Comparative Analysis of Poland, Slovenia, and Hungary
By: Joshua DunnGuangyu Zhou
BackgroundPoland
Shock Therapy- Help speed up the transition to a market economy- The price controls on products and restrictions on imports were Population: 38,441,588 Republic
Slovenia Most productive out of all of Yugoslavia’s Republics after Independence- The wealthiest nations in Europe - Grown since its independence from Yugoslavia- Include a well-developed economic infrastructure and a well-educated labor force Population: 2,000,092 Parliamentary Republic
Hungary Self-Sufficient- First multi-party elections country in 1990- Succeeded in transforming its command economy into a market economy- Both foreign ownership and foreign investment in Hungarian firms- Economic growth as one of the newest member countries of the European Union since 2004 Population: 9,976,062 Parliamentary Democracy
6 Institutional FrameworksAllocation MechanismForms of Ownership of Land and CapitalRole of PlanningTypes of IncentivesIncome RedistributionRole of Politics
Allocation MechanismPoland
Command Market Transitioned in 1990 Used “shock therapy” to transform into a market economy- Shock therapy program around 1990 -> the most well developed countries in Europe- Remained stable during the recent economic recession- Transitioned to a democratic state in 1990 by liberalizing its economy the privatization of
companies to increase its economic growth.Slovenia
Command Market Independence from Yugoslavia in 1991 as one of the several Yugoslav Republics- Success through trade and enterprise- After independence from Yugoslavia, pursued towards international trade and foreign
investment from other countriesHungary
centrally planned Market Privatization occurred from 1990 to 1994- Command economy to a market economy ->gradual methods and not through the use of
“shock therapy”- Before the transition, most of Hungary’s economy was mostly based on producing and exporting goods solely to the USSR (Union of Soviet Socialist Republics)- Most of the economy’s firms are privatized
Forms of Ownership of Land and CapitalPoland
Capitalist Was not completely privatized, agricultural infrastructure was
underdeveloped- only small and medium state owned companies are privatizedSlovenia
Capitalist Foreign investors contributed to economic growth of the country
Socialism High taxes and state control slowed growth
Hungary Capitalist
Located in the center of Europe which allowed for high economic activity through imports and exports
Role of PlanningPoland
Shock Therapy Program – Balcerowicz Plan Decontrol of most prices to prevent inflation Removed foreign exchange controls Privatization occurred over the first few years
Slovenia Gradual Transition for Privatization
Most successful economy out of all of Yugoslavia’s Republics- Banking, telecommunications, and public utility sectors- Restrictions on foreign investment are removedHungary
State Privatization Agency (SPA) Government sold state property instead of giving to people for free Substantial privatization occurred
Types of IncentivesPoland
Economic Reforms Demand for health care, education, and employment led to government
action in mid 2000s- Remove price controls and several subsidies to industry- Open their market to the foreign investorsSlovenia
Dependence on foreign investors- Faced to other EU countries, particular in Germany, Austria, Italy, and France
Socialist policies hinder participation in economy- High taxes
Hungary Exports- including machinery, vehicles, food, beverages, tobacco, crude materials,
manufactured goods, fuels and electric energy- Export to Germany, Austria, Italy, France, U.K., Romania, and Poland
Income RedistributionPoland
Individual tax rate – Between 18% and 32% Shock therapy contributed to increased inequality Rawlsian
Slovenia Individual tax rate – Between 16% and 41%
Considerable and steady equality of income Austrian
Hungary Individual tax rate – Between 18% and 36%
High social security taxes and poverty Rawlsian
Role of PoliticsPoland
Government imposing economic reform- tax system, government expenditure and banking system Poland’s political stability allowed for more foreign investment- No laws that limit or prohibits foreign investment, participation and control
Slovenia Government encouraged economic activity- government spending on education and maintenance on highway
Hungary Managing debt – Cutting expenses on programs Political corruption is an issue
Bribery- Ranks 46th out of 180 countries in transparency international- Corruption perception index 6.1 of 10, with higher scores indicating less corruption
9 CriterionLevel of OutputGDP GrowthComposition of OutputDegree of Static EfficiencyDegree of Dynamic EfficiencyMacroeconomic StabilityEconomic Security of an IndividualDegree of Economic EqualityDegree of Economic Freedom
Level of Output
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
5000
10000
15000
20000
25000
30000
GDP per capita
PolandSloveniaHungary
GD
P pe
r ca
pita
1. Each country experienced GDP growth2. Declined from 2008 to 2009
GDP Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-10
-8
-6
-4
-2
0
2
4
6
8
GDP Growth
PolandSloveniaHungary
Gro
wth
(%
)
1. All 3 countries experienced growth throughout the 2000s2. Poland did not experience a significant decline3. Slovenia and Hungary experienced a decline from 2007 to 2009
Composition of OutputOutput (% of GDP)
Country Military Agriculture Imports Exports
Poland 1.91 4.5 38 35
Slovenia 1.45 2.6 47.6 60.2
Hungary 1.47 4 73 70.4
1. Poland’s agricultural infrastructure is underdeveloped2. Slovenia’s exports influenced GDP growth since 20003. Hungary’s location allowed long term economic growth
Degree of Static Efficiency
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
5
10
15
20
25
Unemployment (% of Labor)
PolandSloveniaHungary
% o
f La
bor
1. Poland’s unemployment very high during early 2000s2. Hungary’s racial inequality causing unemployment3. Slovenia’s employment stable
Degree of Dynamic EfficiencyPoland
Surplus Labor Unemployment Recently had the most GDP growth in Europe
Slovenia Well-educated work force Highly dependant on foreign trade
Hungary Located in central Europe Highly dependant on exports
Ranking: Slovenia Hungary Poland
Macroeconomic StabilityGDP per capita
Rates in all three countries were steadily growing with Slovenia having the highest GDP per capita
Unemployment Poland and Hungary had problems with unemployment in the
previous 10 years Slovenia held a stable employment rate
Inflation Each country held stable inflation rates
Exchange Rate Volatility Hungary’s currency (Hungarian Forint) lowered from 282/US$
in 2000 to 202/US$ in 2009 Poland and Slovenia’s currencies lowered slightly but remained
stable
Macroeconomic StabilityLabor force participation rate
Ranking: Slovenia Poland Hungary
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
10203040506070
Employment Rate (%)
PolandSloveniaHungary
% o
f La
bor
Economic Security of an Individual
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
5000
10000
15000
20000
25000
30000
GDP per capita (Adjusted for inflation)
PolandSloveniaHungary
US$
- All countries have similar GDP per capita rates- Slovenia has the highest rate
Economic Security of an IndividualUnemployment rate
Slovenia has the lowest, Hungary has the highestHealth
Life Expectancy Poland: 76.1 years - Slovenia: 77.3 years - Hungary: 74.8 years
Infant Mortality (per 1000 live births) Poland: 6.5 - Slovenia: 4.2 - Hungary: 5.3
Ranking: Slovenia Poland Hungary
Degree of Economic EqualityGini Coefficient
Poland: 34.9 Slovenia: 28.4 Hungary: 24.7
Ranking: Hungary Slovenia Poland
Degree of Economic Freedom
2000 2001 2002 2003 2004 2005 2006 2007 200850
55
60
65
70
75
80
Economic Freedom Index
PolandSloveniaHungary
- Slovenia’s state of control limits economic freedom- Poland’s economic reforms- Hungary’s location
- Ranking:- Hungary- Poland- Slovenia
Possible PoliciesPoland
Reform agricultural infrastructure to help lower unemployment
Maintain GDP growthSlovenia
Lower taxes to attract more foreign investorsLower state control to allow for higher economic growth
Hungary Impose policies to lower or eliminate racial inequality to
lower unemploymentConsider income redistribution and lowering taxes on
social security programs