OECD Economic Studies No. 18, Spring 1992

Regionalisation and world trade

Peter J. Lloyd

This paper considers the growth in regional trading arrangements (RTAs) in the world economy over the period 1961-89. The number of RTAs and of countries participating in them and the intra-area freeing of trade have certainly increased. However, the empirical evidence from an examination of the import trade data for four RTAs among OECD countries (EC, EFTA, Canada-United States FTA, and Australia-New-Zealand CER) does not support the view that RTAs have led to a growing regionalisation of world trade. There is some tendency for world trade to become more polarised as the share of intra-area imports has increased for the westem European and ASEAN regions but not for the North American region. The paper surveys the literature on trade diversion/creation and other effects on non-member countries and considers the effects of RTAs on the multilateral trading system.

Institutional commitments and policy credibility: a critical survey and empirical evidence from the ERM

Thomas Egebo and A. Steven Englander

The success of ERM countries in reducing inflation has led to much analysis of whether ERM membership has given rise to policy credibility effects. This article examines the analytical foundations of the credibility hypothesis, reviews the econometric evidence on whether or not credibility contributed to low-cost disinflation in ERM countries and provides independent estimates of possible credibility effects since 1987. The article finds some policy credibility effects in financial markets in the second half of the 1980s, but there is little evidence that credibility effects in labour or product markets have significantly reduced the costs of disinflation.

What is households' non-market production worth?

Ann Chadeau

This paper deals with the measurement of the non-market production of goods and services by households and explains why the issue is important for various areas of economic analysis. It discusses the definition of production in the UN-OECD System of National Accounts. It then reviews and assesses different measurement methods of the value added by non-market productive household activities. Estimates of the value of unpaid labour for several OECD countries are compared and their importance relative to official measures of GDP, private consumption and household disposable income is shown. The paper concludes with suggestions for future research.

Wages and wage policies in market economies: lessons for Central and Eastern Europe

Robert J. Flanagan

This paper reviews theory and evidence on how market economies solve the labour allocation and performance problems and draws lessons for the economic transitions in the countries of Central and Eastern Europe (CEECs). The paper begins by addressing the role of wages and competitive labour market mechanisms in skill acquisition and in the industrial allocation of labour. Subsequent sections address institutional aspects of wage formation, the conflict between the efficiency and distributional aspects of wages, and how wage incentives are used to encourage high performance within organisations. The problem of establishing effective managerial incentives in CEECs receives particular attention. The paper concludes with a consideration of the difficulty in establishing effective incomes policies to counter the threat of inflation during the economic transitions in CEECs.

Labour markets and the transition in Central and Eastern Europe

Tito Boeri and Mark Keese

The initial phase of the transition from centrally-planned to market-based economies has been marked by a rapid rise in unemployment in Central and Eastern Europe. While this may have been inevitable in the short-run, high and persistent levels of unemployment could strain the social consensus supporting the current reforms. The risks of this occurring are discussed in this article which first presents an overview of labour markets under central planning and then analyses recent developments, including the changing structure of employment, growth of the private sector and the composition of the pool of unemployed. A final section discusses some implications for labour market policies.