Pub Date : 1993-01-31DOI: 10.1111/J.1468-0351.1993.TB00067.X
S. Wijnbergen
Enterprise reform is emerging as the core economic problem in Eastern Europe. As privatization has been delayed, a new problem has emerged, largely unanticipated by outside advisers: It is probably possible to run a clear-cut state enterprise efficiently, and it is certainly possible to get efficient performance from a private enterprise. But it is utterly impossible to get anything like efficiency from an enterprise for which the current and future ownership status are in limbo. What has happened in Poland, where reform started earlier than elsewhere, is probably a harbinger of things to come. Two years after the crumbling of central authority that used to exercise both ownership and control, ownership of state-owned enterprises remains ineffective and control diffuse. Lacking sharply defined control rights, various groups (workers, incumbent managers, and local authorities) often had no other way of demonstrating their clout than by disrupting the enterprise. And with changes in ownership announced but not implemented, managers and workers councils alike have every incentive to decapitalize the enterprise and increase its debts. Eastern Europe is not well served with straight textbook advice. The common wisdom on privatization fails to address the problems created by diffuse ownership and conflicts over control that exist before privatization. Regular cash auctions may fail to match managers and capital stock efficiently because of pervasive wealth constraints. Standard service on enterprise restructuring does not allow for the sheer scale of the problem or the special reasons why, in Eastern Europe, current profits are a poor guide to potential profitability. Simply applying Western bankruptcy procedures based on current data about enterprise profitability introduces a destructive bias toward liquidation and delay. And, the author argues, introducing Western style unemployment insurance, although it would lower the social costs of unemployment, could also contribute to its indefinite extension. The author sketches how these problems can be addressed by incorporating all the incentive problems specific to Eastern Europe into the design of the policies to be implemented. Sometimes the advice that results is novel and as yet untried; sometimes examples exist of its successful implementation. But the alternative is a long period of declining incomes and, presumably, increasing social unrest as the consensus underlying the reform programs begins to erode.
{"title":"Enterprise Reform in Eastern Europe","authors":"S. Wijnbergen","doi":"10.1111/J.1468-0351.1993.TB00067.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00067.X","url":null,"abstract":"Enterprise reform is emerging as the core economic problem in Eastern Europe. As privatization has been delayed, a new problem has emerged, largely unanticipated by outside advisers: It is probably possible to run a clear-cut state enterprise efficiently, and it is certainly possible to get efficient performance from a private enterprise. But it is utterly impossible to get anything like efficiency from an enterprise for which the current and future ownership status are in limbo. What has happened in Poland, where reform started earlier than elsewhere, is probably a harbinger of things to come. Two years after the crumbling of central authority that used to exercise both ownership and control, ownership of state-owned enterprises remains ineffective and control diffuse. Lacking sharply defined control rights, various groups (workers, incumbent managers, and local authorities) often had no other way of demonstrating their clout than by disrupting the enterprise. And with changes in ownership announced but not implemented, managers and workers councils alike have every incentive to decapitalize the enterprise and increase its debts. Eastern Europe is not well served with straight textbook advice. The common wisdom on privatization fails to address the problems created by diffuse ownership and conflicts over control that exist before privatization. Regular cash auctions may fail to match managers and capital stock efficiently because of pervasive wealth constraints. Standard service on enterprise restructuring does not allow for the sheer scale of the problem or the special reasons why, in Eastern Europe, current profits are a poor guide to potential profitability. Simply applying Western bankruptcy procedures based on current data about enterprise profitability introduces a destructive bias toward liquidation and delay. And, the author argues, introducing Western style unemployment insurance, although it would lower the social costs of unemployment, could also contribute to its indefinite extension. The author sketches how these problems can be addressed by incorporating all the incentive problems specific to Eastern Europe into the design of the policies to be implemented. Sometimes the advice that results is novel and as yet untried; sometimes examples exist of its successful implementation. But the alternative is a long period of declining incomes and, presumably, increasing social unrest as the consensus underlying the reform programs begins to erode.","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"53 1","pages":"21-38"},"PeriodicalIF":0.0,"publicationDate":"1993-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74673364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00072.X
F. Coricelli, Alfredo Dec Thorne
{"title":"Dealing with enterprises' bad loans","authors":"F. Coricelli, Alfredo Dec Thorne","doi":"10.1111/J.1468-0351.1993.TB00072.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00072.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"3 1","pages":"112-115"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76848109","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00074.X
S. Wijnbergen
{"title":"Financial aspects of enterprise reform","authors":"S. Wijnbergen","doi":"10.1111/J.1468-0351.1993.TB00074.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00074.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"24 1","pages":"117-121"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89741379","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00070.X
P. Messerlin
{"title":"The EC and Central Europe: The missed rendez-vous of 1992?","authors":"P. Messerlin","doi":"10.1111/J.1468-0351.1993.TB00070.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00070.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"4 1","pages":"89-109"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82854211","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00069.X
A. Hussain, N. Stern
Central to a transition from a command to a market economy is a radical transformation in the role of the state, involving both a withdrawal from economic decision-making and greater responsibilities for social welfare. Schematically, transition may be seen as consisting of three interrelated strands: first, the recasting of enterprises into institutions akin to firms in market economies and their disengagement from the state; second, an overhaul of the public finances and, particularly, the tax system; third, the institution of a social security system which does not rely on extensive price subsidies and secure lifetime employment. These three strands are closely intertwined because enterprises are the principal source of tax revenue and the main social welfare agencies in command economies. In the packages pressed on transitional economies the emphasis has been on a transformation of ownership of enterprises. Reform of the tax system and the institution of a social security system, in contrast, have not received the same attention. As is becoming increasingly obvious, a neglect of these is likely to expose the transition process to dangers and mistaken decisions which may seriously damage its prospects for success. In this paper we examine both the transformation of ownership in relation to the role of the state and tax reform in transitional economies.
{"title":"The Role of the State, Ownership and Taxation in Transitional Economies*","authors":"A. Hussain, N. Stern","doi":"10.1111/J.1468-0351.1993.TB00069.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00069.X","url":null,"abstract":"Central to a transition from a command to a market economy is a radical transformation in the role of the state, involving both a withdrawal from economic decision-making and greater responsibilities for social welfare. Schematically, transition may be seen as consisting of three interrelated strands: first, the recasting of enterprises into institutions akin to firms in market economies and their disengagement from the state; second, an overhaul of the public finances and, particularly, the tax system; third, the institution of a social security system which does not rely on extensive price subsidies and secure lifetime employment. These three strands are closely intertwined because enterprises are the principal source of tax revenue and the main social welfare agencies in command economies. In the packages pressed on transitional economies the emphasis has been on a transformation of ownership of enterprises. Reform of the tax system and the institution of a social security system, in contrast, have not received the same attention. As is becoming increasingly obvious, a neglect of these is likely to expose the transition process to dangers and mistaken decisions which may seriously damage its prospects for success. In this paper we examine both the transformation of ownership in relation to the role of the state and tax reform in transitional economies.","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"59 1","pages":"61-87"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77879595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00066.X
M. Bruno
{"title":"Stabilization and the macroeconomics of transition ‐ How different is Eastern Europe?","authors":"M. Bruno","doi":"10.1111/J.1468-0351.1993.TB00066.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00066.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"7 1","pages":"5-19"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88476843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00073.X
D. Begg, R. Portes
Throughout Central and Eastern Europe (CEE), there is a widespread failure of enterprise debtors to make scheduled payments of principal and interest to creditors, who in turn have strong incentives not to declare bankruptcy. In such circumstances, the price mechanism does not properly guide the reallocation of resources. The normal process of exit in a market economy is suspended, and the disproportionate share of bank credit effectively going to refinancing of incumbents impedes entry. We argue that this may be the single most important obstacle to economic restructuring in CEE. We discuss the scope of and reasons for this problem; the inefficiencies it creates; and how to deal with it. We propose a sequencing of recapitalization of banks and of enterprises that is designed to be credible and robust to the incentive failures identified. We then assess the fiscal consequences of such a reform package and how it affects the conduct and effectiveness of monetary policy. We conclude that the international institutions must put the full weight of their authority and credibility behind such a package in order to break through the obstacles to successful restructuring.
{"title":"Enterprise Debt and Economic Transformation: Financial Restructuring of the State Sector in Central and Eastern Europe","authors":"D. Begg, R. Portes","doi":"10.1111/J.1468-0351.1993.TB00073.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00073.X","url":null,"abstract":"Throughout Central and Eastern Europe (CEE), there is a widespread failure of enterprise debtors to make scheduled payments of principal and interest to creditors, who in turn have strong incentives not to declare bankruptcy. In such circumstances, the price mechanism does not properly guide the reallocation of resources. The normal process of exit in a market economy is suspended, and the disproportionate share of bank credit effectively going to refinancing of incumbents impedes entry. We argue that this may be the single most important obstacle to economic restructuring in CEE. We discuss the scope of and reasons for this problem; the inefficiencies it creates; and how to deal with it. We propose a sequencing of recapitalization of banks and of enterprises that is designed to be credible and robust to the incentive failures identified. We then assess the fiscal consequences of such a reform package and how it affects the conduct and effectiveness of monetary policy. We conclude that the international institutions must put the full weight of their authority and credibility behind such a package in order to break through the obstacles to successful restructuring.","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"96 1","pages":"116-117"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84218303","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00068.X
R. Frydman, Andrzej Rapaczyński
{"title":"Insiders and the state: overview of responses to agency problems in East European privatizations","authors":"R. Frydman, Andrzej Rapaczyński","doi":"10.1111/J.1468-0351.1993.TB00068.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00068.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"496 1","pages":"39-59"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91181966","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1993-01-01DOI: 10.1111/J.1468-0351.1993.TB00071.X
David Hexter
{"title":"The bad debt problem in Easter Europe","authors":"David Hexter","doi":"10.1111/J.1468-0351.1993.TB00071.X","DOIUrl":"https://doi.org/10.1111/J.1468-0351.1993.TB00071.X","url":null,"abstract":"","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"35 1","pages":"111-112"},"PeriodicalIF":0.0,"publicationDate":"1993-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86573876","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study uses data from the 2005 Albania Living Standards Measurement Study survey to assess the impact of past migration experience of Albanian households on non-farm business ownership through instrumental variables regression techniques. Considering the differences in earning potentials and opportunities for skill acquisition in different destination countries, we differentiate the impact of past household migration experience by main migrant destinations. The study also explores the heterogeneity of impact based on the timing of migration. The empirical results indicate that past household migration experience exerts a positive impact on the probability of owning a non-farm business. While one additional year in Greece increases the probability of household business ownership by roughly 6 percent, a similar experience in Italy or farther destinations raises the probability by over 25 percent. Although past household migration experience for the period of 1990-2000 is positively associated with the likelihood of owning a household enterprise, a similar association does not exist for the period of 2001-2004. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.
{"title":"Investing back home","authors":"Talip Kilic, C. Carletto, B. Davis, A. Zezza","doi":"10.1596/24403","DOIUrl":"https://doi.org/10.1596/24403","url":null,"abstract":"This study uses data from the 2005 Albania Living Standards Measurement Study survey to assess the impact of past migration experience of Albanian households on non-farm business ownership through instrumental variables regression techniques. Considering the differences in earning potentials and opportunities for skill acquisition in different destination countries, we differentiate the impact of past household migration experience by main migrant destinations. The study also explores the heterogeneity of impact based on the timing of migration. The empirical results indicate that past household migration experience exerts a positive impact on the probability of owning a non-farm business. While one additional year in Greece increases the probability of household business ownership by roughly 6 percent, a similar experience in Italy or farther destinations raises the probability by over 25 percent. Although past household migration experience for the period of 1990-2000 is positively associated with the likelihood of owning a household enterprise, a similar association does not exist for the period of 2001-2004. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.","PeriodicalId":47148,"journal":{"name":"Economics of Transition","volume":"37 1","pages":"587-623"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84389755","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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