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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.

Suggested Citation

  • Falk, Martin & Raiser, Martin & Brauer, Holger, 1996. "Making sense of the J-curve: Capital utilisation, output, and total factor productivity in Polish industry 1990-1993," Kiel Working Papers 723, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:723
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    References listed on IDEAS

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    More about this item

    Keywords

    capital ultilisation; efficiency; J-curve; Poland;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • P47 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Performance and Prospects

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