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<p style="padding-top: 0px; padding-right: 0px; padding-bottom: 0.5em; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; "><em>Viv Davies interviews L&aacute;szl&oacute; Halpern for Vox</em></p>
<p style="padding-top: 0px; padding-right: 0px; padding-bottom: 0.5em; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; "><em>June 2011</em></p>
<p style="padding-top: 0px; padding-right: 0px; padding-bottom: 0.5em; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; "><em>Transcription of a VoxEU audio interview [http://www.voxeu.org/index.php?q=node/6709]</em><b>&nbsp;</b></p>
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<p><strong>Viv Davies:</strong> Hello, and welcome to Vox Talks, a series of audio interviews with leading economists from around the world. I'm Viv Davies from CEPR. It's the 7th of June, 2011, and I'm talking to Laszlo Halpern, Deputy Director of the Institute of Economics of the Hungarian Academy of Sciences. We discuss work in progress on the third EFIGE project policy report on the impact of the crisis on European firms. The report observes the extent of heterogeneity across countries and firms and the way they were affected by the crisis and questions the tradeoff between export-oriented strategies and outsourcing.</p>
<p>I began by asking Laszlo to outline the objectives of the draft report.</p>
<p><strong>Laszlo Halpern:</strong> This report is trying to capture the effect of the crisis on those firms in seven countries who are constituting this research project. The most important findings of our reports are the following: That crisis made some important effect on the behavior of firms in five respects. One is that we found that those firms who are exporting more, they're more affected by the crisis than those firms who were relying more on qualified labor, say, skilled blue collar and white collar were less affected by the crisis in terms of suffering less sales reduction or export reduction.</p>
<p>The most interesting finding is that firms who are able to outsource their production were less touched by the crisis. They suffered less as compared to those who are the target of outsourcing activities.</p>
<p>Then we have also looked at the impact of financial indicators. Say, whether firms were relying more on trade credit and other types of credits. We found that those firms who are relying less on credit, they were impacted less by the crisis.</p>
<p>And finally, we found that the firms who have access to public procurement in forms of different ways, then they were somewhat more advantaged as compared to those firms who didn't have that type of access.</p>
<p>And obviously in this exercise we have found some important country differences. And if we are allowed to interpret our results that those countries who were able to rely on more budgetary expenditure, budgetary outlays were able to defend somewhat more their firms from the collapse that the crisis caused.</p>
<p><strong>Viv:</strong> So what do you think was particularly surprising or unexpected about the result from the project?</p>
<p><strong>Laszlo:</strong> Well actually, that was quite interesting that in case of these countries, that somehow there was an important differentiation according to which the extent of export collapse compared to the sales collapse was somewhat differentiated. So for example, in countries like Austria and France, exporting firms were more affected by the crisis than firms specializing only for domestic sales. That type of difference was not evident in the case of Spain or Hungary, though the size of the collapse was much larger for Spain and Hungary. But there was no differentiation across exporting versus non exporting firms in case of those countries who suffered the most.</p>
<p><strong>Viv:</strong> And to what extent do you think that the impact on the trade between firms was a direct result of government interventions, of government policies? Or did not that come into it?</p>
<p><strong>Laszlo:</strong> Well actually, this is what we somehow saw in our results. This is only with respect to the public procurement where we attempted to somehow identify some sort of policy on behalf of the government. That was all. Otherwise, we were not able to detect anything on the trade performance of firms related to the state role. Because the questioner, on the basis of what we see, the question on the basis of which we were doing this exercise was not specific enough to investigate what was the role of the state in shaping the export performance of firms.</p>
<p><strong>Viv:</strong> And are things changing now since you've collected the data? Do you know if things are changing in terms of the dynamics of trade?</p>
<p><strong>Laszlo:</strong> Well, that was a side observation of this investigation. That we have to look for why, for example, these EFIGE countries are not able to go back to the level of the trade that used to be their level before the crisis. And in this respect, the gap between the vast majority of the emerging economies, like China, Brazil, India they are recovering much faster, and they already exceeded their level of their trade activity before the crisis. Which is not the case for, say, these seven countries. And we don't know the reason yet. There might be some comparative advantage type of problem. Or perhaps that there is reallocation of trade activities globally which is going on.</p>
<p>But this exercise, this study was unable to capture that because we didn't have data for that. And we only, like I say, confined our attention to these seven countries.</p>
<p><strong>Viv:</strong> And what about the employment impacts of these issues?</p>
<p><strong>Laszlo:</strong> Well actually, our initial hypothesis was that, perhaps those firms who are relying on a flexible employment arrangement. For example, a larger share of temporary employee perhaps helped firms to travel through the crisis better. But we found that those firms who had this larger share of temporary employment laid off a larger number of employees than those who didn't have that type of arrangement. So the idea that perhaps this short working time arrangement could have offered better opportunities to firms has somehow been rejected by our data.</p>
<p><strong>Viv:</strong> So this particular report comes at, I think it's the third policy report from from the EFIGE project. Where do you think it fits in the general policy direction of the project? And what objectives and what aims do you have in terms of policy influence or policy relevance for the project as a whole?</p>
<p><strong>Laszlo:</strong> I think that the overall aim of the project is to say something about the pattern of internationalization of European firms and how to explain which firms are more competitive on global markets. Obviously this is an important aspect of the project, that is, what's happening during the crisis. But this was not the major aim of the project, to explore the crisis. Because when we were putting together questions, we didn't think of the crisis that would happen. Because the project has been prepared much earlier. So then we added these crisis questions to the questionnaire. And that's why we were able to somewhat put together this report, because of that adjustment to the changing situation in the global economy.</p>
<p>So I think that we continue the project. And we are doing different packages exploring the ideas and problems questioned there about the different organizational forms of internationalization, how the technology adjustment is taking place when the firms are entering the international scene. How the innovation is intertwined with this internationalization of firms, and things like that. And how the employment organizational structures are related to the pattern of how the firms become international. And whether it is going together with getting closer to the international frontier of technology, and things like that.</p>
<p><strong>Viv:</strong> Laszlo Halpern, thanks very much for talking to us today.</p>
<p><strong>Laszlo:</strong> Thank you.</p>