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

Richard Frensch () and Achim Schmillen

No 295, Working Papers from Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast 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.

Keywords: Balassa-Samuelson; transition (search for similar items in EconPapers)
JEL-codes: F40 F43 (search for similar items in EconPapers)
Pages: 28
Date: 2011-01
New Economics Papers: this item is included in nep-eec, nep-opm and nep-tra
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Journal Article: The Penn Effect and Transition: The New EU Member States in International Perspective (2013) Downloads
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