Inequality, growth and public spending in Central, East and Southeast Europe

The article analyses the joint determinants of inequality and growth with a special emphasis on public spending structures in transition. We find especially government expenditures on subsidies to be negatively correlated with both inequality and growth, as more generally government expenditures seem to act counter-cyclically and inequality reducing. Also, there is a mutual benefit of low real interest rates, to both equity and economic development. This hints to the fact that in the late 1990's and early 2000's the European integration process allowed several of the transition economies to aim for the best of both worlds: equity and economic development.Inequality; Government Expenditures, Economic Growth, Transition

Real Exchange Rate Distortion in Southeast Europe

In this paper, first we investigate to which extent the real exchange rate is distorted in the 7 Southeast European countries (SEECs), and compare the findings with other countries in Europe. Second, we shed light into possible determinants and effects of the real exchange rate distortions. Finally, a policy change away from a possibly distorted real exchange rate in the SEECs is being simulated. The results indicate that especially the West Balkan countries have overvalued real exchange rates, while other transition countries' exchange rates are rather undervalued. Some of the main determinants of the real exchange rate distortion are related to the inflow of remittances and FDI, while it was found that nominal exchange rate depreciation and trade openness reduce the real exchange rate distortion. The simulation model shows that a devaluation can have large positive effects on domestic output, exports and trade with self.Real Exchange Rate, Partial Equilibrium Model, Simulation Model, International Trade, Southeast Europe

Illegal Trade in South East Europe

Based on the theoretical foundations as described in Bhagwati (1974), illegal trade can be defined to consist of faked invoicing on the one hand and smuggling on the other hand. While in the first case at least one of the trading partner countries has recorded a trade flow either as an export or as an import, in the latter case no official customs data is available. Smuggling is bypassing legal trade channels altogether. Therefore it is difficult to estimate the full magnitude of illegal trade with the help of one single method. In this paper we rather tried to detect faked invoicing and smuggling in the Balkans separately. Therefore we first tried to measure illegal cross-border trade in South East Europe (SEE) in order to have at least some impressions about the magnitude of this phenomenon and second we analysed illegal trade from a more theoretical perspective and provided an overview of possible policy relevant aspects. The paper ends with some discussion on the impact of illegal trade on security and of some soft security instruments that could be used to address it.Illegal Trade, Faked Invoicing, Smuggling, South East Europe

Household Tax Compliance and the Shadow Economy in Central and Southeastern Europe

This paper presents and applies a new indicator of the size of the shadow economy based on the estimation of tax compliance in the household sector. These estimates are performed for the countries of Central, Eastern and Southeastern Europe using 2001 data. Estimates of income declaration rates and of corresponding undeclared household income are computed using household consumption data as well as detailed data on household taxation. Specific aspects such as remittances, the role of agriculture and the impact of tourism are explicitly taken into account and discussed.

Inertial particles distribute in turbulence as Poissonian points with random intensity inducing clustering and supervoiding

This work considers the distribution of inertial particles in turbulence using the point-particle approximation. We demonstrate that the random point process formed by the positions of particles in space is a Poisson point process with log-normal random intensity ("log Gaussian Cox process" or LGCP). The probability of having a finite number of particles in a small volume is given in terms of the characteristic function of a log-normal distribution. Corrections due to discreteness of the number of particles to the previously derived statistics of particle concentration in the continuum limit are provided. These are relevant for dealing with experimental or numerical data. The probability of having regions without particles, i.e. voids, is larger for inertial particles than for tracer particles where voids are distributed according to Poisson processes. Further, the probability of having large voids decays only log-normally with size. This shows that particles cluster, leaving voids behind. At scales where there is no clustering there can still be an increase of the void probability so that turbulent voiding is stronger than clustering. The demonstrated double stochasticity of the distribution originates in the two-step formation of fluctuations. First, turbulence brings the particles randomly close together which happens with Poisson-type probability. Then, turbulence compresses the particles' volume in the observation volume. We confirm the theory of the statistics of the number of particles in small volumes by numerical observations of inertial particle motion in a chaotic ABC flow. The improved understanding of clustering processes can be applied to predict the long-time survival probability of reacting particles. Our work implies that the particle distribution in weakly compressible flow with finite time correlations is a LGCP, independently of the details of the flow statistics

Economic Inequality in Central, East and Southeast Europe

The article analyses the issue of economic inequality in the transition economies of Central, East and Southeast Europe. It consists of a literature review and a descriptive analysis as well as an econometric modelling exercise. In the fi rst part we point at the fact that the rise in income inequality was triggered by the magnitude of transitional output loss and a reduction of formal employment. Rising wage inequality was at the core of total income dispersion, while government transfers had a redistributional function only in Central and Southeast European countries contrary to the Commonwealth of Independent States (CIS). In the econometric analysis it is found that for instance public utilities infrastructure liberalisation has increased inequality in transition, while price and trade liberalisation has decreased it. A high share of employment in industry and high government expenditures are connected with less inequality.income distribution, inequality, transition economies

Should Local Public Employment Services be Merged with the Local Social Benefit Administrations?

The German Federal government has allowed some regions (Approved Local Providers) to be solely responsible for the care of long-term unemployed. The remaining regions had to form Joint Local Agencies, where the local social benefit administrations work together with the local public employment services. We find that despite positive self-selection Approved Local Providers do not perform better than Joint Local Agencies. Even more interestingly, using a unique data set on organisational characteristics we are able to show that the organisational features implemented primarily by Approved Local Providers are positively correlated with the job finding probability of the long-term unemployed. Thus, regions that self-selected into Approved Local Providers seem to have implemented a better organisational structure. However, their relatively poor performance overall compared to Joint Local Agencies suggests that they underestimated the benefits of having the local public employment service merged with the local social benefit administration.organisation, labour market integration, evaluation

The Impact of Customs Procedures on Business Performance: Evidence from Kosovo

This paper aims to identify formal and informal institutional factors in customs procedures and their impact on the performance of small and medium-sized enterprises (SMEs) involved in international trade in Kosovo based on a questionnaire conducted in 2009. The econometric findings show that one of the most important obstacles encountered by SMEs are regular appeals against customs decisions that are assumed to be inter alia a consequence of frequent changes in over-complicated laws and regulations. However, there is a positive and significant effect of the formal customs institutions that facilitate the trade of imported goods, namely of so-called customs procedures with economic impact.customs, firm performance, formal and informal institutions, small and medium-sized enterprises, Kosovo