Download Experiences on the EU Periphery

Experiences on the
EU Periphery
Thorvaldur Gylfason
Norway, Iceland, and the EU
With Switzerland, Norway and Iceland
are the sole European nations that have
no intention of joining the EU any time
soon
Switzerland is a special case
– Joined UN only this year
Norway and Iceland are affluent
– Norway: Ppp-adjusted GNP per capita: $30K
– Iceland: $29K
– Switzerland: $30K; US: $34K (2000)
GNP per capita, 2000
(USD, ppp-adjusted)
Luxembourg
United States
Sw itzerland
Norw ay
Iceland
Ireland
Portugal
Greece
0
10.000 20.000 30.000 40.000 50.000
Norway and Iceland:
GNP per capita, 1962-2000
40.000
35.000
Iceland
30.000
Norway
25.000
Current US$,
Atlas method
20.000
15.000
10.000
5.000
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
0
Ireland and Greece:
GNP per capita, 1962-2000
25000
Ireland
20000
15000
Greece
Current US$,
Atlas method
10000
5000
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
0
Iceland, Norway, Ireland, & Greece:
GNP per capita, 1962-2000
40.000
35.000
30.000
25.000
20.000
Iceland
Norway
Ireland
Greece
Current US$,
Atlas method
15.000
10.000
5.000
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
0
Background
Two rich countries, but in different
ways
Norway has been well managed
Low inflation, stable growth, low
unemployment, no external debt,
efficient oil-wealth management
Iceland has been less well managed
High inflation, uneven growth, low
unemployment, high external debt,
overfishing
Natural Resources
Norway
Small fisheries sector
1% of GNP and employment
Huge oil sector
Oil wealth: 50-250% of GNP
Oil revenue: 5-25% of GNP
Iceland
Large fisheries sector
10% of GNP, 40% of exports
Exports
Stagnant exports for a long time
Unique among industrial countries
Norway’s exports
Equivalent to about 43% of GNP since
before the oil discoveries
Oil exports have crowded out nonoil
exports
Iceland’s exports
Equivalent to about a third of GNP
since 1945 (in fact, since 1870)
Iceland, Norway, Ireland, & Greece:
FDI 1975-2000 (% of GDP)
60
Iceland
50
Norway
Ireland
40
Greece
30
20
10
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
0
Norway: Background
Rejected membership twice
1972 and 1994
Political leadership wanted to join the
EU ...
In 1994, all major political parties and interest
organizations advocated membership
... but the people said No!
Strongest objections came from rural
areas
Fishing and farming communities along the
coast, especially up north
Iceland: Background
Never held a referendum
Political leadership does not want to join ...
One of two main opposition parties wants to join,
all other political parties, including present
government, and most interest organizations
are against EU membership, or at least
ambivalent
... but, polls indicate, the people want to
join
Strongest objections come from rural areas
Fishing and farming communities around the coast
are overrepresented in the political arena
Dutch Disease Symptoms
Most often, overvaluation and volatility
of currency
Rural subsidies distort real exchange rate
Sluggish exports and FDI
Lack of interest in full participation in
European integration
Natural wealth: Mixed blessing?
Natural wealth and economic
increase in the
growth, 1965-1998 An
natural capital
share by 8% goes
along with a
decrease in per
capita growth by
1% per year.
Growth of GNP per capita 1965-1998, adjusted for
initial income (%)
6
4
2
0
0
10
20
30
40
50
-2
-4
-6
r = -0.64
-8
Share of natural capital in national wealth 1994 (%)
60
Sources of growth
Sir Arthur Lewis: x is mainly trade,
stable politics, good weather
Growth
+
Investment
+
+
x
denotes a positive effect in the direction shown
+
Education
Sources of growth
Recent research: x is natural resource
abundance or intensity, inter alia
Growth
+
Investment
+
-
-
x
denotes a positive effect in the direction shown
denotes a negative effect in the direction shown
+
Education
How Natural Resource
Intensity Affects Growth
Four main channels of transmission
from natural resources to growth
1. Dutch disease (incl. foreign capital)
2. Rent seeking (social capital)
 Corruption
 Protectionism
 Lack of democracy
3. Education (human capital)
4. Investment (physical capital)
Natural capital
tends to crowd out
Channels of Transmission, Again
Four main linkages:
1. Dutch disease
Hurts level or composition of exports
2. Rent seeking
Protectionism, corruption
3. Education
4. Investment
Transition Economies: Economic
Growth and Agriculture, 1990-1997
Growth of GNP per capita 1990-97 (in per cent per
year)
10
5
Slovenia
0
0
Poland
Slovak
Hungary
Rep.
Czech Rep.
10
Bulgaria 20
Estonia
Romania
30
40
-5
Belarus
Russia
Lithuania
Latvia Kazakhstan
Uzbekistan
Kyrgiz Rep.
-10
r = -0.57
-15
Ukraine
Georgia
Moldova
Turkmenistan
Azerbaijan
-20
Share of agriculture in labor force 1990 (in per cent)
Transition Economies: Natural
Resource Abundance and Corruption
Corruption perceptions index 1999
7
6
Slovenia
r = -0.72
Estonia
Hungary
5
Czech Rep.
Poland
4
Slovak Rep.
Bulgaria
3
Lithuania
Belarus
Romania
Latvia
Ukrainia
Georgia
Russia
Kazakhstan Kyrgyz Rep.
2
Azerbaijan
Moldova
Albania
Uzbekistan
1
0
0
10
20
30
40
50
Share of agriculture in labor force 1990 (in per cent)
60
Transition Economies: Corruption
and Economic Growth, 1990-1997
Growth of GNP per capita 1990-97 (in per cent per
year)
10
5
Poland
Slovenia
Albania
Slovak Rep.
Romania
Czech Rep.
0
0
1
2
3
Bulgaria
4
Hungary
5
6
7
Estonia
-5
Uzbekistan
-10
Belarus
Lithuania
Kazakhstan
Russia Latvia
Kyrgyz Rep.
Moldova
Ukraine
-15
r = 0.64
Georgia
Azerbaijan
-20
Corruption perceptions index 1999
Strong
connection
between
corruption
and growth
in transition
countries
One Possible Interpretation
Corruption
=
+
Resources
Growth
Growth
Corruption
Resources
Another Possible
Interpretation
Corruption
=
+
Resources
Growth
Growth
Resources
Corruption
Transition Economies: Openness
and Agriculture, 1990-1997
Actual exports less country-size-adjusted
exports 1990-97 (in per cent of GDP)
40
Estonia
30
Czech Rep.
Belarus
Latvia
20
Moldova
Slovenia
Lithuania
Slovak
Kazakhstan Uzbekistan
Rep.
Ukraine
Russia
Bulgaria
Hungary
Azerbaijan
Romania Poland
10
0
0
10
20Georgia 30
40
Kyrgyz Rep.
50
60
-10
r = -0.48
-20
Albania
-30
Share of agriculture in labor force 1990 (in per cent)
Transition Economies: Economic
Growth and Openness, 1990-1997
Growth of GNP per capita 1990-97 (in per cent
per year)
10
5
0
Slovak Rep.
Hungary
0 Romania
-10
Slovenia
Poland
10
Bulgaria 20
-5
Lithuania
Kyrgyz
Rep. -10
Russia
Czech
Rep.
30
Estonia
40
Uzbekistan Belarus
Latvia
Kazakhstan
Moldova
Ukraina
Georgia
-15
Azerbaijan
r = 0.05
-20
Actual exports less country-size-adjusted exports 19901997 (in per cent of GDP)
Weak and
insignificant
connection
between
openness
and growth
in transition
countries
One Possible Interpretation
Openness
=
+
Resources
Growth
Growth
Openness
Resources
Another Possible
Interpretation
Openness
=
+
Resources
Growth
Growth
Resources
Openness
Transition Economies: Openness
and Corruption, 1990-1997
Actual exports less country-size-adjusted exports
1990-1997 (in per cent of GDP)
40
Estonia
30
Belarus
Czech Rep.
Moldova
Latvia Slovak Rep.
Slovenia
Uzbekistan
Russia
Kazakhstan
Lithuania
Ukraine
Bulgaria
Hungary
Romania Poland
Azerbaijan
Georgia
20
10
0
0
1
2
Kyrgiz Rep.
3
4
5
6
-10
r = 0.47
-20
Albania
-30
Corruption perceptions index 1999
7
Significant
connection
between
corruption
and
openness in
transition
countries
Classroom discussion