THE IMPACT OF INSTITUTIONS ON SERVICES EXPORTS OF CENTRAL AND EASTERN EUROPEAN COUNTRIES

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Published: Dec 30, 2019
https://doi.org/10.30525/2256-0742/2019-5-5-9-17

  Oleksandr Shnyrkov

http://orcid.org/0000-0002-2493-4284

  Rita Zablotska

http://orcid.org/0000-0001-7174-8946

  Oleksii Chugaiev

http://orcid.org/0000-0003-3315-2919

Abstract

Besides labor, capital and technology, institutions are another important factor of production and exports. They set a framework of motivation for economic activities and their efficiency. The previous research provided evidence for the effect of institutions on international trade and development. This paper focuses on the effect of institutional progress on export competitiveness of several services sectors in Central and Eastern Europe in the post-crisis period (2011-2017). In the analyzed period the services exports growth turned out to be more stable than the goods exports growth. The multi-country models showed that several types of institutional improvements affected the exports growth in the medium run. Excluding outliers, using weighted enlarged sample and alternative method for measuring exports growth were applied to assess robustness of the research results. Labor force growth, GDP and GDP per capita were initially used as control variables, but in most cases their effect for exports growth was insignificant in Central and Eastern Europe. Sector specific approach to the analysis turned out to be the most effective to understand the transmission mechanism of the effect under the situation of services heterogeneity. Monetary freedom (currency stability and market-based prices) stimulates exports of transport services. The rule of law (contract enforcement, property rights, efficiency of police and courts, absence of crime and violence etc.) is important for raising international tourism receipts. Information and communication technologies services exports depend primarily on voice and accountability (democratic principles, respects human rights and free media). As for financial and insurance services exports, no significant institutional factor was found. Control of corruption, political stability, labor freedom, government integrity, government effectiveness and lower government size also may be important, but their effect is not robust or cannot be distinguished from the effect of the abovesaid factors. It is more likely that fighting corruption may have a positive impact on the services exports than on the goods exports. The latter depend positively on the level of investment freedom. Using the selected EU Member States in Central and Eastern Europe as a benchmarking level enabled us to estimate a potential effect for services exports in case of Ukraine if it reaches their level of institutional development. In particular the institutional progress can boost Ukrainian transport, tourism, information and communication technologies services exports by 30-200% or by 10-15% of its GDP.

How to Cite

Shnyrkov, O., Zablotska, R., & Chugaiev, O. (2019). THE IMPACT OF INSTITUTIONS ON SERVICES EXPORTS OF CENTRAL AND EASTERN EUROPEAN COUNTRIES. Baltic Journal of Economic Studies, 5(5), 9-17. https://doi.org/10.30525/2256-0742/2019-5-5-9-17
Article views: 494 | PDF Downloads: 463

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Keywords

institutions, business regulation, international trade, services exports, Central and Eastern Europe

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Issue
Vol. 5 No. 5 (2019): Baltic Journal of Economic Studies