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Capital Stock and Economic Development in Hungary

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  • Zsolt M. Darvas
  • András Simon

Abstract

Income per capita of Hungary attained 70 percent of the Austrian level by the end of the eighteenth century and fluctuated around this value between the World Wars. As an „achievement” of the last 50 years this ratio — measured at purchasing power parity — has decreased to about 40 percent by the beginning of the nineties. Economic successes since transformation started raised the hope that the Hungarian economy’s lot might turn from the process of lagging behind to catching up. This hope is supported by microeconomic factors such as the intellectual skills of labor, entrepreneurial abilities, and the capacity to accommodate new knowledge and technologies. However, the utilization of microeconomic potentials greatly depends on macroeconomic policies. Microeconomic development efforts lead to increase of investments at the aggregate level, therefore, macroeconomic policy must face the problem of balancing needs and resources. This paper tries to quantify the determinants of this balance. The value ofthe physical capital stock is estimated and on the basis of international experiences investments paths for future income levels are set. Savings prospects of different sectors are confronted with investments needs. Calculations are followed by an economic policy analysis of the fiscal measures needed to catch up to 70 percent of the Austrian level again by 2030.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal The Economics of Transition.

Volume (Year): 8 (2000)
Issue (Month): 1 (March)
Pages: 197-223

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Handle: RePEc:bla:etrans:v:8:y:2000:i:1:p:197-223

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Cited by:
  1. Gabor Vadas & Zsolt Darvas, 2005. "Univariate Potential Output Estimations for Hungary," Macroeconomics 0512009, EconWPA.
  2. Valentina HARTARSKA & Henry THOMPSON, 2008. "Foreign Investment and Transition in Central/Eastern Europe along the Phase Curve," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(2), pages 67-78.
  3. Zsolt Darvas & Gy�rgy Szap�ry, 2008. "Euro Area Enlargement and Euro Adoption Strategies," European Economy - Economic Papers 304, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Ádám Reiff, 2010. "Firm-level adjustment costs and aggregate investment dynamics – Estimation on Hungarian data," MNB Working Papers 2010/2, Magyar Nemzeti Bank (the central bank of Hungary).
  5. J. Gacs, 2000. "Macroeconomic Developments in Hungary and the Accession Process," Working Papers ir00013, International Institute for Applied Systems Analysis.
  6. Hajnalka Tarjani, 2005. "Estimating some labour market implications of skill biased technology change and imports in Hungary," IEHAS Discussion Papers 0508, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  7. Alexei Izyumov & John Vahaly, 2006. "New capital accumulation in transition economies: implications for capital-labor and capital-output ratios," Economic Change and Restructuring, Springer, vol. 39(1), pages 63-83, June.
  8. Johannes Stephan, 2003. "EU Accession Countries’ Specialisation Patterns in Foreign Trade and Domestic Production - What can we infer for catch-up prospects?," IWH Discussion Papers 184, Halle Institute for Economic Research.
  9. Benczur, Peter & Simon, Andras & Varpalotai, Viktor, 2006. "Social costs of consumer impatience in Hungary," Journal of Policy Modeling, Elsevier, vol. 28(8), pages 921-930, November.
  10. Marcin Piatkowski, 2004. "Does ICT Investment Matter for Growth and Labor Productivity in Transition Economies?," Development and Comp Systems 0402008, EconWPA.

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