Working Paper: CEPR ID: DP653
Authors: Gordon Hughes; Paul Hare
Abstract: Using input-output and world price data, this study computes domestic resource costs (DRCs) for branches of manufacturing industry in Bulgaria, Czechoslovakia, Hungary, Poland and the former Soviet Union. The results show a wide dispersion of DRCs in each country, including branches with negative value added at world market prices. Restructuring each economy towards the more competitive branches raises value added at world prices and usually raises employment as well. Since the countries studied are competitive in different sectors, there is little need for them to coordinate industrial policies, but there would be great benefit from schemes to facilitate intraregional trade (e.g. some form of union). The region's present trade with the EC accounts for a small fraction of most EC markets and hence Eastern Europe should not be seen as a threat by EC producers: there is scope for faster liberalization of access to EC markets.
Keywords: Eastern Europe; Competitiveness; Input-Output; Domestic Resource Costs; Industrial Policy; Trade Policy
JEL Codes: F14; L60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| restructuring economies towards more competitive branches (L16) | increase in value-added at world prices (F69) |
| restructuring economies towards more competitive branches (L16) | increase in employment (J68) |
| restructuring output according to competitiveness measures (L11) | beneficial effects on economic outputs (F69) |
| doubling exports to EC countries without restructuring (F14) | smaller effects on economic performance (F69) |
| doubling exports while changing the export pattern based on DRCs (F10) | smaller effects on economic performance (F69) |