Varieties, Jobs and EU Enlargement
Two key factors that have so far allowed fast growing economies of central and eastern Europe to cope with their external constraint have been I) the presence of relatively low unit labour costs and ii)the initial undervaluation of the exchange rate. The accession to the EU will inevitably reduce both sources of competitiveness of eastern European exports: real wages are likely to catch-up western European levels and current EU members are pushing these countries to enforce labour market and social regulations that will increase labour costs; moreover, stability of the exchange rate will be a precondition for the negotiations over the accession to proceed. Small open economies can grow faster than their neighbours without running into a balance of payment crises if they succeed in increasing the number of differentiated goods produced domestically. The multiplication of the number of varieties in these countries after trade liberalisation is an unambiguous sign that consumers coming from the empty shelves of the pre-transition era have a strong taste for varieties, and hence that new varieties can create their own demand. But the increase in the number of varieties will involve a furthering of the worker reallocation process as production is still largely concentrated in homogenous good and scale-intensive industries and enterprise density is significantly lower than in western Europe. This paper will start by reviewing the changing profile and orientation of trade in transitional economies of central and eastern Europe. Next, developments in enterprise density and the performance of greenfield vs. state and privatised firms will be reviewed in an attempt to assess barriers to the entry and growth of small business. Finally, numerical simulations of a model will be developed which enables to assess the likely impact on employment, unemployment and gross worker flows of reductions in start-up costs.
|Date of creation:||01 May 2000|
|Contact details of provider:|| Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109|
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- A. Richter & M.E. Schaffer, 1996. "The Performance of De Novo Private Firms in Russian Manufacturing," CERT Discussion Papers 9610, Centre for Economic Reform and Transformation, Heriot Watt University.
- Robert Feenstra & Tzu-Han Yang & Gary G. Hamilton & Pierpaolo Battigalli, 2003.
"Business Groups and Trade in East Asia: Part 2, Product Variety,"
9614, University of California, Davis, Department of Economics.
- Robert C. Feenstra & Maria Yang & Gary G. Hamilton, 1997. "Business Groups and Trade in East Asia: Part 2, Product Variety," NBER Working Papers 5887, National Bureau of Economic Research, Inc.
- Robert C. Feenstra & Tzu-Han Yang & Gary G. Hamilton, "undated". "Business Groups And Trade In East Asia: Part 2, Product Variety," Department of Economics 96-14, California Davis - Department of Economics.
- Daniel Daianu, 1996. "Stabilization and exchange rate policy in Romania ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 229-248, 05.
- Neven, Damien J, 1994.
"Trade Liberalization with Eastern Nations. How Sensitive?,"
CEPR Discussion Papers
1000, C.E.P.R. Discussion Papers.
- Damien NEVEN, 1994. "Trade Liberalisation with Eastern Nations. How Sensitive ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9407, Université de Lausanne, Faculté des HEC, DEEP.
- Krugman, Paul, 1989.
"Differences in income elasticities and trends in real exchange rates,"
European Economic Review,
Elsevier, vol. 33(5), pages 1031-1046, May.
- Paul Krugman, 1988. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Matsuyama Kiminori, 1995. "New Goods, Market Formations, and Pitfalls of System Design," Journal of the Japanese and International Economies, Elsevier, vol. 9(4), pages 376-402, December.
- Tito Boeri, 1994. ""Transitional" unemployment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(1), pages 1-25, 03.
- Djankov, Simeon & Hoekman, Bernard, 1996. "Intra-Industry Trade, Foreign Direct Investment and the Reorientation of East European Exports," CEPR Discussion Papers 1377, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2000-301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron)
If references are entirely missing, you can add them using this form.