Table of Contents

Economic Convergence and Divergence in Europe

Economic Convergence and Divergence in Europe

Growth and Regional Development in an Enlarged European Union

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

This highly topical book addresses the challenge of economic convergence within Europe, beginning with a thorough review of the theory of growth and related empirical research. Historical and more recent economic developments within the present EU and current accession countries are discussed, along with the design for the process of further integration of accession countries into the EU and the Euro area. Moreover, the potential to achieve a sustainable catch-up process in Western Balkan countries, the Ukraine and Russia is explored, focusing on the task facing the EU in designing proper policies vis-à-vis these countries. The contributors’ varied perspectives ensure that the theories and policies postulated are linked closely with the actual situation in accession countries and offer up-to-date insights.

Chapter 9: Restructuring of firms in Central and Eastern Europe

Jozef Konings

Subjects: economics and finance, regional economics, urban and regional studies, regional economics

Extract

9. Restructuring of firms in Central and Eastern Europe Jozef Konings 9.1. INTRODUCTION Figures 9.1 and 9.2 show the evolution of real GDP and employment for a selection of transition countries since the early 1990s. The unexpected huge collapse in output and employment that occurred in Central and Eastern Europe implied a transition process, which was much harder and longer than was originally anticipated. There are three central institutional developments that have characterized the transition process: the privatization and its sequencing of state-owned enterprises, the emergence of competitive pressure (due to liberalization of markets) and the hardening of budget constraints.1 These institutional changes most likely have had an impact on firm behaviour and it is in this context that a useful distinction can be made between defensive and strategic restructuring (Grosfeld and Roland 1997). ‘Defensive restructuring’ refers to measures taken to guarantee the immediate survival of the firm. These measures include reducing costs and 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Poland Romania Bulgaria Slovak Republic Czech Republic Hungary Estonia Slovenia Note: We normalized GDP at 1 in 1990. Figure 9.1 Evolution of real GDP in CEE countries 168 Restructuring of firms 1.1 1.05 1 0.95 0.9 0.85 0.8 0.75 0.7 0.65 0.6 169 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Poland Romania Bulgaria Slovak Republic Czech Republic Hungary Estonia Slovenia Figure 9.2 Evolution in employment scaling down unprofitable units in the...

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