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The Penn Effect and Transition : The New EU Member States in International Perspective

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  • Richard Frensch

    ()

  • Achim Schmillen

    () (Osteuropa-Institut, Regensburg (Institut for East European Studies))

Abstract

Recent panel studies have found relatively high point estimates for the elasticity of ag-gregate price measures with respect to productivity in (former) transition economies, while other studies report price-productivity elasticity estimates to depend positively on average productivity in the sample. We aim to reconcile both results by putting com-parative price developments of transition economies in an international perspective. We argue that estimating simple price-productivity relationships without the inclusion of other real factors connected to reform effort might severely bias estimates for CEEC economies. Our results imply that, when controlling for reform effort and therefore avoiding this endogeneity problem, the price-productivity-elasticity for CEEC econo-mies was not different from that of non-transition economies during the first 15 years of transition.

Suggested Citation

  • Richard Frensch & Achim Schmillen, 2011. "The Penn Effect and Transition : The New EU Member States in International Perspective," Working Papers 295, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
  • Handle: RePEc:ost:wpaper:295
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    References listed on IDEAS

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    5. Yanping Chong & Òscar Jordà & Alan M. Taylor, 2012. "The Harrod–Balassa–Samuelson Hypothesis: Real Exchange Rates And Their Long‐Run Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 609-634, May.
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    7. Evžen Kočenda & Jan Hanousek, 2010. "Divide and Privatize : Firms Break-up and Performance," Working Papers 291, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
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    11. Richard Frensch, 2000. "Internal Liberalization as a Barrier To Export-led Recovery in Central European Countries Preparing For EU Accession," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 42(3), pages 31-47, September.
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    Cited by:

    1. Frensch, Richard & Schmillen, Achim, 2011. "Can we identify Balassa-Samuelson effects with measures of product variety?," Economic Systems, Elsevier, vol. 35(1), pages 98-108, March.
    2. Karsten Staehr, 2016. "Exchange Rate Policies in the Baltic States: From Extreme Inflation to Euro Membership," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(4), pages 09-18, January.

    More about this item

    Keywords

    Balassa-Samuelson; transition;

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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