SLOWDOWN, CREDIBILITY AND EU ANCHORING OF STRUCTURAL REFORMS IN THE WESTERN BALKANS

Fatmir Besimi

Abstract


The EU integration has been an important process of economic, political and social transformation of the Western Balkans and its convergence with the European Union. According to empirical evidence and the international
reform indicators in the recent years the pace of structural reforms is slowed down in the Western Balkan countries and the catching-up after the global economic crisis is slower compared to the New Member States of the EU. The aim of this paper is to answer the question of how to accelerate economic growth and convergence with the EU by accelerating structural reforms and their credibility. The empirical analysis shows positive impact of structural reforms and EU integration on convergence with the EU. In order to draw recommendations for policy makers in this analysis, we develop a theoretical model for the political economy of structural reforms for the countries of the Western Balkans in the process of EU accession. The model suggests that
in a dynamic world with rational expectations, the credibility of policymakers is crucial in accelerating reforms and joining the EU, especially given the temporal inconsistency and trade-off between short-term costs and
long-term benefits as well as the redistributive effect of reforms in the society. We find that the EU can play a role in increasing the credibility and pace of reforms for countries in the Western Balkans through EU anchoring
of reforms within policy rule framework or through the influence on the following policy channels within policy discretion framework: increasing the government’s reform preferences; reducing the government’s populism; reducing public’s short-termism (public’s reform sensitivity); increasing the credibility of the EU accession process; and reducing the government’s credibility gap. In addition, the empirical and theoretical analysis of this research as a recommendation to the European Commission indicates that when designing an EU enlargement
strategy consideration should be given to the endogenous convergence, the political economy of structural reforms for EU integration, and the strengthening of the credibility of the process of the EU enlargement in the
Western Balkans.


Keywords


Structural reforms, European integration, Political Economy; Credibility; Economic convergence

Full Text:

PDF

References


Acharya, C. P., and Leon-Gonzalez, R., (2012) The Impact of Remittance on Poverty and Inequality: A Micro-Simulation

Study for Nepal. National Graduate Institute for Policy Studies, 7-22-1 Roppongi, Minato-ku, Tokyo, Japan, pp.106-8677.

Acosta, P., Calderón, C., Fajnzylber, P., and López, H., (2006) ‘Remittances and development in Latin America’, The

World Economy, 29, pp.957-987.

Adams, R., (1989) ‘Workers remittances and inequality in rural Egypt’, Economic Development and Cultural Change

(1), pp.45-71.

Adams, R.H. Jr., (2004) ‘Economic growth, inequality and poverty: Estimating the growth elasticity of poverty’, World

Development 32, pp.1989–2014.

Adams, R.H., Jr. (1991) The effects of international remittance on poverty, inequality and development in rural Egypt.

Research Report 86, Washington DC, IFPRI.

Adger, W. N., (1999) ‘Exploring income inequality in rural coastal Viet Nam’ Journal of Development Studies 35(5),

pp.96–119.

Ahlburg, D. A., (1996) ‘Remittances and the income distribution in Tonga’, Population Research and Policy Review 15(4),

pp.391–400.

Bahmani-Oskooee, M., Hegerty S. W., Wilmeth, H., (2008) ‘Short-run and long-run determinants of income inequality:

Evidence from 16 countries’, Journal of Post Keynesian Economics 30, pp.463-484.

Barham, B., Boucher, S, (1998) ‘Migration, remittances and inequality: Estimating the net effects of migration on income

distribution’, Journal of Development Economics 55(2), pp.307–331.

Binatli, A. O., (2012) ‘Growth and Income Inequality: A Comparative Analysis’ Economics Research International.

doi:10.1155/2012/569890.

Dreher, A., Gaston, N., and Martens, P. (2008) Measuring globalisation: Gauging its consequences. Springer Verlag,

New York.

Castelló-Climent, A., (2010) ‘Inequality and growth in advanced economies: an empirical investigation’, Journal of

Economic Inequality, 8, pp.293–321.

Easterly, W., (2001) ‘The lost decade: Developing countries stagnation in spite of policy Reform 1980-1990’, Journal of

Economic Growth 6, pp.135-157.

Engle, Robert F. and W.J. Clive Granger, (1987) ‘Co-integration and error correction: representation, estimation and

testing’, Econometrica, 55(2), pp.251-276.

Forbes, J. K., (2000) ‘A Reassessment of the Relationship Between Inequality and Growth’, American Economic Review,

(4), pp.869-887.

Frank, M. W., (2011) ‘Inequality and Growth in the United States: Evidence from a new state level panel of Income

Inequality Measures’ Economic Inquiry, 47 (1), pp.55-68.

Galor, O., and Moav, O., (2004) ‘From physical to human capital accumulation: inequality and the process of development’,

Review of Economic Studies, 71(4), pp.1001-1026.

Gaston, N., Rajaguru, G., (2009) ‘The long-run determinants of Australian income inequality’, Economic Record 85(270),

pp.260-275.

Granger, C.W.J. (1969) ‘Investigating Causal Relations by Econometric Models and Cross-spectral Methods’,

Econometrica, 37(3), pp.424-438.

Handa, S., and King, D., (1997) ‘Structural adjustment policies, income distribution and poverty: A review of the Jamaican

experience’, World Development 25(6), pp.915–930.

Herzer, D., Vollmer, S., (2012) ‘Inequality and growth: evidence from panel cointegration’, Journal of Economic Inequality,

, pp.489-503.

Hsing, Y., (2005) ‘Economic growth and income inequality: the case of the US. International’, Journal of Social

Economics, 32, pp.639-647.

Jalil, A., (2012) ‘Modeling income inequality and openness in the framework of Kuznets curve: New evidence from china’,

Economic Modelling, 29, pp.309-315.

Johansen, S. and K. Juselıus, (1990) ‘Maximum likelihood estimation and inferences on cointegration-with applications

to the demand for money’, Oxford Bulletin of Economics and Statistics, 52, pp.169-210.

Johansen, S. (1988) ‘Statistical analysis of cointegration vectors’, Journal of Economic Dynamics and Control, 12,

pp.231-254.

Jong, C. S., (2010) A Reassessment the Relationship between Growth and Inequality: Evidence from New Data. Institute

for Monetary and Economic Research, The Bank of Korea, 110, Namdaemunro 3-Ga, Jung-Gu, Seoul, 100-794,

Republic of Korea.

Koechlin, V., and Leon, G., (2007) ‘International remittances and income inequality: An empirical investigation’, Journal

of Economic Policy Reform 10(2), pp.123-141.

Kuznets, S. (1955) ‘Economic growth and income inequality’, American Economic Review, 45(1), pp.1–28.

Lerman, J. P.,and Feldman, S., (1998) ‘Non-farm activity and rural household income: Evidence from Philippine microdata’,

Economic Development and Cultural Change 46(4), pp.789–806.

Li, H. (1998) ‘Explaining international and intertemporal variations in income inequality’, Economic Journal, 108(446),

pp.26–43.

McKenzie, D and Rapoport, H, (2007) ‘Network effects and the dynamics of migration and inequality: theory and evidence

from Mexico’ Journal of Development Economics, 84, pp.1–24.

Meschi, E., and Vivarelli, M., (2009) ‘Trade and income inequality in developing countries’ World Development 37,

pp.287-302.

Morley, B. (2006) ‘Causality between economic growth and immigration: An ARDL bound testing approach’, Economic

Letters, 90, pp.72-76.

Narayan, P.K. (2005) ‘The saving and investment nexus for china: Evidence from cointegration tests’, Applied

Economics, 37(17), pp.1979-1990.

Nguyen, V. C., (2008) ‘Do Foreign Remittances Matter to Poverty and Inequality? Evidence from Vietnam’, Economics

Bulletin, 15(1), pp.1-11.

Pesaran, M., Shin Y. and R.J. Smith, (2001) ‘Bounds testing approaches to the analysis of level relationships’ Journal of

Applied Econometrics, 16, pp.289-326.

Pede, V. O., Sparks, A. H., Mckinley, J. D., (2012). Regional Income Inequality and Economic Growth: A Spatial

Econometrics Analysis for Provinces in the Philippines. Social Sciences Division, International Rice Research Institute,

DAPO Box 7777, Metro Manila, Philippines.

Petersen L.(2012) Remittances and Inequality a Case Study of Albania. Bachelor Thesis, Department of Economics,

Lund University. 912.

Qureshi, M. S., Wan, G. (2008) ‘Distributional consequences of globalisation: Empirical evidence from panel data’ Journal

of Development Studies 44(10), pp.1424-1449.

Rodriguez, E. R., (1998) ‘International migration and income distribution in the Philippines’, Economic Development and

Cultural Change 46(2), pp.329–350.

CEA Journal of Economics

Roine, J., Vlachos, J., and Waldenström, D., (2009) ‘The long-run determinants of inequality: What can we learn from

top income data?’ Journal of Public Economics 93, pp.974-988.

Shahbaz, M. Rehman, I.U. and Mahdzan, N.S.A. (2014) ‘Linkages between income inequality, international remittances

and economic growth in Pakistan’, Qual Quant. Vol. 48(3), pp.1511-1535.

Shahbaz, M., (2010) ‘Income inequality-economic growth and non-linearity: a case of Pakistan’, International Journal of

Social Sciences, 37 (8), pp.613-636.

Stark, O., Taylor, J. E.,and Yitzhaki, S., (1988) ‘Migration, remittances and inequality: A sensitivity analysis using the

extended Gini index’, Journal of Development Economics 28(3), pp.309–322.

Tang, T. C., (2003) ‘Japanese aggregate import demand function: Reassessment from the Bounds’ testing approach’,

Japan and World Economy, 15, pp.419-436.

Tarı, R. (2011) Ekonometri, Umuttepe Yayınları, 11. Baskı, Kocaeli.

Taylor, J. E., (1992) ‘Remittances and inequality reconsidered: Direct, indirect and intertemporal effects’, Journal of Policy

Modeling 4(2), pp.187-208.

Taylor J.E., and Wyatt, T.J., (1996) ‘The shadow value of migrant remittances, income and inequality in a household-farm

economy’, Journal of Development Studies 32(6), pp.899-912.

Waheed, O. O., Shittu, A. M., (2012) ‘Remittances and income inequality in rural Nigeria’, E3 Journal of Business

Management and Economics, 3, pp.210-221.

Zouheir, A., Imen, M. S., (2012) ‘Economic Growth and Income Inequality: Empirical Evidence from North African

Countries’, Asian Economic and Financial Review, 2 (1), pp.142-154.


Refbacks

  • There are currently no refbacks.