How high can Hungary’s sustainable growth rate be? I. Theoretical questions about sustainable economic growth
The central question with sustainable economic growth is what rate can be achieved in the long term alongside internal and external equilibrium and without irreparable harm to the natural environment. At a given employment level, the growth rate is ultimately determined by technical development, but the rate is not irrespective of the proportion of investment. But a reverse relation applies here. Rather than the rate being arrived at from the investment ratio, but it determines the proportion of investment to GDP—through the general and marginal levels of capital efficiency. This brings to the fore the questions of investment funds and domestic savings, the external sources. Countries catching up with the developed economies usually suffer from a funding shortage, due to a number of factors, which gives special importance to investment efficiency and factors that increase internal sources and improve efficiency. A salutary role in these is played by reforming the system of institutions and developing human capital. The links make clear that the growth rate can be understood from the system of internal and external conditions— growth is endogenous in nature. The study underlines theoretical connections that help to determine the growth potential of the Hungarian economy.
Business cycle harmonization in new and old EU member-states
The study analyses the degree of similarity in the business cycles of the EMU members and eight new Central and Eastern European (CEE) EU members, for which EMU acces-sion will be the next stage of integration. The coincidence of cycles is usually regarded as one of the most important optimal currency area properties. While the business cycles of Hungary, Poland and Slovenia greatly approximate to those of the EMU countries in GDP, industrial production and exports, the same cannot be said of consumption or services. The other CEE countries show little or no coincidence in their cycles. The EMU countries have managed to achieve increasing harmonization of their cycles, which could support the endogeneity of optimum currency areas.
Over-education, under-education and wage premiums on the Hungarian labour market, 1994–2002
The paper looks at the impact of over-education and under-education on earnings in Hungary over the period 1994–2002, using a large set of cross-section data representa-tive of employees. Schooling was measured in years of education, while required education was proxied by modal years of education in occupations, and the difference between employees’ observed education and the modal education of their occupation allowed them to be classified as under-educated, over-educated or educated as required. The standard results were gained. 1. An extra year of required education and over-education yields positive and an extra year of under-education negative wage premiums. 2. The economic return on required education is higher than on over-education. 3. The penalty for under-education is smaller than the return on required education. Rising demand for educated workers and increases in higher-education supply were seen over the period. Initially, supply seems to have been rather inelastic, which brought rising wage premi-ums for the over-educated. Then it gained elasticity, leading to higher economic returns on required education. The proportion of over-educated workers increased from 11 per cent in 1994 to 24 per cent in 2002.
The flow of operating capital in the light of the theory of location choice
The study presents and systematizes explanations in commerce theory about the location of foreign operating-capital flow and related empirical researches. The theory of intellec-tual capital that can be seen as the mainstream at present has shortcomings as well as major virtues. The future would seem to belong in this narrower field to models capable of handling complex integration strategies. Examination of types of direct capital invest-ment—horizontal, vertical and complex—adds a new dimension to the efforts to assess in a way different from the traditional one a country’s state and pace of integration into the world economy.