with a relatively low per capita income level, these favorable initial conditions resulted in a considerable growth catch-up potential. Moreover, Poland enjoyed a close proximity to the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the
European Community (EU) countries and unlike some other transition countries did not experience internal or external conflicts in the early transition years.
In addition to these initial conditions and factors, Poland's robust growth performance also reflects macroeconomic and reform policies that, on the whole, were sound. More specifically, the policy ingredients of the Polish success story include:(7)
* an early political window of opportunity opening in 1989 (the so-called period of "extraordinary politics," characterized char·ac·ter·ize
tr.v. character·ized, character·iz·ing, character·iz·es
1. To describe the qualities or peculiarities of: characterized the warden as ruthless.
2. by a broad political consensus on the reform strategy and a willingness among the public to accept difficult and radical measures);
* a comprehensive and upfront further price and trade liberalization, extending the initial liberalization measures introduced in the 1980s;
* current account convertibility of the currency and an early and broad dismantling dis·man·tle
tr.v. dis·man·tled, dis·man·tling, dis·man·tles
a. To take apart; disassemble; tear down.
b. of obstacles to foreign trade, which prompted a swift reorientation Noun 1. reorientation - a fresh orientation; a changed set of attitudes and beliefs
orientation - an integrated set of attitudes and beliefs
2. reorientation - the act of changing the direction in which something is oriented of trade toward the West and put pressure on firms to restructure;
* low entry barriers for new firms, facilitating a redistribution re·dis·tri·bu·tion
1. The act or process of redistributing.
2. An economic theory or policy that advocates reducing inequalities in the distribution of wealth. of labor from state-owned to new enterprises;
* the imposition The printing of pages on a single sheet of paper in a particular order so that they come out in the correct sequence when cut and folded. of relatively hard budget constraints A Budget Constraint represents the combinations of goods and services that a consumer can purchase given current prices and his income. Consumer theory uses the concepts of a budget constraint and a preference ordering to analyze consumer choices. on public enterprises;
* a relatively liberal social safety net -- a generous retirement regime during the early transition years in particular -- easing the social strains associated with restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). ;
* a consistently prudent macroeconomic policy stance, including an exchange rate policy geared to avoid overvaluation o·ver·val·ue
tr.v. o·ver·val·ued, o·ver·val·u·ing, o·ver·val·ues
To assign too high a value to: overvalued the painting. ;
* a substantial reduction in external debt, which opened the door to large-scale foreign direct investment (FDI FDI
See: Foreign direct investment ) inflows;
* the establishment of a commercial banking sector and securities markets subject to strict regulation and strong supervision, and the implementation of a financial restructuring program providing incentives to banks and enterprises to resolve non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. ;
* extensive legal and institutional reform in support of the market and private sector activity in non-financial areas as well.
The remainder of the paper focuses on three distinct features of the Polish experience that can largely explain the country's strong growth record. First, rapid and comprehensive price and trade liberalization and the imposition of financial discipline on economic agents, state-owned enterprises in particular, resulted in a swift and massive reallocation of resources The provision of logistic resources by the military forces of one nation from those deemed "made available" under the terms incorporated in appropriate NATO documents, to the military forces of another nation or nations as directed by the appropriate military authority. toward market-determined uses. Second, strong expansion in newly established domestic small- and medium-sized enterprises (SMEs) -- facilitated by liberal regulations affecting entry, fast small-scale privatization privatization: see nationalization.
Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned , and the release of labor and capital by financially constrained con·strain
tr.v. con·strained, con·strain·ing, con·strains
1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force.
2. state-owned enterprises -- acted as a main source of growth in the initial transition years. Third, factor accumulation, especially as regards capital, became the dominant source of growth from 1994. The increase in investment was driven in part by a boom in FDI, and foreign affiliates replaced local SMEs as providers of the main impetus Impetus is a stimulus or impulse, a moving force that sparks momentum.
Impetus may also refer to:
While Poland's performance clearly stands out vis-a-vis the contemporaneous con·tem·po·ra·ne·ous
Originating, existing, or happening during the same period of time: the contemporaneous reigns of two monarchs. See Synonyms at contemporary. experience of other transition countries, it has been surpassed in other regions over the 1992-98 period. Among European countries, Ireland has enjoyed far more rapid growth over this period (averaging 7 [degrees] percent per annum). More distant "tigers," particularly in Asia, have recorded even faster growth during those years. In fact, most countries in the world have experienced at least one 7-year expansion at 5 percent per annum or higher since the 1970s, including over half of the current OECD member countries. Admittedly, however, few among those countries had to cope with as momentous mo·men·tous
Of utmost importance; of outstanding significance or consequence: a momentous occasion; a momentous decision. a structural transformation as the transition countries had in the 1990s. Moreover, most of those episodes of rapid growth had a broad regional basis, while Poland's performance did not.
Poland's relative position in Europe has improved considerably during the 1990s (Figure 2). In terms of absolute size gauged at market exchange rates, Poland caught up with the poorer EU member countries (namely, Greece and Portugal). Poland's economic weight also increased compared with its immediate neighbors: while Poland's GDP was 7 percent larger than the combined GDP of Hungary, the Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. and the Slovak Republic in 1991 (at market exchange rates), it had become 21 percent larger by 1998.(8) In per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. terms, and at purchasing power parity Purchasing power parity
The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. rates, Poland's relative position improved sharply, in contrast to that of its aforementioned a·fore·men·tioned
The one or ones mentioned previously.
Adj. 1. neighbors. Thus, per capita income rose from 46 to 54 percent of the level in Greece.(9) Notwithstanding the dynamism of the catch-up, however, living standards living standards npl → nivel msg de vida
living standards living npl → niveau m de vie
living standards living npl in Poland remain well below those in Hungary, the Czech Republic and even the Slovak Republic.
III. Sectoral, Ownership, and Regional Variations
Disaggregating value-added by sector, ownership category, and region allows us to identify the main sources of growth. Decomposing the sectoral and regional pattern of growth also gives an indication of how widespread the overall expansion has been, bearing in mind that the more diversified diversified (di·verˑ·s the growth base, the less vulnerable growth is to sector or region-specific shocks (although, at the same time, large shifts in the composition of output at finer disaggregation dis·ag·gre·ga·tion
1. A breaking up into component parts.
2. An inability to coordinate various sensations and a failure to observe their mutual relations. levels can be indicative of restructuring). Despite the relatively poor quality of the available data, the changes over the period under consideration are large enough to allow some broad indicative conclusions.
Growth has been driven first and foremost by industry, and more specifically by manufacturing (Figure 3 and Table 1). More than 60 percent of the cumulative increase in aggregate value-added between 1991 and 1998 is accounted for by manufacturing. Over that same period, mining and agriculture essentially stagnated, notwithstanding some short-run fluctuations. Construction contributed a bit more than proportionately pro·por·tion·ate
Being in due proportion; proportional.
tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates
To make proportionate. , largely reflecting strong growth of this sector in 1997-98. Somewhat surprisingly, market services,(10) at least as measured in the national accounts, started to grow later and less vigorously, and in cumulative terms contributed much less than proportionately. At the broadest level of aggregation, there has thus been less of a shift from industry to services than might have been expected on the basis of the widespread perception of the former regime as being characterized by overindustrialization. The decline of the relative importance of the loss-making mining sector, however, is more in line with what could have been anticipated, as is the diminishing di·min·ish
v. di·min·ished, di·min·ish·ing, di·min·ish·es
a. To make smaller or less or to cause to appear so.
b. weight of the agricultural sector, which at the onset of the transition was larger than in comparable transition economies (Landesmann, 2000). Also, the broadly defined services sector comprises both activities that were overweight Overweight
Refers to an investment position that is larger than the generally accepted benchmark.
For example, if a company normally holds a portfolio whose weighting of cash is 10%, and then increases cash holdings to 15%, the portfolio would have an overweight under central planning -- freight and certain government administrative functions, for instance -- and activities that were underweight Underweight
An situation where a portfolio does not hold a sufficient amount of securities to satisfy the accepted benchmark of the portfolio's asset allocation strategy.
Notes: , including trade, hotels and restaurants, and financial intermediation. A strong expansion in the provision of such consumer-oriented services since 1992 provided a major impetus to overall growth, as had been expected. Moreover, this expansion is likely to be underestimated in the official statistics as tax-induced under-reporting affects consumer-oriented services in particular.
Table 1: Growth of Value Added by Sector (In percent, in real terms) Sectoral share in 1992 1992 1993 1994 Agriculture, forestry 6.7 -9.4 7.0 -15.1 Fishing 0.1 ... -53.9 10.6 Industry 34.0 2.6 8.6 10.3 of which: Mining and 3.4 -5.3 -9.8 -1.9 quarrying Manufacturing 26.9 5.1 11.9 11.2 Electricity, gas 3.8 ... 1.5 16.2 and water supply Construction 7.8 3.8 1.1 2.7 Trade and repair of 13.1 ... 5.8 -1.5 consumer goods Hotels and restaurants 0.4 ... 2.3 7.3 Transport, storage 6.2 ... -5.3 0.5 and communication Financial intermediation 0.5 ... 29.1 102.1 Real estate and business 6.5 ... 1.5 6.9 services Public administration 6.1 ... 5.2 7.8 and defense Education 3.8 ... 0.1 10.3 Health care and 4.2 ... 0.5 4.1 social security Other 6.5 ... -18.2 3.4 Memo: GDP 2.6 3.8 5.2 1995 1996 1997 1998 Agriculture, forestry 10.4 2.4 1.1 6.1 Fishing -8.3 7.0 -10.5 -33.0 Industry 10.4 7.6 10.3 4.3 of which: Mining and 1.5 4.7 -4.3 -11.6 quarrying Manufacturing 13.7 8.8 14.4 7.6 Electricity, gas 2.1 3.5 0.6 -1.0 and water supply Construction 5.8 2.8 13.6 9.1 Trade and repair of 5.0 6.1 8.1 5.1 consumer goods Hotels and restaurants 6.5 16.8 7.3 8.4 Transport, storage 2.3 5.4 5.6 6.3 and communication Financial intermediation 21.4 11.3 2.9 6.6 Real estate and business 5.8 0.9 -0.7 4.0 services Public administration 4.2 4.4 5.9 1.6 and defense Education 1.5 1.4 0.9 2.7 Health care and 1.6 1.5 0.8 1.5 social security Other 0.7 6.9 -6.8 1.0 Memo: GDP 7.0 6.0 6.8 4.8 Source: GUS and authors' calculations.
(1.) Based on the 1993 system of national accounts starting from 1993. The 1992 figures are based on the former system and therefore incomplete and not directly comparable to subsequent ones.
Another feature of growth in the 1990s is the greater dynamism in the private sector. Between 1991 and 1998, the private sector share in output rose at a faster pace than the share in employment, at both the aggregate and the broad sectoral levels, in industry in particular.(11) In 1998, the private sector accounted for around 70 percent of aggregate output and employment. The observation that the private sector outperformed its state sector counterpart counterpart n. in the law of contracts, a written paper which is one of several documents which constitute a contract, such as a written offer and a written acceptance. holds even taking into account the fact that -- to an extent that official statistics do not allow to identify -- private sector growth in part reflects privatization operations (Kennedy, 1997). The expansion of the private sector was first driven by new domestic SMEs. From 1994, stimulated by an agreement on external debt owed to the London Club An informal group of private creditors on the international stage. Similar to the Paris Club of public lenders. London Club is not the only informal group of private creditors. Its first meeting took place in 1976 in response to Zaire's payment problems. of creditors and by an upswing Upswing
An upward turn in a security's price after a period of falling prices. in large-scale privatization, FDI began to pick up, and the main driving force of private sector expansion changed to foreign affiliates. Reflecting the increasingly important contribution from these affiliates to growth, their share in manufacturing employment rose from less than 10 percent in 1993 to more than 20 percent in 1998, while that in manufacturing sales rose from somewhat more than 10 percent to more than 30 percent in the same period.
The increase in the share of private sector activity has been associated with a rapid expansion in the number of firms, starting from a highly concentrated pattern, in industry in particular. At the end of the 1980s, less than 3 percent of the state-owned 4,900 firms in industry accounted for half of industrial output, and large firms also accounted for the bulk of industrial employment (Berg, 1994). Between 1991 and 1998, the number of registered commercial law companies increased more than two and a half times, to 136,500, that of joint ventures rose almost eight-fold to around 37,000, while that of unincorporated Adj. 1. unincorporated - not organized and maintained as a legal corporation
unorganised, unorganized - not having or belonging to a structured whole; "unorganized territories lack a formal government" private businesses increased by more than 50 percent, to more than 2 million.
The strong growth in the number of private sector enterprises reflects both a correction to the distorted size distribution of firms in industry and the development of a small business sector oriented o·ri·ent
1. Orient The countries of Asia, especially of eastern Asia.
a. The luster characteristic of a pearl of high quality.
b. A pearl having exceptional luster.
3. toward consumer services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, (Table 2). This growth was supported by liberal entry requirements and by privatization policies that quickly transferred SMEs in the services sector to private ownership and that gave state enterprises in other sectors incentives to sell or lease assets to private enterprises. Moreover, new private firms benefited from a relatively easy access to bank lending, as the reform and reorganization of the banking sector contributed to a reorientation of credit flows to such firms (Anderson and Kegels, 1998; Bratkowski, Grosfeld, and Rostowski, 2000). The rapid development of a new private enterprise sector is one of the key features of the so-called Polish model of transition.(12)
Table 2: Indicators of Private Sector Dynamism 1989 1990 1991 1992 1993 1993(1) Number of enterprises Commercial 16905 36267 53771 69907 83283 83283 law companies of which with 429 1645 4796 10131 15167 15167 foreign capital of which in: Industry 4083 9073 11735 15315 18338 19862 Construction 3406 5946 9632 12063 13775 11667 Trade 2175 9043 17768 24199 29381 30444 Hotels and ... ... ... ... ... 971 restaurants Transport and 1672 2081 3284 communication Financial ... ... ... ... ... 603 intermediation Unincorporated ... 1135 1420 1629 1862 1862 private businesses (in thousands) State enterprises 7337 8453 8228 7245 5924 5924 Memo item Started 107 1297 2056 2635 2635 privatizations Completed 6 228 612 989 989 privatizations Private sector share in output (in percent) Gross domestic ... 30.9 41.7 45.2 47.9 46.4 product Agriculture ... 77.5 80.0 84.6 86.5 86.5 Industry(2) 16.2 18.3 24.8 28.2 34.6 34.6 Mining ... ... ... ... ... ... Manufacturing ... ... ... ... ... ... Construction(2) 25.5 33.8 58.8 74.3 82.3 82.3 Retail sales 59.5 63.7 82.8 86.4 89.1 89.1 Transport and ... ... 35.1 37.3 37.3 communication(2) Exports ... 4.9 21.9 38.4 44.0 44.0 Imports ... 14.6 49.9 54.5 59.8 59.8 Private sector share in employment (in percent) Total 46.2 48.9 54.1 56.0 58.9 58.9 Agriculture 84.9 86.5 89.2 91.4 93.7 94.6 Industry 29.1 31.2 35.8 40.5 42.7 40.7 Mining ... ... ... ... ... 1.9 Manufacturing ... ... ... ... ... 49.2 Construction 37.4 42.1 59.5 71.9 74.8 69.6 Trade and repair 72.7 82.2 88.3 90.7 93.2 92.7 Transport, and ... ... 20.1 21.0 27.6 communication Financial ... ... 32.0 27.6 33.1 33.9 intermediation Real estate ... ... ... ... ... 57.9 1994 1995 1996 1997 1998 Number of enterprises Commercial 95017 104922 115739 26465 136497 law companies of which with 19737 24086 28622 32942 36850 foreign capital of which in: Industry 22726 25077 27379 29532 31426 Construction 12821 13634 14646 15589 16565 Trade 34639 38001 41991 45896 49195 Hotels and 1230 1483 1771 2045 2328 restaurants Transport and 3950 4454 5003 5550 6064 communication Financial 851 1118 1377 1706 2012 intermediation Unincorporated 1977 1957 2241 2541 2637 private businesses (in thousands) State enterprises 4955 4357 3847 3369 2906 Memo item Started 3132 3582 3953 4178 4648 privatizations Completed 1380 1690 1991 2325 2569 privatizations Private sector share in output (in percent) Gross domestic 45.5 52.8 54.5 58.7 60.9 product Agriculture 87.9 89.1 88.7 88.7 89.5 Industry(2) 39.4 46.9 52.4 63.5 69.1 Mining 2.3 2.6 2.6 5.5 7.6 Manufacturing 47.0 53.5 62.1 75.2 80.6 Construction(2) 84.9 87.6 87.9 93.2 93.9 Retail sales 90.8 92.4 92.9 94.7 95.0 Transport and 38.5 40.1 42.2 44.7 ... communication(2) Exports 53.2 56.8 62.9 74.3 78.8 Imports 66.9 69.7 75.6 82.5 86.5 Private sector share in employment (in percent) Total 60.6 62.4 65.1 68.2 70.7 Agriculture 95.9 96.6 97.6 97.8 98.0 Industry 46.1 50.5 55.2 63.7 70.1 Mining 3.0 3.1 3.3 4.5 6.9 Manufacturing 55.1 60.0 64.9 74.5 81.5 Construction 78.2 80.9 84.5 87.7 91.3 Trade and repair 93.4 94.1 94.9 96.1 97.3 Transport, and 25.4 26.7 28.8 32.9 34.9 communication Financial 33.3 36.4 38.6 42.0 49.9 intermediation Real estate 60.0 63.3 65.4 69.8 73.3 Source: GUS and authors' calculations (1) New classification; (2) Share in sales
Turning to the regional dimension,(13) growth appears not to have been uniform. Homogeneous The same. Contrast with heterogeneous.
homogeneous - (Or "homogenous") Of uniform nature, similar in kind.
1. In the context of distributed systems, middleware makes heterogeneous systems appear as a homogeneous entity. For example see: interoperable network. regional GDP data are not available throughout the period under consideration, and those that exist suffer from a major structural break in 1992.(14) Notwithstanding those limitations, it can be noted that the recovery has been pulled by the capital (Warsaw Warsaw (wôr`sô), Pol. Warszawa, city (1993 est. pop. 1,655,700), capital of Poland and of Mazowieckie prov., central Poland, on both banks of the Vistula River. ) and a small number of other large regions which have also recorded above-average growth. The Warszawkie (Warsaw) region alone accounted for around one fifth of nationwide growth between 1992 and 1996. The two largest regions (i.e., the capital and Katowice) accounted for over a third of aggregate growth. Close to 60 percent of growth was accounted for by only six of the 49 regions, representing no more than 36 percent of nationwide GDP in 1992.
Although regional and sectoral specificities overlap to some extent, regions burdened with stagnating sectors do not appear to be systematically lagging Lagging
Strategy used by a firm to stall payments, normally in response to exchange rate projections. . For example, there is only an extremely weak correlation between the share of agriculture in regional GDP in 1992 and regional GDP growth since, and the main mining region (Katowice) has recorded above-average GDP growth. More detailed data indicate that both overall and industrial specialization A career option pursued by some attorneys that entails the acquisition of detailed knowledge of, and proficiency in, a particular area of law.
As the law in the United States becomes increasingly complex and covers a greater number of subjects, more and more attorneys are in the regions declined markedly during the period of high growth 1994 to 1998 (Deichman and Henderson, 2000). This suggests that the local drag from struggling dominant sectors has often been compensated by the development of activity in others, which might constitute indirect evidence of restructuring.
Nonetheless, the uneven speed of the recovery across regions begs the question whether in the process regional per capita GDP has tended to become more or less equal. The top panel in Figure 4 shows that not all regions were equally affected during the great contraction The Great Contraction is Milton Friedman's term for the Great Depression.
Friedman labelled it thus because he believed that the depression lasted so long due to the Federal Reserve's mismanagement. of the late 1980s and early 1990s. The capital in particular was relatively spared, even though it too suffered a large decline. The bottom panel illustrates the unevenness of the recovery through 1996.(15) Table 3 displays a set of summary statistics pointing to a significant increase in regional disparities between 1992 and 1996, and also, albeit less unequivocally, between 1986 and 1996.(16) Cross-regional correlations highlight the magnitude of the shifts that took place, with regional rankings changing both during the second half of the 1980s and during the first half of the 1990s. (17)
Table 3: Regional GDPs: Selected Summary Indicators (Summary statistics based on nominal regional GDP per capita relative to the nationwide average) Including Warsaw 1986 1990 1991 1992 1995 1996 Coefficient 0.32 0.36 0.34 0.23 0.32 0.34 of variation Maximum 2.15 2.35 2.27 1.58 2.10 2.13 Minimum 0.60 0.52 0.54 0.65 0.60 0.59 Max/min 3.6 4.6 4.2 2.5 3.5 3.6 Average of 2.19 2.53 2.35 2.03 2.22 2.30 top 5 over average of bottom 5 Average of 1.83 2.08 2.01 1.80 1.89 1.91 top 10 over average of bottom 10 Correlation matrix Including Warsaw 1986 1990 1991 1992 1995 1996 1986 1.00 0.94 0.93 0.79 0.86 0.84 1990 1.00 0.97 0.86 0.90 0.89 1991 1.00 0.85 0.91 0.90 1992 1.00 0.87 0.87 1995 1.00 0.98 1996 1.00 Excluding Warsaw 1986 1990 1991 1992 1995 1996 Coefficient 0.24 0.26 0.26 0.21 0.29 0.30 of variation Maximum 1.55 1.67 1.61 1.49 2.10 2.13 Minimum 0.60 0.52 0.54 0.65 0.60 0.59 Max/min 2.6 3.2 3.0 2.3 3.5 3.6 Average of 1.79 2.00 1.88 1.92 1.95 1.97 top 5 over average of bottom 5 Average of 1.64 1.84 1.79 1.73 1.75 1.77 top 10 over average of bottom 10 Correlation matrix Excluding Warsaw 1986 1990 1991 1992 1995 1996 1986 1.00 0.88 0.86 0.73 0.83 0.78 1990 1.00 0.94 0.87 0.91 0.87 1991 1.00 0.84 0.92 0.88 1992 1.00 0.83 0.83 1995 1.00 0.98 1996 1.00 Sources: GUS, RECESS, and authors' calculations.
One could further wonder whether divergent di·ver·gent
1. Drawing apart from a common point; diverging.
2. Departing from convention.
3. Differing from another: a divergent opinion.
4. growth performance and prospects have prompted regional migration flows. No such effects could be identified in the demographic data. However, in a context of enduring housing shortages, geographical labor mobility Labor mobility or worker mobility is the socioeconomic ease with which an individual or groups of individuals who are currently receiving remuneration in the form of wages can take advantage of various economic opportunities. may in some cases involve commuting rather than migrating, at least in the shorter run.
IV. Industrial Output
Given the contribution of industry to overall growth, and the existence of comparatively better data than for the service sector, further disaggregation within industry can provide some relevant insights on the growth process.
Unlike for GDP as a whole, long-run historical series are available for industry, allowing us to put recent developments in a deeper historical perspective. The contraction associated with transition far exceeded any earlier decline, including the large depression of the early 1980s,(18) to the point that the volume of industrial output -- measured in gross terms without adjustment for intermediate inputs -- in 1991 had reverted re·vert
intr.v. re·vert·ed, re·vert·ing, re·verts
1. To return to a former condition, practice, subject, or belief.
2. Law To return to the former owner or to the former owner's heirs. to its level of the mid-1970s (Figure 5). Growth in 1992-98 was about as vigorous as in the 1960s and the first half of the 1970s, and by 1996, output exceeded its historical 1988 peak. Like for GDP as a whole, growth was distinctly stronger in Poland than in neighboring countries following the transitional collapse (Figure 6).
The composition of industrial output shifted considerably over time. At the broadest level, and at constant 1991 prices, the share of mining halved halve
tr.v. halved, halv·ing, halves
1. To divide (something) into two equal portions or parts.
2. To lessen or reduce by half: halved the recipe to serve two.
3. between 1991 and 1998, to 5 percent, whereas that of manufacturing increased by close to 12 percentage points, to some 90 percent. At the same time, the share of the electricity, gas and water supply sector dropped almost as sharply as that of mining. In the case of mining, the drop reflected the fact that the contraction lasted through 1993 and that output fell precipitously pre·cip·i·tous
1. Resembling a precipice; extremely steep. See Synonyms at steep1.
2. Having several precipices: a precipitous bluff.
3. in 1998, in a context of weakening weak·en
tr. & intr.v. weak·ened, weak·en·ing, weak·ens
To make or become weak or weaker.
weaken·er n. coal prices, downscaling Global climate models (GCMs) are run at coarse spatial resolution (typically of the order 50,000 km²) and are unable to resolve important sub-grid scale features such as clouds and topography. As a result GCMs can’t be used for local impact studies. of production facilities and rising imports (Table 4). In stark contrast, manufacturing output almost doubled between 1991 and 1998.
Table 4: Sales Volume in Industry (Rate of change in real terms) 1991 1992 1993 1994 1995 Total -8.0 2.8 6.4 12.1 9.7 Mining and quarrying -2.6 -5.3 -4.1 4.6 -0.6 Manufacturing -10.3 5.1 10.4 13.7 11.6 Food products and beverages 0.6 1.7 8.6 12.8 9.3 Tobacco products -15.9 6.0 16.6 10.0 -0.5 Textiles -13.6 3.4 9.9 14.6 -1.0 Clothing -5.2 15.7 8.3 11.0 2.2 Leather and leather products -7.7 -5.7 -1.2 12.6 8.2 Wood and wood products -2.6 15.4 3.7 10.6 10.0 Pulp and paper -3.9 12.0 6.6 24.7 18.2 Publishing and printing -15.5 28.4 39.0 6.9 17.3 Coke, refined petroleum -14.9 12.8 12.3 7.2 5.6 products and derivatives Chemicals and chemical -9.9 -2.0 6.1 17.3 13.1 products Rubber and plastic products 3.0 29.9 19.9 16.1 17.0 Other non-metallic mineral -3.3 -1.4 9.8 14.6 4.8 products Basic metals -23.8 -2.3 1.8 16.7 15.2 Metal products (except 1.0 19.8 7.1 15.6 15.8 machinery and equipment) Machinery and equipment -24.7 -7.7 9.4 15.5 20.9 Office equipment and -35.1 -16.0 51.4 -1.6 52.2 computers Electrical machinery and -6.7 2.1 10.9 9.7 16.1 apparatus Radio, TV and -23.5 14.9 27.0 26.8 17.4 communication equipment Medical, precision and -9.6 3.4 16.1 11.7 25.7 optical instruments Motor vehicles and trailers -22.9 11.0 27.4 13.7 14.1 Other transport equipment -23.4 7.2 9.6 22.6 3.9 Furniture and other -6.0 13.0 11.4 14.5 24.2 manufacturing Scrap recycling -15.3 26.8 -9.8 8.0 23.5 Electricity, gas and water 3.5 -4.6 -11.2 4.7 0.9 supply Electricity, gas, steam and 3.3 -5.2 -12.0 4.5 0.8 hot water supply Collection, purification and 6.1 0.5 -2.9 7.0 1.4 distribution of water Share Cumul- in ative 1998 1996 1997 1998 1991-98 Sales Total 8.3 11.5 4.6 70 100.0 Mining and quarrying 2.5 0.5 -13.0 -15 6.1 Manufacturing 9.8 13.4 6.4 95 84.7 Food products and beverages 9.6 9.6 7.1 75 21.0 Tobacco products -5.4 4.1 6.2 41 1.0 Textiles 2.8 6.9 -2.9 38 2.1 Clothing 4.8 12.7 6.9 79 2.4 Leather and leather products 12.5 4.2 -15.5 12 0.9 Wood and wood products 12.7 12.0 9.1 100 2.9 Pulp and paper 9.8 18.8 8.8 150 1.8 Publishing and printing 14.4 15.6 14.7 239 2.9 Coke, refined petroleum 2.8 1.7 -13.0 30 3.3 products and derivatives Chemicals and chemical 4.9 11.9 -2.6 58 5.8 products Rubber and plastic products 17.2 21.1 15.4 247 3.5 Other non-metallic mineral 9.5 11.9 10.7 76 4.2 products Basic metals 0.0 13.2 -4.8 44 5.5 Metal products (except 20.4 14.1 19.0 181 4.3 machinery and equipment) Machinery and equipment 9.8 8.7 -1.0 67 5.1 Office equipment and 44.2 24.3 20.4 311 0.3 computers Electrical machinery and 11.8 15.9 7.7 101 2.7 apparatus Radio, TV and 19.2 29.0 17.6 293 1.8 communication equipment Medical, precision and 14.7 19.7 1.9 136 1.0 optical instruments Motor vehicles and trailers 34.0 31.1 18.3 281 6.0 Other transport equipment -4.8 11.2 10.2 75 2.2 Furniture and other 14.2 25.4 18.9 205 3.7 manufacturing Scrap recycling -10.0 17.2 8.1 74 0.3 Electricity, gas and water 0.3 3.4 1.0 -6 9.2 supply Electricity, gas, steam and 0.4 3.5 0.6 -8 8.3 hot water supply Collection, purification and -0.4 3.0 5.9 15 0.9 distribution of water Source: GUS.
At a more disaggregated Broken up into parts. level as well, important shifts were recorded. Looking at the main 23 manufacturing sectors, output grew by at least 5 percent per annum on average in all but three sectors while it boomed in 11 sectors, where annual growth exceeded 10 percent on average (Table 4). While production increased in all 23 manufacturing sectors, it declined or even collapsed for a number of products (Figure 7).(19) The most spectacular declines were recorded for some categories of electronic consumer goods consumer goods
Any tangible commodity purchased by households to satisfy their wants and needs. Consumer goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances) have a significant life span, often defined as three years or more, and and heavy machinery (radios, metal cutting machines), but strikingly other types of electronics consumer goods and heavy machinery recorded among the most impressive surges (color TVs, heavy vehicles). At the level of individual products, the output mix therefore changed considerably. However, and although some heavy industry items registered declines or very limited growth, the share of heavy industry may not have declined significantly.
Looking at the behavior over time of the output series for individual products (not shown), it appears that during the period 1992 to 1998 on the whole their degree of synchronization (1) See synchronous and synchronous transmission.
(2) Ensuring that two sets of data are always the same. See data synchronization.
(3) Keeping time-of-day clocks in two devices set to the same time. See NTP. increases with average overall growth, i.e. the dispersion dispersion, in chemistry
dispersion, in chemistry, mixture in which fine particles of one substance are scattered throughout another substance. A dispersion is classed as a suspension, colloid, or solution. of their growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. tended to be lower the faster GDP expanded.(20) However, the coefficient of variation Coefficient of Variation
A measure of investment risk that defines risk as the standard deviation per unit of expected return. of the growth rates of individual items was several times lower prior to 1990, consistent with the idea that transition involves significant modifications of the structure of supply (and demand).(21)
The evolution of output has also varied considerably across regions. Between 1991 and 1998, the volume of industrial output had increased everywhere, more than doubling in 19 of the 49 regions (Figure 8). Growth ranged from 9 to 340 percent, with the five most dynamic regions recording an expansion over 8 times as rapid as the bottom five.
V. Investment And Productivity
intr.v. re·vert·ed, re·vert·ing, re·verts
1. To return to a former condition, practice, subject, or belief.
2. Law To return to the former owner or to the former owner's heirs. to a more macroeconomic level of analysis, the question arises as to which forces were underlying the expansion on the supply side. This section documents the shift, over the 1992-98 period, from an intensive to a more extensive growth pattern.
Labor was hoarded on a large scale in Poland in the 1980s. Gora and Rutkowski (1990) for example estimate that labor hoarding amounted to around one fourth of total employment at the time (hoarding being defined as labor that would not have been employed had the economy functioned as a market one with the same level of output). Labor hoarding increased during the 1990-91 contraction, as separations were limited by political and social considerations, so that employment declined less than output. Hence, by the time output started to recover, there was a labor "overhang Overhang
Calculated as stock options granted, plus the remaining options to still be granted, and then divided by the total shares outstanding.
A high percentage for the overhang is usually a bad thing. " on the order of 30 percent. This helps explain why employment continued to decline for another two years, and why it expanded so little from 1994 onwards on·ward
Moving or tending forward.
adv. also on·wards
In a direction or toward a position that is ahead in space or time; forward.
Adv. 1. . In fact, by 1998, real GDP had increased by 42 percent compared with its 1991 trough Trough
The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion. even as employment was no larger than in 1991.
This would be consistent with full dishoarding by 1998 if the ratio of productively employed labor to GDP was to be the same in 1998 as in 1991. However, there is no compelling reason to believe that this should be the case. Starting from relatively low levels, investment boomed between 1994 and 1998, rising on average by 16 percent per annum in real terms, with a strong foreign contribution (Tables 5 and 6).(22) The increase in investment contributed to quantitatively but also qualitatively rebuild a rather worn out and largely obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed,
2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. capital stock. On those grounds, and also given anecdotal evidence anecdotal evidence,
n information obtained from personal accounts, examples, and observations. Usually not considered scientifically valid but may indicate areas for further investigation and research. of continued overstaffing in some heavy industries, it would seem incorrect to conclude that production factors were fully used by 1998.
Table 5: Sources of Growth on the Demand Side (In percent and in real terms) Share in 1992 1993 1994 1991 GDP GDP 100.0 2.6 3.8 5.2 Consumption 82.0 3.5 4.8 3.9 Private 59.3 2.3 5.2 4.4 Public 22.7 6.4 3.8 2.2 Gross capital formation 19.9 -13.0 12.8 9.1 Fixed investment 19.5 2.3 2.9 9.2 Exports 23.5 10.8 3.2 13.1 Imports -25.4 1.7 13.2 11.3 1995 1996 1997 1998 GDP 7.0 6.0 6.8 4.8 Consumption 3.2 7.2 6.1 4.1 Private 3.3 8.3 6.9 4.7 Public 2.9 3.4 3.2 1.6 Gross capital formation 10.5 34.0 20.9 13.8 Fixed investment 16.5 19.7 21.7 13.2 Exports 22.8 12.0 12.2 10.3 Imports 24.3 28.0 21.4 13.7 Source: GUS. Table 6: Indicators of Foreign Direct Investment (Flows and stocks) 1994 1995 1996 1997 1998 Inward Flows (in $ millions) PAIZ statistics Projects of over $1 million 1493 2512 5196 5678 9574 Estimated total projects ... ... ... 6600 10100 Balance of payments statistics Cash-based, gross 542 1132 2768 3077 5129 Accruals-based, gross 1875 3659 4498 4908 6365 of which: purchased shares 884 1807 2845 2663 4323 reinvested earnings 382 888 244 25 -264 loans from foreign 397 666 1095 1767 2025 shareholders in-kind contributions 212 298 314 453 281 Foreign direct investment End-period stocks (in $ billions) in Poland PAIZ statistics Projects of over $1 million 4.3 6.8 12.0 17.7 27.3 Estimated total projects ... ... 14.0 20.6 30.7 Commitments 4.9 5.3 7.9 10.8 13.3 NBP statistics 3.8 7.8 11.5 14.6 22.5 Of which: equity and 2.8 6.1 8.7 10.1 16.1 reinvested earnings(1) Memorandum item: $ GDP2 92.6 126.3 143.0 143.1 157.7 Sources: Polish Agency for Foreign Investment (PAIZ); National Bank of Poland (NBP). (1) Includes contributions in kind and excludes loans. (2) Revised GDP series from 1995 onwards.
Thus, input and output behavior allow us to distinguish two phases in the seven-year expansion. The initial recovery in 1992-93 involved an increase in capacity utilization rates Capacity utilization rate
The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. broadly defined, or in other words Adv. 1. in other words - otherwise stated; "in other words, we are broke"
put differently a move towards the production possibility frontier. Growth took on a more extensive character from around 1994, when factor accumulation picked up, especially as regards capital. The pickup Pickup
A gain in yield made by selling one bond and buying another. Also referred to as "yield pickup."
When the present yield is relatively low compared to the longer-term yields, pickups will be done by investors trying to increase the yield and duration of their in capital accumulation Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. Capital can be generally defined as assets invested for profit. from 1994 was in part driven by an increase in FDI, which rose from 2 percent of GDP in 1994 to 4 percent of GDP in 1998. As labor productivity is on average higher in firms with foreign involvement,(23) this increase in FDI also boosted labor productivity, in those manufacturing sectors that received large inflows in particular.(24)
Measuring productivity developments in terms of productivity of labor only, at the most aggregate level, labor productivity rose at an annual rate of around 6 percent during the initial recovery, as against 4 percent rate in subsequent years (Table 7).(25) As illustrated in Figure 9, a similar pattern was recorded in Hungary (where the contribution of FDI was even more important), whereas productivity improved much less in the Czech Republic and the Slovak Republic.
Table 7: Productivity Developments in the Visegrad Countries (annual percentage change(1, 2)) Czech Republic Whole Economy Industry Y K L TFP Y K L TFP 1980 2.4 4.8 0.7 0.3 1.8 5.3 0.2 -0.1 1981 -0.7 5.2 0.4 -2.9 -0.7 6.3 0.1 -3.0 1982 -0.8 4.3 0.3 -2.5 -1.5 5.0 0.3 -3.4 1983 1.2 4.0 0.1 -0.3 0.8 4.0 0.4 -0.9 1984 2.6 4.3 0.7 0.7 3.9 4.6 0.1 2.2 1985 0.6 4.3 0.8 -1.4 2.2 5.2 0.4 0.2 1986 2.1 4.2 1.1 -0.1 2.6 5.0 1.2 0.0 1987 0.6 3.5 0.4 -0.9 3.2 4.3 0.5 1.4 1988 2.0 3.7 0.5 0.4 3.2 4.3 0.1 1.6 1989 4.4 3.1 0.6 3.0 3.2 3.7 0.4 1.6 1990 -1.2 2.5 -1.0 -1.5 -1.4 2.3 -4.3 0.5 1991 -12.2 2.4 -5.6 -9.4 -23.8 2.5 -3.8 -22.2 1992 -3.4 2.3 -2.6 -2.4 -8.2 3.0 -8.1 -4.1 1993 0.6 2.3 -1.6 0.8 -5.4 2.8 -5.0 -3.2 1994 3.1 1.9 0.8 2.0 2.1 3.3 -5.5 4.5 1995 6.2 3.0 2.6 3.5 5.7 4.0 0.6 3.9 1996 3.8 4.1 0.7 1.9 9.6 3.9 -0.8 8.8 1997 0.3 3.8 -1.0 -0.3 7.7 3.6 -1.0 7.1 1998 -2.4 3.5 1.2 -2.0 -1.6 0.2 1.3 -2.7 Hungary Whole Economy Industry Y K L TFP Y K L TFP 1980 0.2 5.0 -0.7 -1.1 -1.1 6.2 -2.4 -1.7 1981 2.9 4.1 -0.7 1.9 4.9 5.1 -2.3 4.6 1982 2.8 4.2 -0.4 1.6 4.6 4.8 -2.4 4.4 1983 0.7 4.2 -0.6 -0.4 1.8 5.5 -2.4 1.4 1984 2.7 4.0 -0.6 1.7 2.5 5.3 -1.2 1.4 1985 -0.3 3.3 -0.5 -1.1 -2.1 3.3 -0.3 -3.1 1986 1.5 3.7 -0.3 0.3 -0.5 5.6 -0.4 -2.2 1987 4.0 3.1 -0.5 3.2 3.2 3.7 -1.3 2.7 1988 -0.1 3.5 -0.6 -0.9 -1.5 3.8 -2.0 -1.5 1989 0.7 6.4 -0.5 -1.2 -2.0 4.3 -2.1 -2.2 1990 -3.6 4.3 -1.6 -4.1 -8.0 3.7 -2.7 -7.6 1991 -12.7 3.6 -6.0 -10.0 -19.6 3.5 -7.7 -15.9 1992 -3.1 3.4 -9.4 1.8 -6.9 3.6 -10.9 -1.1 1993 -0.6 3.4 -6.5 2.4 3.0 3.2 -11.2 9.1 1994 2.9 3.7 -2.0 2.9 5.8 3.5 -4.6 7.6 1995 1.5 3.4 -2.0 1.6 6.7 3.5 -5.5 9.0 1996 1.3 3.4 -0.8 0.6 3.1 3.6 -0.9 2.4 1997 4.5 3.6 0.0 3.3 14.0 3.8 1.7 11.6 1998 5.0 3.9 1.4 2.7 11.2 4.5 4.5 6.6 Poland(3) Whole Economy Industry Y K L TFP Y K L TFP 1980 -6.2 4.3 4.6 -10.7 -4.2 4.5 0.2 -5.9 1981 -10.5 3.3 0.5 -12.0 -14.7 3.4 -0.2 -15.8 1982 -4.9 1.9 -2.5 -4.0 -3.9 2.1 -4.9 -1.4 1983 5.4 2.5 -0.3 4.8 5.4 2.8 -0.3 4.6 1984 5.4 2.4 0.3 4.4 5.0 3.1 0.5 3.6 1985 3.5 2.6 0.9 2.1 3.7 3.4 0.1 2.5 1986 4.1 1.9 0.3 3.3 4.2 2.4 -1.9 4.6 1987 2.0 3.8 -0.3 0.8 3.1 3.7 0.2 1.7 1988 4.0 2.5 -0.7 3.6 4.5 2.6 -0.4 3.9 1989 0.2 3.7 -1.0 -0.4 -2.1 3.2 0.0 -3.3 1990 -12.3 1.1 -3.5 -10.5 -24.8 2.3 -5.8 -21.9 1991 -7.9 1.2 -6.0 -4.4 -18.8 0.9 -8.3 -13.6 1992 1.5 1.3 -4.3 3.8 2.6 1.2 -9.1 8.0 1993 3.7 1.9 -2.4 4.6 8.3 1.7 -5.6 11.3 1994 5.1 2.6 1.0 3.5 9.8 2.8 -0.8 9.4 1995 6.8 2.1 1.8 4.9 9.9 0.3 3.1 7.7 1996 5.8 4.7 1.9 2.9 7.3 5.9 -0.7 5.7 1997 6.6 3.4 2.7 3.6 9.8 3.5 0.3 8.4 1998 4.7 4.0 0.3 3.1 4.3 2.1 -3.0 4.8 Slovak Republic Whole Economy Industry Y K L TFP Y K L TFP 1980 3.1 6.4 0.7 0.4 4.0 6.9 1.2 0.8 1981 -0.1 6.0 1.1 -2.9 1.5 7.0 1.9 -2.2 1982 -0.2 5.2 0.6 -2.4 -1.7 5.3 0.7 -4.0 1983 3.2 5.2 1.1 0.7 3.8 5.7 1.2 1.0 1984 4.5 5.5 1.4 1.6 6.8 6.3 1.3 3.8 1985 3.8 5.2 1.3 1.2 5.9 6.5 1.3 2.8 1986 4.0 4.5 1.8 1.3 4.4 3.9 1.7 1.9 1987 2.5 4.0 1.1 0.5 4.7 4.1 1.1 2.6 1988 1.9 3.9 1.0 -0.1 3.5 3.9 0.9 1.6 1989 1.1 3.8 -0.2 -0.1 1.9 3.7 -0.8 1.2 1990 -2.5 3.3 -0.8 -3.1 -2.8 3.8 -2.1 -2.8 1991 -15.8 2.7 -8.3 -11.3 -21.6 3.0 -8.3 -17.2 1992 -6.7 2.9 0.2 -7.9 -9.8 3.2 -13.0 -2.4 1993 -3.8 2.9 0.0 -4.7 -3.9 3.1 -5.2 -1.6 1994 4.8 2.8 -1.8 4.9 4.7 3.1 -5.6 7.3 1995 6.7 3.0 2.2 4.2 8.0 3.3 1.0 6.2 1996 6.4 4.0 0.8 4.5 0.4 4.4 -1.5 -0.1 1997 6.3 4.3 0.2 4.6 2.3 4.7 -3.4 2.9 1998 4.3 4.4 1.2 3.0 0.9 0.2 1.5 0.9 Source: National statistical authorities, and authors' calculations. (1) Based on logarithmic growth rates. (2) Y stands for output, K for Capital, L for Labor, and TFP for Total Factor Productivity (3) Unrevised GUS series.
In manufacturing as well, labor productivity gains have tended to decline somewhat over time, from over 15 percent per year in 1992-93 to a bit less than 10 percent on average in subsequent years. Those are far more rapid increases than during earlier decades, which in industry averaged 8 percent in the 1950s, 5 percent in the 1960s, 6 percent in the 1970s and 4 percent in the 1980s (excluding 1980-81).(26) In cumulative terms, manufacturing output per unit of labor more than doubled between 1991 and 1998.(27)
Similar insights emerge from an analysis that explicitly takes into account the contribution of capital accumulation and computes the rate of growth of total factor productivity (TFP TFP Total Factor Productivity
TFP Tradition, Family and Property
TFP Time for Prints
TFP Transference-Focused Psychotherapy
TFP Trade for Prints (modeling)
TfP Training for Peace (South Africa) ), the component of the rate of output growth that cannot be attributed to increased input of labor or capital accumulation.(28) Aggregate TFP growth turned positive again in 1992, in tandem Adv. 1. in tandem - one behind the other; "ride tandem on a bicycle built for two"; "riding horses down the path in tandem"
tandem with the return to growth of the overall economy, and averaged somewhat less than 4 percent on an annual basis during 1992-98. During the initial recovery in 1992-93, the combined contribution of changes in capital and labor remained negative,(29) and positive TFP growth in excess of overall growth mainly reflected an increase in capacity utilization rates. In the following years, as renewed growth in input of factors, in particular capital, was recorded, the contribution of TFP growth to overall growth fell back to somewhat less than two-thirds.
The average rate of TFP growth in Poland over the 1992-98 period has been remarkably high by international standards. Among emerging market economies, comparable TFP growth has only been achieved by China in recent years.(30) And only two industrial countries, Finland and Ireland, registered a growth rate of TFP exceeding 3 percent in the 1990s. The experience of Finland, which entered a deep recession in the early years of the decade as trade with Russia collapsed but then returned to robust output growth in the second half of the 1990s, is akin to Poland's.
Poland's productivity gains since 1992 reflect in part the response to the increasingly competitive environment faced by Polish industry, as trade expanded rapidly in the wake of the 1990 liberalization. From 1992 to 1998, the volume of Polish exports more than doubled, while that of imports nearly tripled. This surge in trade was mainly driven by a rapid expansion in manufacturing trade with the EU countries. The EU share in total Polish exports rose from less than one third in 1992 to almost 70 percent in 1998, while the EU share in total imports rose from around around one half to more than 65 percent in the same period. Manufacturing and machinery products were the fastest growing component of total exports between 1992 and 1998, as their share rose from less than one third to more than one half in this period. The expansion of manufacturing trade with the EU has been a key factor explaining the sharp productivity improvements in Polish industry.
Productivity gains have in part stemmed stemmed
1. Having the stems removed.
2. Provided with a stem or a specific type of stem. Often used in combination: stemmed goblets; long-stemmed roses. from the reallocation Noun 1. reallocation - a share that has been allocated again
allocation, allotment - a share set aside for a specific purpose
2. reallocation of inputs of factors across sectors. Employment in agriculture and industry dropped significantly through 1993, even as it was growing in heretofore underdeveloped un·der·de·vel·oped
Not adequately or normally developed; immature. sectors such as trade (Table 8). Within manufacturing, labor also shifted considerably, as documented by Marchetti (1997). In the process, labor inputs moved out of state-owned enterprises and into de novo [Latin, Anew.] A second time; afresh. A trial or a hearing that is ordered by an appellate court that has reviewed the record of a hearing in a lower court and sent the matter back to the original court for a new trial, as if it had not been previously heard nor decided. firms (Jackson et al., 1999). Inputs of capital were also subject to considerable sectoral reallocation in the period 1993 to 1998, reflecting the uneven distribution of the economy-wide investment boom, with investment recording only modest gains in agriculture but expanding rapidly in trade and services activities. Decomposing the economy into six broad sectors (agriculture, industry, construction, transport and communication, trade, and other services), the sectoral reallocation of inputs accounted for around one-fourth of the aggregate gains in TFP during the 1992-98 period of renewed growth. This is almost twice as much as its contribution during the 1983-89 period, the last episode of pre-transitional growth.(31)
Table 8: Employment (In percent) Shares 1989(1) 1992(1) 1992(2) 1993(2) Agriculture and 26.7 26.2 25.8 25.7 forestry Industry 28.8 26.5 25.8 25.6 Mining 2.9 3.1 3.1 2.9 Manufacturing 25.3 22.9 21.0 20.8 Construction 7.8 7.3 7.0 6.0 Services 36.7 40.1 41.6 42.7 Trade 8.6 10.9 12.3 13.1 Transport and 5.8 5.3 6.2 6.1 communication Finances 1.0 1.4 1.3 1.5 Public administration 1.5 2.0 2.2 2.4 Health and education 11.5 13.0 12.2 12.5 Total 100.0 100.0 100.0 100.0 Change 1998(2) 1989- 1993- 93(1) 98(2) Agriculture and 25.7 -17.4 8.0 forestry Industry 23.4 -25.8 -1.1 Mining 2.0 -16.4 -27.3 Manufacturing 20.7 -26.9 7.5 Construction 5.8 -34.7 4.6 Services 45.1 -2.5 14.2 Trade 13.6 33.5 12.3 Transport and 5.6 -24.6 -0.5 communication Finances 2.0 29.8 41.3 Public administration 2.7 26.8 25.3 Health and education 12.2 -3.5 5.6 Total 100.0 -15.7 8.1 Sources: GUS, and authors' computations. (1) Former classification. (2) SNA classification.
TFP computations at the sectoral level indicate that in industry TFP growth also exceeded output growth during the first two recovery years, as industrial employment continued to shrink shrink Vox populi noun A psychiatrist . Thereafter and through 1998, the contribution to output growth from increases in TFP relative to factor accumulation was more important in industry than in the overall economy, reflecting an only modest pick-up in employment in the sector.(32)
The sustainability of Poland's high-growth performance started to be questioned in 1998, as the economy showed signs of deceleration deceleration /de·cel·er·a·tion/ (de-sel?er-a´shun) decrease in rate or speed.
early deceleration . The slowdown For articles with similar titles, see Slow Down (disambiguation).
A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. was partly caused by a deliberate tightening of financial policies intended to restrain domestic demand and to contain a widening current account deficit. It also reflected external factors, namely the slowdown in Western Europe Western Europe
The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and the shock imparted by the sharp decline in demand from Russia and other countries east of Poland, illustrating the sensitivity of growth to exogenous Exogenous
Describes facts outside the control of the firm. Converse of endogenous. developments in export markets. As a result, real GDP growth was down to 2.9 percent in the last quarter of 1998 compared with a year earlier, slowing further to only 1.6 percent in the first quarter of 1999, with gross industrial output shrinking in those two quarters for the first time since 1991. But the growth slowdown proved to be temporary and GDP growth picked up again by the fourth quarter. This episode has raised questions, however, as to whether strong growth is sustainable and what Poland's medium-term growth prospects are.
Poland's growth potential can be assessed using the coefficients from growth regressions derived from the neoclassical ne·o·clas·si·cism also Ne·o·clas·si·cism
A revival of classical aesthetics and forms, especially:
a. A revival in literature in the late 17th and 18th centuries, characterized by a regard for the classical ideals of reason, form, growth model and estimated for a large sample of market economies. Regressions that try to properly address measurement problems related to initial per capita income gaps and human capital and that add an institutional quality variable indicate that Poland can achieve average growth rates of per capita income at 5.7 percent per year over a longer-time horizon (Crafts and Kaiser, 2000).(33) These results also suggest that the robust 1994-98 growth performance was broadly in line with potential. Even with sustained high growth, convergence towards EU per capita income levels is bound to be a drawn out process. Based on the per capita income gap in 1998 and assuming that per capita income growth will on average be 5.7 percent in Poland and 2 percent in the current EU members, a full catch-up will require almost 30 years.
Longer-term growth projections can also be derived from a growth accounting exercise. In this approach, Poland's growth potential is based on a combination of an increase in the inputs of factors and TFP gains. Moderate growth in the size of Poland's working age population together with further improvements in the quality of human capital are projected to result in an increase in inputs of labor, measured in effective terms, by 1 percent per year. Assuming that gross fixed capital formation Gross fixed capital formation (GFCF) is a macroeconomic concept used in official national accounts since the 1930s. Concept and data
The statistical aggregate of GFCF is a measure of the net new investment by enterprises in the domestic economy in fixed capital will be maintained at its 1998 level of about 25 percent of GDP and that 8 percent of the capital stock will be scrapped every year, inputs of capital are projected to grow at an annual rate of around 5 3/4 percent.(34) Under these assumptions regarding factor inputs, high and sustained TFP growth of 3 percent per year will still be needed for the 5.7 per capita growth projection to materialize ma·te·ri·al·ize
v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es
1. To cause to become real or actual: By building the house, we materialized a dream. . A more modest increase in capital inputs or lower TFP growth would be associated with significantly weaker longer-term growth.(35)
Poland's growth potential is strong, provided the high investment rates and robust TFP growth recorded in recent years can be sustained. In view of relatively low domestic savings rates Savings rate
Personal savings as a percentage of disposable personal income. , covering the country's investment needs will likely require continued access to foreign savings, FDI in particular. The scope for continued robust TFP growth to a large extent depends on the choice of economic policies. Supply-side policies need to address persisting per·sist
intr.v. per·sist·ed, per·sist·ing, per·sists
1. To be obstinately repetitious, insistent, or tenacious.
2. infrastructure bottlenecks, which cause congestion The condition of a network when there is not enough bandwidth to support the current traffic load.
congestion - When the offered load of a data communication path exceeds the capacity. and may inhibit inhibit /in·hib·it/ (in-hib´it) to retard, arrest, or restrain.
1. To hold back; restrain.
2. growth.(36) This is particularly conspicuous con·spic·u·ous
1. Easy to notice; obvious.
2. Attracting attention, as by being unusual or remarkable; noticeable. See Synonyms at noticeable. in the case of the road network, which is quantitatively and qualitatively lacking (European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community , 1998). Further institutional reform is also needed, and it is likely to be stimulated by the efforts to gain EU accession Coming into possession of a right or office; increase; augmentation; addition.
The right to all that one's own property produces, whether that property be movable or immovable; and the right to that which is united to it by accession, either naturally or artificially. . Weaknesses in the judiciary judiciary
Branch of government in which judicial power is vested. The principal work of any judiciary is the adjudication of disputes or controversies. Regulations govern what parties are allowed before a judicial assembly, or court, what evidence will be admitted, what system -- where the average time for processing cases has tended to lengthen length·en
tr. & intr.v. length·ened, length·en·ing, length·ens
To make or become longer.
lengthen·er n. and enforcement of court rulings often remains wanting -- slow down or altogether discourage certain business ventures but also facilitate corruption, which has been shown to be growth-inhibiting (Mauro, 1996). Also, ambitious institutional reforms launched in 1999 in such areas as devolution devolution n. the transfer of rights, powers, or an office (public or private) from one person or government to another. (See: devolve)
DEVOLUTION, eccl. law. , pensions, and health care have to be implemented fully. Additional productivity gains will result from continued reallocation of capital and labor from low- to high-productivity sectors. Further downsizing (1) Converting mainframe and mini-based systems to client/server LANs.
(2) To reduce equipment and associated costs by switching to a less-expensive system.
(jargon) downsizing in agriculture and heavy industry, in particular, is expected to reduce these sectors' sizable drag on Verb 1. drag on - last unnecessarily long
last, endure - persist for a specified period of time; "The bad weather lasted for three days"
2. overall growth.
VII. Main Conclusions
This paper has highlighted some of the features of Poland's growth performance in the 1990s. This performance has been quite commendable com·mend
tr.v. com·mend·ed, com·mend·ing, com·mends
1. To represent as worthy, qualified, or desirable; recommend.
2. To express approval of; praise. See Synonyms at praise.
3. compared with neighboring countries, but it has not been exceptional by the standards of rapid growth episodes in other regions. First, growth has been largely pulled by manufacturing, reflecting a recovery from the sharp 1990-91 contraction in industry initially and the contribution from a pickup in factor accumulation later on. Second, transition has involved wholesale shifts in the composition of industrial output. These shifts, which have contributed to considerable productivity gains in industry, have been stimulated by a trade reorientation toward Western Europe and large FDI inflows. Third, even though growth has been broad-based, it has been uneven across regions. In a context of limited geographical labor mobility, this may have implications as regards the speed with which structural reforms can be implemented.
In terms of policies, Poland's performance illustrates the crucial importance of letting the reallocation of capital and labor run its course. This requires sound macroeconomic policies, so as to instill in·still
To pour in drop by drop.
instil·lation n. confidence with potential investors, coupled with liberalization on the structural front. Such policies create an environment conducive con·du·cive
Tending to cause or bring about; contributive: working conditions not conducive to productivity. See Synonyms at favorable. to the necessary redistribution of existing resources and to the attraction of external ones in the form of FDI.
(1.) Mark De Broeck is affiliated with the IMF, and Vincent Koen with the OECD. The views in this paper are the authors' alone and should not be taken as representative of the IMF or the OECD. The authors are grateful to Witold Orlowski for sharing regional GDP data, and to Tam Bayoumi, Marek Belka Marek Belka (pronounce: ) (b. January 9, 1952 in Łódź) is a Polish professor of Economics, designated Prime Minister of Poland by President Aleksander Kwaśniewski on March 29, , Andrew Berg, Witold Orlowski, and Nancy Wagner for useful comments. All interpretations and remaining errors are the authors' own.
(2.) In 1998, the Central Statistical Office (GUS GUS Gemeinschaft Unabhängiger Staaten (German: CIS)
GUS Gravis Ultrasound
GUS Great Universal Stores
GUS Grown Up Soda
GUS Giornalisti Uffici Stampa (Italian)
GUS Guide to the Use of Standards ) started to publish a new GDP series, running from 1995 onwards, but with only minute changes for the real GDP index (GUS, 1998). Therefore, the aforementioned average and cumulative figures hold both for the old and the new series.
(3.) See, for instance, Kolodko (1989) and Sachs (1993).
(4.) No consistent long-run GDP series are available, but indices of sectoral developments, and in particular industrial output (see below), support this claim.
(5.) The series shown in Figure 2 reflects revisions by GUS around the mid-1990s, including an 8 percent (rather than 11.6 percent) real GDP decline in 1990. To maintain consistency with the employment and capital stock data, the unrevised Adj. 1. unrevised - not improved or brought up to date; "the book is still unrevised"
unaltered, unchanged - remaining in an original state; "persisting unaltered through time" growth series (in log terms) is used to derive the productivity calculations in Table 7.
(6.) Recently, an alternative series was published showing lower growth in the late 1980s and drops on the order of only 5 to 6 percent both in 1990 and in 1991, implying that GDP may have recovered to its 1989 level already in 1994 (RECESS, 1999). This alternative series vindicates early analyses suggesting that the official data vastly exaggerated the magnitude of the contraction (Berg and Sachs, 1992).
(7.) For analyses of the factors underlying Poland's strong performance, see among others Balcerowicz and Gelb (1994), Balcerowicz (1995), Borensztein and Ostry (1992), Gomulka (1998), Johnson et al. (1999), Kolodko and Nuti (1997), Lane (1992), OECD (1996), Pinto pinto
Spotted horse, also called paint, piebald, skewbald, and other terms to describe variations in colour and markings. The American Indian ponies of the western U.S. were often pintos. Most pure-breed associations refuse to register horses with pinto colouring. et al. (1993), and World Bank (1994).
(8.) Or even 27 percent, based on the revised national accounts series, which lifts the level of nominal GDP Nominal GDP
A gross domestic product (GDP) figure that has not been adjusted for inflation.
It can be misleading when inflation is not accounted for in the GDP figure because the GDP will appear higher than it actually is. by around 6 percent.
(9.) Or even 57 percent, based on the revised national accounts series.
(10.) Market services include the trade and repair; hotels and restaurants; transport, storage and communication; financial intermediation; real estate and business activities; and other categories, see Table 1.
(11.) The state sector continues, however, to account for the bulk of both employment and output in the mining sector.
(12.) See Dabrowski, Gomulka, and Rostowski, 2000.
(13.) Unless specified, the term "regions" henceforth From this time forward.
The term henceforth, when used in a legal document, statute, or other legal instrument, indicates that something will commence from the present time to the future, to the exclusion of the past. denotes the 49 "voivods" under the system prevailing until 1998 (administrative reform in 1998 reduced the number of regions to 16 and created a new layer of counties ("powiats") between regions and municipalities ("gminas").
(14.) See RECESS (1994). The 1986, 1990 and 1991 GDP estimates were kindly provided by Dr. Orlowki of RECESS. They are not based on exactly the same methodology as the subsequent ones, which mainly affects the ranking of the Warszawkie region, the capital's weight being higher, all else equal, under the former than under the new methodology. Moreover, in the absence of regional GDP deflators GDP deflator
A price index used to adjust gross domestic product for changes in prices of goods and services included in the GDP. The GDP deflator is a more broadly based and, many economists argue, a better measure of inflation than the consumer price index , inferences about regional developments are drawn on the admittedly problematic assumption that over the pluri-annual spells considered inflation has been relatively uniform across areas.
(15.) In order to ensure data comparability, the base is 1992 rather than the 1991 national trough.
(16.) Since the capital is most affected by the change in methodology between 1991 and 1992, Table 2 shows results including and excluding it from the sample.
(17.) The report of the Task Force for Regional Development in Poland (1996) discusses which regions gained and which ones lost most through 1994.
(18.) On that episode, see for instance Hanson (1982).
(19.) The products shown in Figure 7 are the main items for which GUS monitors output and for which information is available over a long time span. In that sense, they constitute a representative set.
(20.) This is a striking empirical regularity save for 1995.
(21.) In this computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. , growth rates are expressed as indices with the previous year set equal to 100, in order to preserve the relevance of the coefficient of variation as a measure of dispersion when the mean approaches zero.
(22.) For a detailed analysis of foreign direct investment flows, see FTRI FTRI Florida Telecommunications Relay, Inc.
FTRI Food Technology Research Institute (Egypt) (1998). In 1995-98, foreign direct investment measured on an accruals Accruals
Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. basis accounted for about 15 percent of gross fixed capital formation.
(23.) Konings (1999) presents panel data evidence on this productivity differential.
(24.) Data on cumulative FDI flows through 1998, as published by the Polish Foreign Investment Agency (PAIZ PAIZ Polish Agency for Foreign Investment (helps foreign business considering investment in Poland) ), show an uneven distribution across the 10 manufacturing sectors for which information is available. Labor productivity gains have been particularly strong in manufacturing sectors with a high contribution of FDI to overall capital formation, as reflected in a correlation coefficient Correlation Coefficient
A measure that determines the degree to which two variable's movements are associated.
The correlation coefficient is calculated as: of 0.71 for the period 1992 through 1998 for the 10 sectors.
(25.) As illustrated in Figure 9, a similar pattern was recorded in Hungary (where the contribution of FDI was even more important), whereas productivity improved much less in the Czech Republic and the Slovak Republic.
(26.) Including that recession in the sample brings down the average productivity increase to 2 percent for the 1980s.
(27.) An equally impressive surge was recorded in Hungary over the same period. Again, the Czech Republic and the Slovak Republic witnessed more limited productivity gains.
(28.) In this context, TFP growth should be regarded as truly a residual, reflecting the effect of a variety of factors that influence the efficiency with which factors of production are used, and should not be interpreted as an exogenous rate of technological progress.
(29.) In these TFP calculations, the weight associated with capital is 0.35 and that with labor 0.65.
(30.) Based on the numbers presented in Collins and Bosworth (1996).
(31.) The calculations are based on the approach followed by Bernard and Jones (1996) and Cameron et al. (1997). These authors compute To perform mathematical operations or general computer processing. For an explanation of "The 3 C's," or how the computer processes data, see computer. the contribution of sectoral reallocation of inputs to overall productivity growth by decomposing the change in aggregate TFP into a productivity change effect and a reallocation effect. The first effect measures the contribution of productivity changes within each sector, and the second one the contribution of changes in sectoral composition.
(32.) A comparison with the Czech Republic, Hungary, and the Slovak Republic reveals broadly the same picture. TFP growth initially exceeded output growth, indicating an increase in the rate of capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. , and subsequently made the largest contribution to output growth, especially in industry. The computations are based on the capital stock data published in the national statistical yearbooks, extrapolated using investment data for the most recent years. For Hungary, Darvas and Simon (1999) have derived an alternative set of computations based upon a vintage model to reconstruct re·con·struct
tr.v. re·con·struct·ed, re·con·struct·ing, re·con·structs
1. To construct again; rebuild.
2. the capital stock data.
(33.) These authors also discuss the robustness of earlier estimates in Fischer et al., 1998. For growth regressions that only cover the transition economies as such, see Berg et al., 1999.
(34.) Projected capital stock growth also reflects the assumed initial capital-output ratio. Based on survey data from the Central Statistical Office, the ratio is taken to be 1.7 in 1998.
(35.) The growth projection is also sensitive to the assumptions regarding the initial capital-output ratio and the depreciation rate. Part of the central planning-era capital stock is likely to be obsolete, and this effect can be captured by either reducing the initial capital-output ratio or -- as in the growth scenario here -- assuming a relatively high depreciation rate.
(36.) See Canning (1998) and the references therein for a cross-country approach.
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A region of Asia coextensive with the Far East.
East Asian adj. & n. : Accumulation versus Assimilation Assimilation
The absorption of stock by the public from a new issue.
Underwriters hope to sell all of a new issue to the public.
See also: Issuer, Underwriting
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1. From where; from what place: Whence came this traveler?
2. From what origin or source: Whence comes this splendid feast?
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tr.v. dis·guised, dis·guis·ing, dis·guis·es
a. To modify the manner or appearance of in order to prevent recognition.
b. To furnish with a disguise.
2. Unemployment in Poland in the 1980s," Communist Economies Noun 1. communist economy - the managed economy of a communist state
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JEL Classification Numbers: O47, P24
Mark De Broeck IMF Vincent Koen(1) OECD