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Making sense of the J-curve: Capital utilisation, output, and total factor productivity in Polish industry 1990 - 1993

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  • Falk, Martin
  • Raiser, Martin
  • Brauer, Holger

Abstract

The economies of Central and Eastern Europe are undergoing a period of rapid structural change. The general pattern confirms to the J-curve anticipated by several observers at the start of transition. This paper conceptualises the J-curve as the result of a combination of two factors. First, real energy price increases render parts of the capital stock obsolete, due to complementarity between capital and energy in the short run. Second, demand shifts and to a lesser extent efficiency improvements induced by increases in competition cause dramatic changes in total factor productivity. The paper shows for the case of Polish industry that 43 per cent of the capital stock was rendered obsolete over the 1990-1993 period. Total factor productivity fell by 11 per cent in 1990 but had increased to 17 per cent above the 1989 level by 1993. As the capital stock is gradually rebuilt, improvements in efficiency will guarantee an output level higher than before the start of transition.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 723.

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Date of creation: 1996
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Handle: RePEc:kie:kieliw:723

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Related research

Keywords: capital ultilisation; efficiency; J-curve; Poland;

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  1. Ngo Long & Horst Siebert, 1992. "A model of the socialist firm in transition to a market economy," Journal of Economics, Springer, vol. 56(1), pages 1-21, February.
  2. Patrick J. Kehoe & Andrew Atkeson, 1999. "Models of Energy Use: Putty-Putty versus Putty-Clay," American Economic Review, American Economic Association, vol. 89(4), pages 1028-1043, September.
  3. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April.
  4. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  5. Hughes, Gordon & Hare, Paul G, 1992. "Industrial Policy and Restructuring in Eastern Europe," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 82-104, Spring.
  6. Jonathan David Ostry & Eduardo Borensztein, 1992. "Structural and Macroeconomic Determinants of the Output Decline in Poland: 1990-91," IMF Working Papers 92/86, International Monetary Fund.
  7. Matthew D. Shapiro, 1987. "Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?," Cowles Foundation Discussion Papers 822, Cowles Foundation for Research in Economics, Yale University.
  8. M Belka & S Estrin & M Schaffer & I.J. Singh, 1995. "Enterprise Adjustment in Poland: Evidence from a Survey of 200 Private," CEP Discussion Papers dp0233, Centre for Economic Performance, LSE.
  9. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  10. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
  11. Calvo, Guillermo A & Coricelli, Fabrizio, 1992. "Stagflationary Effects of Stabilization Programs in Reforming Socialist Countries: Enterprise-Side and Household-Side Factors," World Bank Economic Review, World Bank Group, vol. 6(1), pages 71-90, January.
  12. Meyers, Stephen & Salayf, Jurgen & Schipper, Lee, 1994. "Energy use in a transitional economy The case of Poland," Energy Policy, Elsevier, vol. 22(8), pages 699-713, August.
  13. Moroney, John R., 1990. "Energy consumption, capital and real output: A comparison of market and planned economies," Journal of Comparative Economics, Elsevier, vol. 14(2), pages 199-220, June.
  14. Murrell, Peter, 1992. " Evolutionary and Radical Approaches to Economic Reform," Economic Change and Restructuring, Springer, vol. 25(1), pages 79-95.
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