Showing papers in "Austrian Economic Quarterly in 1999"

The Austrian Paradox: "Old" Structures but High Performance?

Abstract: The Austrian "structure-performance paradox" describes the ambiguous observation of high overall economic performance on the one hand, but a considerable lock in to "old" industrial structures on the other. Compared to other high-income countries, Austria is characterised by an almost unique low share of industries, where competitive advantage is mostly driven by technological change. Following the presentation of a new empirical tool useful in structural analysis, this paper will summarise recent empirical results on both aspects of the paradox. Initially, attention will be drawn towards the most relevant policy questions; later some tentative explanations of the paradox will be examined.

Costs and Benefits of EU Eastern Enlargement for Austria

Abstract: The Agenda 2000 of the European Commission and the state of play in negotiations imply that the current candidate countries are going to join the Union in two consecutive groups. This is why simulations for the 2002 to 2010 period, using WIFO's macroeconometric model, assume that the first group of 5 CEECs will accede in 2002 and the other 5 CEECs in 2007. In all, eastward enlargement of the EU is likely to have a positive effect on almost all aggregates of the Austrian economy in the medium and longer term. By 2010, real GDP is projected to be 1.3 percent higher than in a scenario without eastern enlargement. Also, employment figures are expected to rise by around 27,000 workers. The price level would be almost 1 percent lower, and new borrowings of the government would be down 0.4 percent of GDP.

Macroeconomic Effects of Fiscal Consolidation Policy in the EU

Abstract: Between 1995 and 1997, the member states of the European Union succeeded in reducing their government deficits from an average of 5 to 2½ percent of GDP. Economic growth remained sluggish throughout the period, but the recession expected by many as a consequence of restrictive fiscal policies did not occur. This is due to a number of reasons: the favourable development of the world economy constituted the most important factor of growth during the phase of fiscal consolidation. Some countries, which were pursuing particularly restrictive policies, devalued their currencies by a significant margin and were thus able to compensate declining domestic demand through rising exports. Given the substantial drop of the saving ratio, the reduction of household disposable income did not result in a corresponding decline of consumption. The lowering of interest rates in the period of transition to European Monetary Union considerably eased the burden of interest payments on government debt for a number of countries. One-off effects and outsourcing measures also contributed substantially to the process of fiscal consolidation in the EU.

The Potential for Trade between Austria and Five CEE Countries. Results of a Panel Based Econometric Gravity Model

Abstract: In recent years, Austria's exports into several CEECs increased at double-digit rates. The increase in the importance of Austria's foreign trade with the CEECs is closely associated with the institutional, political and economic transformation process taking place in those countries. If this process can be properly fostered within the framework of the European integration, we can expect the average degree of openness of the CEECs to converge to the level prevailing in the current members of the European Union. If such a convergence process were to take place, Austria's current export growth rates would be maintained in the medium run. The economic consequences of these countries' orientation toward the European Union are estimated in a gravity model and the results presented in this issue.

Technology Flows in the Austrian Economy

Abstract: To complement the traditional science and technology indicators, the OECD has been measuring the total R&D content of output flows for several years This measure not only includes direct expenditures on research and development but also the R&D content of intermediate and investment goods, both domestic and imported For the first time, computations of the total R&D content were performed for the Austrian economy For a small open economy, technology flows embodied in imports are particularly relevant The fundamental change in the pattern of technology flows between 1976 and 1994 demonstrates Austria's evolution towards a "knowledge-based economy"

Change in the Service Trade Regime with CEE Countries

Abstract: Austria's service trade with the CEECs is still hampered by high trade barriers. The EU's eastern enlargement should thus produce substantial integrative effects especially in the tertiary sector. In view of the competitive advantages enjoyed by Austria, particularly with regard to complex market services, further liberalisation will open up a considerable demand potential, while at the same time suppliers of labour-cost-intensive services will find themselves faced with keener competition from cross-border shopping and providers in the CEECs. It is therefore advisable to develop a consistent strategy to prepare for enlargement which should focus on facilitating market penetration by Austrian providers.

Impacts of an EU Eastern Enlargement on Austria's Manufacturing. Eastern Opening Stimulates the Austrian Industry

Abstract: Austria's manufacturing particularly profited from the reforms in its eastern neighbour countries A rise in exports to the neighbouring CEECs increased the net production value by about ATS 14 billion The effects of an EU eastern enlargement will be even more pronounced, provided that the structure of foreign trade in the CEECs will adjust to the EU average If Poland, the Czech Republic, Slovenia and Hungary managed to achieve this adjustment by the year 2010, employment in the Austrian industry could rise by about 50,000

Political and Economic Perspectives of the EU Eastern Enlargement

Abstract: The eastern enlargement of the European Union provides Austria with the opportunity to expand to the fullest its political and economic relations with neighbouring countries. For Austria's economy, the enlargement would open new avenues of economic development, but it would impose also greater adjustment costs than for the EU countries as a whole. However, the degree to which the economic potential will be reached depends on political factors, in particular on the reform of the EU institutions and on the specific conditions attached to membership. Furthermore, it is difficult to predict how the enlargement to the east will play out because it is unclear how the economies of transition will develop if they cannot join the Union within a reasonable time frame.

Austrian FDI in Eastern Europe

Abstract: The stock of Austrian FDI in Eastern Europe grew almost tenfold within just seven years: from ATS 5.0 billion in 1990 to ATS 48.4 billion in 1997. Of this, 41 percent were in Hungary, 26 percent in the Czech Republic, 10 percent in Poland, and about 7 percent each in Slovakia and Slovenia. In 1997, fully 93 percent of FDI stock in Eastern Europe was held in the ten EU applicant states, and 85 percent in the five first-round candidates.

Determinants of the Rise of Unemployment in Austria

Abstract: Throughout the 1990s, the labour market has shown an unfavourable development, with unemployment noticeably on the increase. Until 1997, the main reasons underlying this development were a relatively low average rate of economic growth, the 1993 recession, and strong productivity increases in the private sector. In 1997-98, however, unemployment continued to rise despite a favourable economic development. This was due, above all, to the substantially increased labour supply (shortened period of entitlement to parental leave allowance, a more restrictive policy regarding early retirement), the emphasis on part-time employment in the service sector, as well as staff cuts (public sector) and restructuring measures (headquarters of large industrial and service enterprises) in Vienna.

Agriculture. A Critical Area of EU Enlargement

Abstract: Agriculture is among the delicate items of the envisaged eastern enlargement. Major differences between western Europe and the central and eastern European candidate countries in terms of agricultural potential, agricultural structure, performance level of food industry, and agricultural policy are straining integration and arousing fears in both west and east. Most of the CEE countries are more agrarian than their western European counterparts. CEE countries abound in fertile soils and cheap labor. This gives a high agrarian potential which cannot be fully utilized now.

Export Guarantees in Austria

Abstract: Export guarantees are among the few tools left for an active economic policy to promote foreign trade. Under international agreements, which are in place since 1996, guarantees have been restricted to non-marketable risks. As a result, the total volume of guarantees has been stagnating in recent years. Nevertheless, there is clear evidence for the positive effect of guarantees on the export volume in Austria from the calculation of a positive export multiplier and the simulation of a WIFO Macro Model.

Macroeconomic Effects of the Year-2000 Tax Reform

Abstract: The year-2000 tax reform – together with the "family package" – will reduce the tax burden on private households and enterprises by ATS 32.5 billion on a medium-term basis. ATS 17 billion result from the loss of wage and income tax revenues due to the reform of the income tax-rate table, ATS 12 billion from additional transfer payments to families ("family package"), and ATS 3.5 billion from other measures taken to make Austria more attractive as a business location and to promote employment. Relative to the gross domestic product, this tax reform is more comprehensive than the 1989 and 1994 reforms. Its growth stimuli are derived, above all, from private consumption. Overall, the reform will result in a medium-term growth of GDP by 0.4 percent on a cumulative basis by 2005.

Market Opportunities for Austrian Manufacturing Industry

Abstract: An analysis of the Austrian manufacturing sector found persistent structural deficits which continue to hamper Austria's rise to the top ranks of leading industrialised countries: over-specialisation on labour-intensive industries, concurrent with under-specialisation on research-intensive industries, and inadequate positioning on the global market in terms of quality-driven competition. Viewed in terms of an international scale, the Austrian manufacturing sector is too small to advance to market leadership in entire industries or sectors, yet potential market opportunities are available in segments where it already has acquired strong competence and market share, in high-tech niche markets, but also in traditional industries with upgraded products.