Eurasian Economic Perspectives: Mehmet Huseyin Bilgin Hakan Danis Ender Demir Ugur Can Editors

Eurasian Studies in Business and Economics 11/1
Series Editors: Mehmet Huseyin Bilgin · Hakan Danis
Mehmet Huseyin Bilgin
Hakan Danis
Ender Demir
Ugur Can Editors
Eurasian
Economic
Perspectives
Proceedings of the 24th Eurasia
Business and Economics Society
Conference
Eurasian Studies in Business and Economics 11/1
Series editors
Mehmet Huseyin Bilgin, Istanbul, Turkey
Hakan Danis, San Francisco, CA, USA
Representing
Eurasia Business and Economics Society
More information about this series at http://www.springer.com/series/13544
Mehmet Huseyin Bilgin • Hakan Danis •
Ender Demir • Ugur Can
Editors
Eurasian Economic
Perspectives
Proceedings of the 24th Eurasia Business
and Economics Society Conference
Editors
Mehmet Huseyin Bilgin Hakan Danis
Faculty of Political Sciences MUFG Union Bank
Istanbul Medeniyet University San Francisco, CA, USA
Istanbul, Turkey
Ender Demir Ugur Can

Faculty of Tourism Eurasia Business & Economic Society
Istanbul Medeniyet University Fatih, Istanbul, Turkey
Istanbul, Turkey
The authors of individual papers are responsible for technical, content, and linguistic
correctness.
ISSN 2364-5067 ISSN 2364-5075 (electronic)

Eurasian Studies in Business and Economics
ISBN 978-3-030-18564-0 ISBN 978-3-030-18565-7 (eBook)
https://doi.org/10.1007/978-3-030-18565-7
© Springer Nature Switzerland AG 2019

This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the
material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation,
broadcasting, reproduction on microfilms or in any other physical way, and transmission or information
storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology
now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication
does not imply, even in the absence of a specific statement, that such names are exempt from the relevant
protective laws and regulations and therefore free for general use.
The publisher, the authors, and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or
the editors give a warranty, express or implied, with respect to the material contained herein or for any
errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional
claims in published maps and institutional affiliations.
This Springer imprint is published by the registered company Springer Nature Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Preface
This is Volume 1—Eurasian Economic Perspectives of the 11th issue of the

Springer’s series Eurasian Studies in Business and Economics, which is the
official book series of the Eurasia Business and Economics Society (EBES, www.
ebesweb.org). This issue includes selected papers presented at the 24th EBES
Conference—Bangkok, which was held on January 10–12, 2018, in Bangkok,
Thailand, jointly organized by the Faculty of Business Administration Kasetsart
University with the support of the Istanbul Economic Research Association.
Distinguished colleagues Jonathan Batten from University Utara Malaysia,
Malaysia; Euston Quah from the Nanyang Technological University, Singapore;
Naoyuki Yoshino from the Asian Development Bank Institute, Japan; and Partha
Sen from Delhi School of Economics, India, joined the conference as keynote
speakers.
During the conference, participants had many productive discussions and
exchanges that contributed to the success of the conference where 178 papers by
334 colleagues from 47 countries were presented. In addition to publication oppor-
tunities in EBES journals (Eurasian Business Review and Eurasian Economic
Review, which are also published by Springer), conference participants were given
the opportunity to submit their full papers for this issue.
Theoretical and empirical papers in the series cover diverse areas of business,
economics, and finance from many different countries, providing a valuable oppor-
tunity to researchers, professionals, and students to catch up with the most recent
studies in a diverse set of fields across many countries and regions.
The aim of the EBES conferences is to bring together scientists from business,
finance, and economics fields, attract original research papers, and provide them
publication opportunities. Each issue of the Eurasian Studies in Business and
Economics covers a wide variety of topics from business and economics and
provides empirical results from many different countries and regions that are less
investigated in the existing literature. All accepted papers for the issue went through
peer-review process and benefited from the comments made during the conference
v
vi Preface
as well. The current issue covers fields such as economic development, finance,
tourism, public economic, and regional studies.
Although the papers in this issue may provide empirical results for a specific
county or regions, we believe that the readers would have an opportunity to catch up
with the most recent studies in a diverse set of fields across many countries and
regions and empirical support for the existing literature. In addition, the findings
from these papers could be valid for similar economies or regions.
On behalf of the series editors, volume editors, and EBES officers, I would like to
thank all presenters, participants, board members, and the keynote speakers, and we
are looking forward to seeing you at the upcoming EBES conferences.
Istanbul, Turkey Ender Demir

Eurasia Business and Economics Society (EBES)
EBES is a scholarly association for scholars involved in the practice and study of
economics, finance, and business worldwide. EBES was founded in 2008 with the
purpose of not only promoting academic research in the field of business and
economics but also encouraging the intellectual development of scholars. In spite
of the term “Eurasia,” the scope should be understood in its broadest term as having a
global emphasis.
EBES aims to bring worldwide researchers and professionals together through
organizing conferences and publishing academic journals and increase economics,
finance, and business knowledge through academic discussions. Any scholar or
professional interested in economics, finance, and business is welcome to attend
EBES conferences. Since our first conference in 2009, around 11,157 colleagues
from 98 countries have joined our conferences and 6379 academic papers have been
presented. Also, in a short period of time, EBES has reached 2050 members from
84 countries.
Since 2011, EBES has been publishing two academic journals: Eurasian Busi-
ness Review (EABR) and Eurasian Economic Review (EAER). While both journals
are indexed in Scopus, EABR and EAER are indexed in Social Science Citation
Index and Emerging Sources Citation Index, respectively. Furthermore, EABR is in
the fields of industrial organization, innovation, and management science, and EAER
is in the fields of applied macroeconomics and finance. Both journals are published
quarterly, and they have been published by Springer since 2014.
Moreover, since 2014 Springer has started to publish a new conference pro-
ceedings series (Eurasian Studies in Business and Economics) which includes
selected papers from the EBES conferences. The 10th, 11th, 12th, 13th, 14th, 15th,
16th, 17th, 19th, and 20th (Vol. 2) EBES Conference Proceedings have already been
accepted for inclusion in the Thomson Reuters’ Conference Proceedings Citation
Index. The 18th and subsequent conference proceedings are in progress.
vii
viii Eurasia Business and Economics Society (EBES)
On behalf of the EBES officers, I sincerely thank you for your participation and
look forward to seeing you at our future conferences. In order to improve our future
conferences, we welcome your comments and suggestions. Our success is only
possible with your valuable feedback and support.
I hope you enjoy the conference and Bangkok.
With my very best wishes,
Klaus F. Zimmermann, PhD

President
EBES Executive Board
Klaus F. Zimmermann, UNU-MERIT, Maastricht University, The Netherlands
Jonathan Batten, University Utara Malaysia, Malaysia
Iftekhar Hasan, Fordham University, U.S.A.
Euston Quah, Nanyang Technological University, Singapore
Peter Rangazas, Indiana University-Purdue University Indianapolis, U.S.A.
John Rust, Georgetown University, U.S.A.
Marco Vivarelli, Università Cattolica del Sacro Cuore, Italy
EBES Advisory Board

Hassan Aly, Department of Economics, Ohio State University, U.S.A.
Ahmet Faruk Aysan, Istanbul Sehir University, Turkey
Michael R. Baye, Kelley School of Business, Indiana University, U.S.A.
Mohamed Hegazy, School of Management, Economics and Communication, The
American University in Cairo, Egypt
Cheng Hsiao, Department of Economics, University of Southern California, U.S.A.
Philip Y. Huang, China Europe International Business School, China
Noor Azina Ismail, University of Malaya, Malaysia
Irina Ivashkovskaya, State University – Higher School of Economics, Russia
Hieyeon Keum, University of Seoul, South Korea
Christos Kollias, Department of Economics, University of Thessaly, Greece
William D. Lastrapes, Terry College of Business, University of Georgia, U.S.A.
Brian Lucey, The University of Dublin, Ireland
Rita Martenson, School of Business, Economics and Law, Goteborg University,
Sweden
Steven Ongena, University of Zurich, Switzerland
Panu Poutvaara, Faculty of Economics, University of Munich, Germany
Peter Szilagyi, Central European University, Hungary
Amine Tarazi, University of Limoges, France
Russ Vince, University of Bath, United Kingdom
Wing-Keung Wong, Department of Finance, Asia University, Taiwan
Naoyuki Yoshino, Faculty of Economics, Keio University, Japan
Eurasia Business and Economics Society (EBES) ix
Organizing Committee
Klaus F. Zimmermann, PhD, Maastricht University, The Netherlands
Mehmet Huseyin Bilgin, PhD, Istanbul Medeniyet University, Turkey
Hakan Danis, PhD, Union Bank, U.S.A.
Alina Klonowska, PhD, Cracow University of Economics, Poland
Jonathan Tan, PhD, Nanyang Technological University, Singapore
Sofia Vale, PhD, ISCTE Business School, Portugal
Ender Demir, PhD, Istanbul Medeniyet University, Turkey
Orhun Guldiken, PhD, University of Arkansas, U.S.A.
Ugur Can, EBES, Turkey
Reviewers
Sagi Akron, PhD, University of Haifa, Israel
Ahmet Faruk Aysan, PhD, Central Bank of the Republic of Turkey, Turkey
Mehmet Huseyin Bilgin, PhD, Istanbul Medeniyet University, Turkey
Hakan Danis, PhD, Union Bank, U.S.A.
Ender Demir, PhD, Istanbul Medeniyet University, Turkey
Giray Gozgor, PhD, Istanbul Medeniyet University, Turkey
Orhun Guldiken, University of Arkansas, U.S.A.
Peter Harris, PhD, New York Institute of Technology, U.S.A.
Mohamed Hegazy, The American University in Cairo, Egypt
Gokhan Karabulut, PhD, Istanbul University, Turkey
Christos Kollias, University of Thessaly, Greece
Davor Labaš, PhD, University of Zagreb, Croatia
Chi Keung Marco Lau, PhD, University of Northumbria, United Kingdom
Gregory Lee, PhD, University of the Witwatersrand, South Africa
Nidžara Osmanagić-Bedenik, PhD, University of Zagreb, Croatia
Euston Quah, PhD, Nanyang Technological University, Singapore
Peter Rangazas, PhD, Indiana University-Purdue University Indianapolis, U.S.A.
Doojin Ryu, PhD, Chung-Ang University, South Korea
Sofia Vale, PhD, ISCTE Business School, Portugal
Manuela Tvaronavičienė, PhD, Vilnius Gediminas Technical University, Lithuania
Contents
Part I Growth, Development and Finance

The Financial Benefits of Training on the Labor Market: Evidence
from Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Madalina Ecaterina Popescu and Ramona-Mihaela Paun
The Nexus Between Economic Development and Environmental
Pollution: The Case of Lithuania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lina Sineviciene, Aura Draksaite, Violeta Naraskeviciute,
and Oleksandr Kubatko
The Impact of Changes in Time to Maturity on the Risk
of Geometric Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Ewa Dziawgo
Part II Tourism
A Conceptual Paper of the Smart City and Smart Community . . . . . . . 39
Normalini M. D. Kassim, Jasmine Ai Leen Yeap, Saravanan Nathan,
Nor Hazlina Hashim, and T. Ramayah
Tourist Destination Assessment by Revised Importance-Performance
Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Olimpia I. Ban, Victoria Bogdan, and Delia Tușe
Part III Public Economics

Corrupt Practices in Public Procurement: Evidence from Poland . . . . . 71
Arkadiusz Borowiec
Evaluation System for the Public Institutions Employees . . . . . . . . . . . . 83
Stefania Cristina Mirica, Liliana Mihaela Moga, and Bucur Iulian Dediu
xi
xii Contents
Part IV Regional Studies

An Overview of the Trends in the Evaluation System for the Public
Management Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Bucur Iulian Dediu, Liliana Mihaela Moga, and Stefania Cristina Mirica
Assessment of the Importance of Agri-Food Products Trade
Between the European Union and China . . . . . . . . . . . . . . . . . . . . . . . . 105
Aneta Jarosz-Angowska
Economic and Environmental Performance of Post-Communist
Transition Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Lina Sineviciene, Oleksandra V. Kubatko, Iryna M. Sotnyk,
and Ausrine Lakstutiene
List of Contributors
Olimpia I. Ban Department of Economics and Business, University of Oradea,

Oradea, Romania
Victoria Bogdan Department of Finance and Accounting, University of Oradea,
Oradea, Romania
Arkadiusz Borowiec Faculty of Engineering Management, Poznan University of
Technology, Poznan, Poland
Bucur Iulian Dediu The School for Doctoral Studies in the Socio-Humanities,
Dunarea de Jos University of Galati, Galati, Romania
Aura Draksaite School of Economics and Business, Kaunas University of
Technology, Kaunas, Lithuania
Ewa Dziawgo Faculty of Administration and Social Sciences, Kazimierz Wielki
University, Bydgoszcz, Poland
Nor Hazlina Hashim School of Communication, Universiti Sains Malaysia,
Penang, Malaysia
Aneta Jarosz-Angowska Department of Economics and Agribusiness, University
of Life Sciences in Lublin, Lublin, Poland
Normalini M. D. Kassim School of Management, Universiti Sains Malaysia,
Penang, Malaysia
Oleksandra V. Kubatko Department of Economics and Business Administration,
Sumy State University, Sumy, Ukraine
Ausrine Lakstutiene School of Economics and Business, Kaunas University of
Stefania Cristina Mirica Department of Juridical Sciences, The School for
Doctoral Studies in the Socio-Humanities, Dunarea de Jos University of Galati,
Galati, Romania
xiii
xiv List of Contributors
Liliana Mihaela Moga Department of Economics, Dunarea de Jos University of

Galati, Galati, Romania
Violeta Naraskeviciute School of Economics and Business, Kaunas University of
Saravanan Nathan Telekom Malaysia Berhad, Penang, Malaysia
Ramona-Mihaela Paun George Herbert Walker School of Business and Technol-
ogy, Webster University Thailand, Bangkok, Thailand
Madalina Ecaterina Popescu The National Scientific Research Institute for Labor
and Social Protection, The Bucharest University of Economic Studies, Bucharest,
Romania
T. Ramayah School of Management, Universiti Sains Malaysia, Penang, Malaysia
Lina Sineviciene School of Economics and Business, Kaunas University of
Iryna M. Sotnyk Department of Economics and Business Administration, Sumy
State University, Sumy, Ukraine
Delia Tușe Department of Mathematics and Informatics, University of Oradea,
Oradea, Romania
Jasmine Ai Leen Yeap School of Management, Universiti Sains Malaysia,
Penang, Malaysia
Part I
Growth, Development and Finance
The Financial Benefits of Training
on the Labor Market: Evidence from
Romania
Madalina Ecaterina Popescu and Ramona-Mihaela Paun
Abstract In this paper we study the direct effects of vocational training upon
earnings, and bring empirical evidence for the case of Romania. In order to deter-
mine whether vocational training generates an increase in earnings, a quantitative
analysis is conducted and econometric tools are applied on both a treatment and a
control group. Survey micro-datasets are used together with a probit model, a Kernel
matching algorithm and an ordered logit. The main findings are consistent with the
international literature in the field, arguing in favor of a positive return on training, as
higher earnings are to be expected after attending training programs.
Keywords Vocational training · Earnings · Impact evaluation · Ordered logit
1 Introduction
As vocational training has become one of the popular active labor market policies,
more and more studies have focused on evaluating its impact on the labor market.
Although the vast majority of empirical studies focused on its effects on employ-
ability, significant concerns are also raised on the financial benefits of training. This
paper is, therefore, dedicated to the direct effects of vocational training on earnings.
The case of Romania is discussed, and empirical evidences are brought in favor of
the human capital theory. The research question underpinned in this study refers to
the impact of vocational training upon earnings.
Since official databases could not provide specific wage information at individual
level, survey micro-datasets were used in the analysis. The methodological approach
M. E. Popescu
The National Scientific Research Institute for Labor and Social Protection, The Bucharest
University of Economic Studies, Bucharest, Romania
R.-M. Paun (*)
George Herbert Walker School of Business and Technology, Webster University Thailand,
Bangkok, Thailand
e-mail: paunrm@webster.ac.th
© Springer Nature Switzerland AG 2019 3

M. Huseyin Bilgin et al. (eds.), Eurasian Economic Perspectives, Eurasian Studies in
Business and Economics 11/1, https://doi.org/10.1007/978-3-030-18565-7_1
4 M. E. Popescu and R.-M. Paun
relies on a quasi-experiment which assumes building a counterfactual scenario based

on two distinct groups of individuals that were registered as unemployed in 2013 by the
Romanian National Agency of Employment (NAE). The two groups were made up of
individuals that shared rather similar observable characteristics, but with the difference
that the individuals assigned to the treatment group attended a training program, while
the control group consisted of individuals who did not attend such a program.
The structure of the paper is the following: Sect. 2 provides a brief state of the art
of previous empirical studies in the field, followed by Sect. 3 which is dedicated to
data description and methodology. The main findings of the study are presented in
Sect. 4, while the conclusions are summarized in the last section.
2 Literature Review
Economists have tried for quite some time to provide an explanation for wage
differentials. According to the early work of Becker (1964) and Mincer (1958), if
other things are being equal, then personal income varies depending on the amount
of investment in human capital. Such investments refer to education and training
undertaken by individuals or groups of people.
There are several empirical studies that looked into the financial benefits of
training although the vast majority focused on the impact of trainings on employ-
ability. For instance, Bartel (1995) used a large US company data covering the
period between 1986 and 1990 and found that wages of workers that have attended
on-the-job training were 10.6% higher than those who did not undertake training,
and that one additional day of training raised their wages by 1.6%.
When considering the advantages of long versus short training programs based on
the Swedish Level of Living Survey for 1968, 1981 and 1991, Regner (2002) found
that employees with jobs that require long on-the-job training earn 15.7% more than
workers with jobs that have short training requirements. In addition, the wage effects
of on the job training vary significantly between men and women, and the private
and public sectors. The wage premium of long training is 20.8% for men versus
13.5% for women, and 18.1% for employees working in the private sector versus
11% for those working in the public sector. The study also highlighted that public-
sector employees benefit more from specific training, whereas those working for the
private sector gain more from general training, while the wage effect of on-the-job
training is larger for recently hired employees than for senior employees.
In another study, Greenberg et al. (2003) checked the effects of 15 different
training programs sponsored by the US government between 1964 and 1998 for
disadvantaged, low-income individuals. They considered three groups: adult
women, adult men and youth, and concluded that the effects of training are the
highest for women, rather small for men and negligible for youths. For adults, the
effects persisted for several years. Another interesting finding of this study shows
that training programs that are more expensive are not necessarily the ones gener-
ating the highest returns.
The Financial Benefits of Training on the Labor Market: Evidence from Romania 5
Budria and Pereira (2004) used pooled data for Portugal covering the period from
1998 to 2000 and found that the returns to training are much higher for women than
men but the effects differ depending on education and experience. No significant
differences in returns to training were found between the private sector and the
public sector even though some particularities were noticed indicating that experi-
ence matters in the private sector while education leads to higher earnings in the
public sector.
Arulampalam et al. (2004) examined the returns to training for ten European
countries to see if they are similar for employees that are part of different wage
groups. Their findings show that, except for Belgium, training yields similar per-
centage returns across the conditional wage distribution. In Belgium, employees that
are part of the lower wage group seem to enjoy a larger return on training than those
in higher wage group.
In another study, Muehler et al. (2007) applied non-parametric matching estima-
tion in order to compare the effects of general continuous training versus firm-
specific training programs on wages. Based on the German Socio-Economic Panel
(GSOEP) datasets, they found that general training yields up to 5–6% wage increase,
while firm-specific trainings have rather insignificant effects. Their findings are
consistent with the human capital theory, as general training is normally associated
with higher financial benefits than firm-specific training.
Heng et al. (2007) used data from a labor force survey on training conducted in
2004 in Singapore that included 2400 respondents and concluded that the well-
educated and higher earning individuals are more likely to attend training programs
but the ones that benefit the most are the relatively low paid workers. Workers with
relatively low earnings and less than 10 years of experience are more likely to consider
the training successful and get a pay rise or promotion. For workers under 37 years old,
age has a small positive impact on training participation which becomes negative for
older workers. A possible explanation might be the smaller incentive for employers to
send their senior workers for training, either due to the higher opportunity cost or the
narrower time horizon of getting the benefits out of the training program.
For the case of Romania, there are less impact evaluation studies on the impact of
vocational training on the labor market (see Popescu and Roman 2018; Pirciog et al.
2015; Roman and Popescu 2015; Rodriguez-Planas and Benus 2006). Among them,
however, only Roman and Popescu (2015) actually focused on evaluating the effects
of training on the Romanian migrants’ income through a propensity score matching
approach. The empirical study was based on datasets collected through an online
survey conducted in 2010 upon Romanian migrants worldwide that were divided
between a control and a treatment group. The conclusions once again supported the
theory that higher incomes are expected after attending training programs.
More recently, Popescu and Roman (2018) studied the effects of training upon
employability in Romania and found a positive, but rather modest impact on
employability for persons below 55 years old. More precisely, the participation to
training increased the chances of employment by 15%, being more successful for
women living in urban areas. The authors also made some recommendations on
better targeting and profiling the vocational training participants in Romania in order
to facilitate a smoother insertion on the labor market and a better match between
people’s skills and the requirements of the labor market.
3 Data Description and Methodology
Since the official NAE database lacks wage information available at individual level,
survey micro-datasets were used in the analysis. The survey was conducted in
October 2014 by the National Scientific Research Institute for Labor and Social
Protection on approximately 400 respondents one and a half years after the training
measure was implemented.
In order to quantify the impact of vocational training on earnings, we built a
counterfactual scenario that allows estimating what would have happened to the
treated persons in the absence of the intervention. A quasi-experimental approach
was thus applied, and individuals registered as unemployed in 2013 by the NAE
were randomly selected from the NAE database and placed in a treatment or a
control group. The treatment group was made up of individuals that attended a
training program by the end of 2013, while the control group consisted of individuals
that shared similar observable characteristics except that they did not attend such
training programs.
The standard procedure for estimating the effectiveness of a particular interven-
tion when several observable characteristics are considered includes: the estimation
of the propensity score, the selection of a matching algorithm that will use the
estimated propensity scores to match the individuals in the control group to those
in the treatment group, and the estimation of the impact of the intervention with the
matched sample.
The propensity score shows the probability that one individual in the full sample
receives the treatment, given a set of observed variables, thus reducing the matching
problem to a single dimension. Therefore, rather than matching all the values of the
variables, individuals can be compared based on the propensity scores only.
A major challenge in most empirical program evaluation studies is related to the
selection of the set of covariates to be included in the analysis that describe
background information that is relevant for the performance of each individual in
the labor market. In this paper, both socio-demographic and economic variables
were considered according to the economic theory and prior empirical studies in the
field (Popescu and Roman 2018). The selected covariates are summarized in Table 1.
The initial data samples consisted of 116 respondents in the treatment group and
276 in the control group. Studying the structural differences based on the main socio-
demographic characteristics of both the treated and the control groups revealed
several particularities. In the search of a better match between the treated individuals
and those belonging to the control group, we turned to a matching technique, namely
the Kernel matching algorithm implemented in STATA.
The Kernel matching technique is a non-parametric estimator that estimates the
counterfactual outcome using a weighted average of all the comparison units. The
Table 1 The main covariates considered in the analysis

Individual
Types of information characteristics Codifications based on sub-categories
Socio-demographic Age Age 18–24/age 25–44/age over 45
characteristics Gender Male/female
Residence area Urban/rural
Level of Low level of education/medium level of education/
education high level of education
Economic variables Activity sector Services sector/industry sector/construction/other
sectors
main advantage of this method consists in the use of more information in order to
reduce the variance. Even though the algorithm could still generate some poor
matches, we accepted such biases due to data limitations.
For that, a probit model was first estimated (see Table 2) to predict the propensity
scores of each individual representing each individual’s chance of attending a
training program. For this purpose, a binary treated variable was built by taking
value 1 in case the individual attended the training program and 0 otherwise.
Next, the Kernel matching algorithm was applied based on the previously
estimated propensity score of each individual. The common support restriction
generated a drop of seven individuals belonging to the treated group and eight
individuals from the control group, summing up to a total of 377 respondents
remaining in the analysis.
Since the background information regarding individuals’ earnings at the moment
the survey was conducted could only be collected as a categorical variable, it
requires logistic model estimation. More precisely, the net earnings variable is
described through the following categorical variable:
8
< 1,if net earnings are below 600 lei
Net earnings ¼ 2,if net earnings are between 600 and 1500 lei
:
3,if net earnings are over 1500 lei
The classes used for collecting net earnings data, although not equal in width, do
reflect to a certain extent how the respondents’ income compare to the net minimum
earnings1 and to the net average earnings2 for 2014. The first category includes
net earnings that are below the estimated net minimum wage, the second included
earnings that are roughly between the minimum wage but less than the net
average earnings, while the last include observations that are close or above the
net average earnings.
1
Gross minimum earnings in Romania were 850 lei in January–June 2014, and increased to 900 lei
in July 2014, corresponding to a net minimum earnings of around 678 lei.
2
Net average earnings in September 2014 were 1698 lei.
Table 2 The probit model Covariates Coefficients

output
Age 18–24 0.34 (0.21)
Medium level of education 0.72 (0.22)
Low education level 0.57 (0.31)
Urban 0.78 (0.20)
Male 0.92 (0.15)
Industry sector 1.1 (0.45)
Services sector 0.27 (0.19)
Constant 1.16 (0.27)
Pseudo R2 0.17
Observations 392
Note: Standard errors are in parentheses. p < 0.01, p < 0.05,
p < 0.10
The ordinal structure of this outcome variable does not allow for an average
estimation of the impact of training upon net earnings. Instead, a quite suitable
alternative consists in estimating an ordered logit model for the individuals’ chance
to earn more.
An ordered logit model allows modelling the relationship between a categorical
variable and a set of independent variables by estimating a score based on a linear
function of independent variables, along with a set of thresholds. The general form of
the model is the following:

P outcomej ¼ i ¼ P ki1 < β1 x1 j þ β2 x2 j þ . . . þ βk xkj þ u j ki ð1Þ
where β1, β2, . . . , βk are the estimated coefficients together with k1, k2, . . . , kk 1,
where k represents the number of possible outcomes.
The outputs of the logistic estimation as well as the main findings of the empirical
study are presented in the following section.
4 Findings
The propensity scores of each individual that represent their chance of attending a
training program are predicted through a probit model that is provided in Table 2.
The binary treated variable takes a value of 1 in case the individual attended the
training program and 0 otherwise. According to Table 2, the estimated probit model
is valid, being statistically significant with respect to the LR test. Although the
pseudo R2 level is modest (only 17%) we have to accept such limitation because no
additional explanatory variable was available to be included in the model.
The estimated coefficients have the expected sign and are statistically significant.
The dummy variable corresponding to the Construction sector had to be eliminated
so that the balancing property be satisfied. In general, we can conclude that men
working in Industry or Services sectors have less chance to attend training programs
compared to women and individuals working in other economic sectors. Moreover,
chances tend to increase with the number of years of education (as higher educated
persons tend to attend more training programs than low educated individuals).
Similar conclusions can be drawn for urban area individuals as compared to those
living in rural areas. One last finding suggests that young people have higher chances
to attend training programs than those that are 25 and above.
A Kernel matching algorithm was then applied based on the previously estimated
propensity score of each individual. The common support restriction generated a
drop of seven individuals belonging to the treated group and eight individuals from
the control group, summing up to a total of 377 respondents remaining in the
analysis.
An ordered logit model was then estimated to quantify the impact of vocational
training on earnings. Using the backward approach, we built an ordered logit model
based on the following explanatory variables: the respondent’s age, gender, educa-
tion level, residence area and economic activity sector. The dummy variable
(treated) indicating whether the respondents benefited from a training program or
not was also inserted in the estimation in order to check how training influences the
chances of individuals to earn more (meaning to get a boost on the earnings scale,
rising from a lower level to an upper sequential one). Even though new explanatory
variables should be added to assure a better specification, due to data limitation we
were unable to generate any new variable from the initial database. The general
model is therefore presented in Table 3.
The estimated model is statistically significant, as confirmed by Likelihood Ratio
test (LR test) and the level of pseudo R2 of 38.2%. Although it is desirable to get a
value closer 1, the rather low level of the pseudo R2 is not surprising, since binary
models are expected, to certain extent, to have modest values for the pseudo R2.
In order to interpret the results obtained from the ordered logit model, we must
bear in mind that since this is not a linear regression model, the interpretation of the
Table 3 The output of net Covariates Coefficients

earnings ordered logit model
Treated 2.88 (0.89)
Age 18–24 0.42 (0.18)
Medium level of education 0.25 (0.13)
Low education level 0.31 (0.11)
Urban 2.50 (0.85)
Male 1.93 (0.56)
Industry sector 48.80 (19.34)
Services sector 102.08 (58.94)
Construction sector 102.23 (48.19)
Pseudo R2 0.3821
Observations 377.0
Note: Standard errors are in parentheses. p < 0.01, p < 0.05,
p < 0.10
coefficients requires a distinct approach, based on the odds ratio determined out of
the exponential model. The general findings yielded from the binary model confirm
the fact that less educated people have lower chances to benefit from an increase in
earnings as compared to highly educated ones. Moreover, age plays an important
role in stimulating an increase in net earnings. More precisely, the likelihood of an
increase in net earnings for young people aged between 18 and 24 years old is 58%
smaller as compared to persons that are over 25 years old.
Regarding the economic activity sector, the econometric results suggest that those
working in Constructions, Services or Industry have higher chances to get an
increase in earnings as compared to other activity sectors. As expected, out of the
three activity sectors considered in the analysis, people working in Constructions
and in the Services sector (very close to it, based on the odd ratios) have the highest
chances of getting an increase in income as compared to other economic activity
sectors.
Less surprising is also the fact that people living in urban areas have 2.5 more
chances to benefit from an increase in income as compared to those living in rural
areas and that males are expected to earn 1.93 times more than females, keeping all
other variables constant. Regarding the impact of vocational training upon earnings,
the results suggest that the likelihood of an increase in earnings is 2.9 times higher
for those who attended a training program than for those who did not.
The findings of the present empirical study encourage us to argue in favor of
vocational training and to confirm the research hypothesis that vocational training
does generate a post program increase in training beneficiaries’ net earnings in
Romania. The main findings of the counterfactual scenario approach are consistent
with the international literature in the field, arguing in favor of a positive return on
training, as higher earnings are to be expected after attending training programs.
To conclude, if we were to build up a general profile of the respondents who are
expected to earn more based on the current binary model, then it will be mostly
described as high educated men, that are over 25 years old, living in urban areas and
working in Constructions or in the Services sector. Moreover, additional chances to
benefit from an increase in earnings rise in favor of those who attended a training
program, as compared to those who did not participated in such programs.
5 Conclusions
Vocational training has become one of the most popular active labor market policies,
and more and more studies have focused on evaluating its impact on the labor
market, mainly its effect on employability. Recently, significant concerns are also
raised on the financial benefits of training. This paper is therefore focused on the
direct effects of vocational training upon earnings, and brings empirical evidence for
the case of Romania in favor of the human capital theory.
In order to determine whether vocational training generates an increase in earn-
ings, a quantitative analysis was conducted and econometric tools were applied on
both a treatment and a control group. Since official databases could not provide
specific wage information at individual level, survey micro-datasets were used in the
analysis.
The main findings suggest a positive return on training, as higher earnings are to
be expected after attending training programs. In general, the results are consistent
with the international literature in the field, arguing that vocational training should
indeed lead to a positive return on training investment, as higher earnings are to be
expected after attending training programs.
Based on the main econometric results of the paper regarding the impact of
trainings on earnings, we can conclude that chances of benefitting from an increase
in earnings rise in favor of those who attend a training program, that are high
educated men, over 25 years old, living in urban areas and working in Constructions
or in the Services sector.
While the present study has supplied much useful information on the impact of
vocational trainings on earnings, it has several limitations that must be acknowl-
edged. One refers to the small number of variables used in the analysis, and another
to the fact that the net earnings were collected as a categorical variable with rather
few available categories which restricted the impact evaluation analysis. Therefore,
our model has a limited power to estimate the chances of an individual to increase the
net earnings. While it will estimate the chances of switching from a lower level on
the earnings scale to an upper one, it will not be able to estimate the actual difference
in net income resulted from attending a training program. Further investigation is
therefore required to bring new and more consolidated proofs of the financial
benefits of training on the labor market in transition countries, such as Romania.
Acknowledgements The authors would like to thank the Romanian National Scientific Research
Institute for Labor and Social Protection (INCSMPS) for providing access to the micro-survey
database. The authors would also like to thank Webster University Thailand for financially
supporting this research.
References
Arulampalam, W., Booth, A. L., & Bryan, M. L. (2004). Are there asymmetries in the effects of
training on the conditional male wage distribution? (IZA Discussion Paper, No. 984).
Bartel, A. P. (1995). Training, wage growth, and job performance: Evidence from a company
database. Journal of Labor Economics, 13, 401–425.
Becker, G. (1964). Human capital (2nd ed.). New York: Columbia University Press.
Budria, S., & Pereira, P. T. (2004). On the returns to training in Portugal (IZA Discussion Paper
No. 1429).
Greenberg, D. H., Michalopoulos, C., & Robins, P. K. (2003). A meta-analysis of government-
sponsored training programs. Industrial and Labor Relations Review, 57, 31–53.
Heng, A. B., Cheolsung, P., Haoming, L., Thangavelu, S. M., & Wong, J. (2007). The impact of
structured training on workers’ employability and productivity (SCAPE Working Paper Series,
Paper No. 2007/02).
Mincer, J. (1958). Investment in human capital and personal income distribution. Journal of
Political Economy, LXVI(4), 281–302.
Muehler, G., Beckmann, M., & Schauenberg, B. (2007). The returns to continuous training in
Germany: New evidence from propensity score matching estimators. Review of Managerial
Science, 1(3), 209–235.
Pirciog, S., Ciuca, V., & Popescu, M. E. (2015). The net impact of training measures from active
labor market programs in Romania – Subjective and objective evaluation. Procedia Economics
and Finance, 26, 339–344.
Popescu, M. E., & Roman, M. (2018). Vocational training and employability: Evaluation evidence
from Romania. Evaluation and Program Planning, 67, 38–46.
Regner, H. (2002). The effects of on-the-job training on wages in Sweden. International Journal of
Manpower, 23, 326–344.
Rodriguez-Planas, N., & Benus, J. (2006). Evaluating active labor market programs in Romania
(IZA Discussion Paper Series, No. 2464).
Roman, M., & Popescu, M. E. (2015). The effects of training on Romanian migrants’ income: A
propensity score matching approach. Economic Computation and Economic Cybernetics Stud-
ies and Research, 43(1), 85–108.
The Nexus Between Economic Development
and Environmental Pollution: The Case
of Lithuania
Lina Sineviciene, Aura Draksaite, Violeta Naraskeviciute,

and Oleksandr Kubatko
Abstract The aim of this research is to assess a link between economic develop-
ment and environmental pollution in the case of Lithuania. The research methods
used in this research are as follows: systemic, logical and comparative analysis of
literature, and statistical methods: descriptive statistics analysis, correlation analysis.
Empirical analysis of this study focuses on the data of Lithuanian counties. The
study covers 2000–2015 years using annual data. The cross-sectional data of Lith-
uanian counties showed that the pollution is higher in the higher GDP per capita
counties. However, annual data analysis showed that there is a positive tendency in
the sustainable development of the counties as there is the evidence that a strong
negative correlation between the pollution and economic development exists in the
majority of Lithuanian counties. It means that the decrease of pollution is related to
the growth of economic development or vice versa.
Keywords Economic development · Sustainability · Environmental pollution ·

Lithuania
1 Introduction
Energy intensive economies face growing environmental pollution problems if the

energy efficiency does not increase with growing economic development as societies
consume more energy resources what increases environmental pollution. Economic
development of countries highlights new issues for scientist and policy-makers as it
is important to ensure economic growth avoiding the increment of environmental
pollution. The relationship between economic development and environmental
pollution has been a focus of research by economists for many years. According to
L. Sineviciene (*) · A. Draksaite · V. Naraskeviciute

School of Economics and Business, Kaunas University of Technology, Kaunas, Lithuania
e-mail: lina.sineviciene@ktu.lt; aura.draksaite@ktu.lt; violeta.naraskeviciute@ktu.lt
O. Kubatko
Department of Economics and Business Administration, Sumy State University, Sumy, Ukraine

14 L. Sineviciene et al.
Yevdokimov et al. (2011), there are two basic competing views explaining this
relationship: the first one states that economic growth is harmful to the environment
due to ineffective use of resources while the second one states that technological
progress and economic growth improve environmental quality due to technological
innovations. Chandran and Tang (2013) argue that energy consumption and eco-
nomic development goals, which countries pursue at the expense of the environment
quality, are the most important variables that are associated with environmental
degradation. In the majority of the studies, the energy consumption and economic
development are main indicators used in the analysis of the relationship between
economic growth and pollution. Understanding the main factors of environmental
quality is crucial for the development of green growth policies.
There is an evidence in the scientific literature that there is a link between
economic development and environmental pollution. This evidence is proved by
Cialani (2007) who has found a positive linear relationship between CO2 emissions
and GDP per capita in the case of Italy over the period 1861–2002. Akbostanci et al.
(2008) argue that there is a monotonically increasing relationship between CO2
emissions and per capita income in the case of Turkey over the period of
1968–2003. De Groot et al. (2002) in the case of China over the period
1982–1997 has found a linear relationship between income and pollution: an
increase in per capita income is associated with a decline in pollution. Lacheheb
et al. (2015) also argue that there is a relationship between income and population.
Luo et al. (2014) presents the results on the relationship between air pollutants
and economic development of the provincial capital cities in China. The analysis of
the relationship between air pollutants and the three major industries (the primary,
secondary and tertiary industries) shows the declining trend of the pollutant concen-
trations with the improvement of energy efficiency and implementation of environ-
mental protection policies.
Many studies show the interconnections between processes and factors of eco-
nomic growth and environmental pollution. These research results are based on
studies conducted in the case of many countries and regions and in different periods
(Soytas and Sari 2003; Lee 2006; Lee and Chien 2010; Haggar 2012; Shahbaz et al.
2013; Hwang and Yoo 2014; Zeng et al. 2014; Erol and Yu 1998; Narayan and
Smyth 2008; Bowden and Payne 2009; Ozcan 2013; Wesseh and Zoumara 2012).
However, the contradiction of research results makes it difficult to formulate precise
guidelines for the implementation of an effective sustainable energy policy in certain
areas and countries. There are many studies concerning the relationship between
economic development and environmental pollution. The results differ depending on
the study sample, i.e. the countries used in the research development level and the
period chosen.
Despite single studies of regional problems, there is a lack of studies analyzing
regional problems, or local level problems. The understanding of the relationship
between economic development and environmental pollution in regions or at a local
level becomes of particular importance in order to apply environmental pollution
decrement tools effectively. The aim of the study is to assess a link between
The Nexus Between Economic Development and Environmental Pollution: The. . . 15
economic development and environmental pollution in the case of Lithuania. The

research object: a link between economic development and environmental pollution.
2 Research Methodology
The link between economic development and environmental pollution in the case of
Lithuania is investigated in this chapter. The research methods used in this research:
systemic, logical and comparative analysis of literature, and statistical methods:
descriptive statistics analysis, correlation analysis (Spearman’s rho correlation).
Lithuanian counties annual data ranging from 2000 to 2015 are used in the empirical
analysis.
The cross-sectional data technique using arithmetic averages is applied. The
source of the data is the database of the Lithuanian department of statistics. The
indicator of air emissions from stationary sources is chosen to represent the pollu-
tion. In order to make comparisons better, air emissions from stationary sources
indicator is expressed in ton, per capita and square kilometer. Economic develop-
ment is represented by real GDP per person indicator.
3 Findings
According to the European Commission (2010), in the Europe 2020 Strategy, it is

argued that the transition towards a green, low carbon and resource efficient econ-
omy in achieving smart, sustainable and inclusive growth is very important. The
inefficient use of resources, the unsustainable pressure on the environment, and
climate change, as well as social exclusion and inequalities, pose challenges to
long-term sustainable economic growth (European Commission 2014). Therefore,
the transition to a green economy depends on the natural and human resources of
each state and on the level of economic development. Strategic priorities and
principles of sustainable development of Lithuania are set out in the national
legislation taking into account the national interests and peculiarities of Lithuania,
the provisions of the EU Sustainable Development Strategy and other program
documents. The analysis of Lithuanian changes in pollution and real GDP per capita
has shown that there is a tendency that the pollution has decreased while the real
GDP increased during the period of 2000–2015 (see Fig. 1). However, the decrease
in pollution per capita is not sustainable. The sharp decline in pollution was observed
during the years of the economic crisis from 2007 until 2009. However, the
economic recovery caused the increase of pollution, and the sharp increment of
the pollution is observed in the last year of the analysis.
In order to better understand the situation of Lithuania, all data of Lithuania and
Lithuanian counties were investigated. The descriptive statistics of Lithuanian all
sample data and Lithuanian counties data (see Tables 1 and 2) shows that large
30
25
20
15
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Pollution per capita, kg RGDP per person, th EUR
Fig. 1 The tendencies of pollution and real GDP per capita in Lithuania. Source: compiled by the
authors, Data source: the Lithuanian Department of Statistics (2017)
Table 1 Descriptive statistics of Lithuania all sample data

Std.
Indicators N Range MIN MAX Mean Dev.
Pollution, ton 16 41,767.80 56,513.70 98,281.50 76,472.44 13,865.6
Pollution per 16 9.00 19.00 28.00 23.69 2.8
capita, kg
Pollution per 16 639.00 866.00 1505.00 1171.06 212.3
km2, kg
RGDP per per- 16 4.93065 5.81040 10.74105 8.111 1.9
son, thousands
EUR
Source: authors’ calculations, Data source: the Lithuanian Department of Statistics (2017)
differences exist between the Lithuanian counties economic development and the
pollution indicators. The results of descriptive statistics, i.e. standard deviation,
using all sample data shows that there is a high variability in the data. High
differences between pollution indicators and real GDP per capita comparing Lithu-
anian counties’ data also exist.
The results of descriptive statistics of Lithuanian counties show that the highest
economic development is in the largest counties of Lithuania with the largest cities,
however, the pollution (per capita) is not the highest in all these counties. The
exception is the capital of Lithuania (Vilnius) where the high value-added service
sector is well developed. In the case of Vilnius county, the indicator of pollution per
capita is only in the seventh position if compared with other counties (according to
the indicator of pollution per km2 is in the fourth place due to the high density of
population). The lower pollution (per capita and per square km) is in the lower
economic development counties as the population is smaller and industry sector is
weaker developed but with exception of Telsiai county, which indicators of pollution
Table 2 Descriptive statistics of Lithuanian counties data

Std.
Alytus
Pollution, ton 16 1299.30 1211.40 2510.70 1657.29 416.8
Pollution per 16 7.00 7.00 14.00 9.69 2.0
capita, kg
Pollution per km2, 16 240.00 223.00 463.00 305.62 76.9
kg
RGDP per person, 16 2.68716 4.22374 6.91091 5.47 1.0
thousands EUR
Kaunas
Pollution, ton 16 8470.40 10,104.90 18,575.30 13,267.39 2689.5
Pollution per 16 10.00 16.00 26.00 20.25 3.0
capita, kg
Pollution per km2, 16 1025.00 1249.00 2274.00 1639.69 330.3
kg
RGDP per person, 16 5.52865 5.04587 10.57452 7.76 2.0
thousands EUR
Klaipeda
Pollution, ton 16 11,087.70 3484.70 14,572.40 8926.72 3912.7
Pollution per 16 27.00 11.00 38.00 24.56 9.4
capita, kg
Pollution per km2, 16 2131.00 667.00 2798.00 1700.88 745.0
kg
RGDP per person, 16 5.14062 5.96107 11.10169 8.59 2.1
thousands EUR
Marijampole
Pollution, ton 16 605.20 1633.30 2238.50 1878.22 151.2
Pollution per 16 5.00 9.00 14.00 11.06 1.4
capita, kg
Pollution per km2, 16 136.00 366.00 502.00 420.88 33.9
kg
RGDP per person, 16 3.19559 3.49933 6.69492 5.08 1.2
thousands EUR
Panevezys
Pollution, ton 16 2554.10 2625.60 5179.70 3501.06 699.0
Pollution per 16 7.00 10.00 17.00 13.12 2.1
capita, kg
Pollution per km2, 16 324.00 333.00 657.00 444.19 88.7
kg
RGDP per person, 16 3.33208 4.74453 8.07660 6.21 1.2
thousands EUR
Siauliai
Pollution, ton 16 3411.10 4837.80 8248.90 6386.66 987.3
Pollution per 16 13.00 15.00 28.00 19.75 4.0
capita, kg
(continued)
Table 2 (continued)
Std.
Pollution per km2, 16 400.00 566.00 966.00 746.88 116.1
kg
RGDP per person, 16 3.82106 4.17227 7.99334 6.01 1.4
thousands EUR
Taurage
Pollution, ton 16 1251.40 567.90 1819.30 1175.06 473.2
Pollution per 16 9.00 6.00 15.00 9.69 3.2
capita, kg
Pollution per km2, 16 283.00 129.00 412.00 269.00 108.9
kg
RGDP per person, 16 3.16862 2.82638 5.99500 4.26 1.3
thousands EUR
Telsiai
Pollution, ton 16 15,451.90 21,416.10 36,868.00 29,233.51 4501.1
Pollution per 16 59.00 148.00 207.00 178.88 17.3
capita, kg
Pollution per km2, 16 3551.00 4924.00 8475.00 6742.56 1043.2
kg
RGDP per person, 16 3.72584 4.57604 8.30189 6.58 1.4
thousands EUR
Utena
Pollution, ton 16 983.80 1359.10 2342.90 1767.27 315.6
Pollution per 16 7.00 7.00 14.00 10.75 2.1
capita, kg
Pollution per km2, 16 136.00 189.00 325.00 245.38 43.8
kg
RGDP per person, 16 2.47185 4.84522 7.31707 6.13 0.9
thousands EUR
Vilnius
Pollution, ton 16 7700.90 5196.70 12,897.60 8679.26 2514.2
Pollution per 16 9.00 6.00 15.00 10.38 2.9
capita, kg
Pollution per km2, 16 803.00 534.00 1337.00 892.19 258.9
kg
RGDP per person, 16 7.00767 8.56269 15.57036 11.97 2.5
thousands EUR
Source: authors’ calculations, Data source: the Lithuanian Department of Statistics (2017)
are the highest compared with other counties. The most problematic county is
Marijampole where real GDP per person is the lowest but pollution indicators are
rated on average.
Results of Spearman’s correlations (see Table 3) using cross-sectional data show
that a strong negative relationship between economic development and pollution
Table 3 Results of Spearman’s correlations (all sample data)

Pollution, Pollution per Pollution per RGDP per person,
Indicators ton capita, kg km2, kg thousands EUR
Pollution, ton 1.000 0.964 0.999 0.885
Pollution per capita, kg 0.964 1.000 0.960 0.794
Pollution per km2, kg 0.999 0.960 1.000 0.892
RGDP per person, 0.885 0.794 0.892 1.000
thousands EUR
Source: authors’ calculations
Notes: . Correlation is significant at the 0.01 level (2-tailed); Correlation is significant at the 0.05
level (2-tailed)
exists in the case of Lithuania. This means that pollution is lower in the counties in
which real GDP per capita is higher on the average.
The Spearman’s correlations results (see Table 4) using the separate data of
Lithuanian counties show that only in six cases from ten a statistically significant
negative correlation between the economic development and pollution is assessed.
The results show that there is a tendency that pollution decrease is associated with
the increment of economic development and vice versa but, in the majority of cases,
only in higher economic development counties. The negative correlation between
economic development and pollution indicators indicate that the counties are sus-
tainably developing.
The correlations results (see Table 4) show that, in the two cases, i.e. Marijampole
and Siauliai counties, a statistically significant positive relationship between pollu-
tion and real GDP per capita is found. This means that the development of these
counties is not sustainable. The attention should be paid to the data of these counties
(see Table 2). If to range analyzed data, real GDP per person is in the lowest position
compared with other counties but pollution indicators are rated on average in the
case of Marijampole. Siauliai is relatively clean county but the problem arise due to
low economic development of this county and the increment of the development in
the expense of the environment. High levels of emigration, high unemployment, a
decline in the working-age population, which do not lead the new investment,
hinders the economic development of these regions. The obtained results indicate
that Lithuania can face challenges of sustainable development in the future due to
unequal development of the lower development counties as the uneven development
was observed in these counties during the past decade. The high emigration from
these counties deepens the problems of sustainable development and may be a great
challenge for policy-makers to stabilize the situation in the future.
Table 4 Results of Spearman’s correlations (Lithuanian counties data)

Alytus
Pollution, ton 1.000 0.861 0.999 0.497
RGDP per person, 0.497 0.071 0.496 1.000
thousands EUR
Kaunas
Pollution, ton 1.000 0.928 1.000 0.818
RGDP per person, 0.818 0.704 0.818 1.000
thousands EUR
Klaipeda
Pollution, ton 1.000 0.993 1.000 0.953
RGDP per person, 0.953 0.949 0.953 1.000
thousands EUR
Marijampole
Pollution, ton 1.000 0.804 0.999 0.162
RGDP per person, 0.162 0.668 0.171 1.000
thousands EUR
Panevezys
Pollution, ton 1.000 0.882 1.000 0.488
RGDP per person, 0.488 0.091 0.488 1.000
thousands EUR
Siauliai
Pollution, ton 1.000 0.827 0.999 0.135
RGDP per person, 0.135 0.567 0.138 1.000
thousands EUR
Taurage
Pollution, ton 1.000 0.975 0.990 0.788
RGDP per person, 0.788 0.739 0.792 1.000
thousands EUR
(continued)
Table 4 (continued)
Telsiai
Pollution, ton 1.000 0.856 0.991 0.724
RGDP per person, 0.724 0.365 0.735 1.000
thousands EUR
Utena
Pollution, ton 1.000 0.810 0.999 0.482
RGDP per person, 0.482 0.024 0.462 1.000
thousands EUR
Vilnius
Pollution, ton 1.000 0.983 1.000 0.824
RGDP per person, 0.824 0.829 0.824 1.000
thousands EUR
Source: authors’ calculations
Notes: Correlation is significant at the 0.01 level (2-tailed); Correlation is significant at the 0.05
level (2-tailed)
4 Conclusion
Strategic priorities and principles of sustainable development of Lithuania are set out
in the national legislation taking into account the national interests and peculiarities
of Lithuania, the provisions of the European Union Sustainable Development
Strategy and other program documents. The analysis of Lithuanian changes in
pollution and real GDP per capita growth has shown that there is a tendency that
the pollution has decreased while the real GDP increased during the period of
2000–2015. However, the decrease in pollution per capita is not even and sustain-
able and depends on the economic conditions.
The research results have proved that there is a link between the pollution and
economic development. The cross-sectional data of Lithuanian counties showed that
the pollution is higher in the higher GDP per capita counties but not in all cases.
However, annual data showed that there is a positive tendency in the sustainable
development of the counties as there is the evidence that a strong negative correla-
tion between the pollution and economic development exists in the majority of
Lithuanian counties. It means that the decrease of pollution is related to the growth
of economic development or vice versa. However, the results show that not all
counties develop equally and sustainably.
Acknowledgement This research was funded by a grant (No. TAP LU-4-2016) from the Research
Council of Lithuania.
References
Akbostanci, E., Turut-Asik, S., & Tunc, G. I. (2008). The relationship between income and
environment in Turkey: Is there an environmental Kuznets curve? Energy Policy, 37(3),
861–867.
Bowden, N., & Payne, J. E. (2009). The causal relationship between US energy consumption and
real output: A disaggregated analysis. Policy Model, 31, 180–188.
Chandran, V. G. R., & Tang, C. F. (2013). The impacts of transport energy consumption, foreign
direct investment and income on CO2 emissions in ASEAN-5 economies. Renewable and
Sustainable Energy Reviews, 24, 445–453.
Cialani, C. (2007). Economic growth and environmental quality: An econometric and a decompo-
sition analysis. Management of Environmental Quality: An International Journal, 18(5),
568–577.
De Groot, H., Withagen, C., & Minliang, Z., (2002). Dynamics of China’s regional development
and pollution (Tinbergen Institute Discussion Paper, TI 2001–036–3).
Erol, U., & Yu, E. S. H. (1998). On the causal relationship between energy and income for
industrialized countries. Energy Development, 13, 113–122.
European Commission. (2014). Communication from the Commission to the European Parliament,
the Council, the European Economic and Social Committee and the Committee of the Regions
Green Employment Initiative: Tapping into the job creation potential of the green economy/
COM/2014/0446 final /, [online]. Accessed January 10, 2018, from https://eur-lex.europa.eu/
legal-content/EN/TXT/?uri¼CELEX:52014DC0446
European Commission. (2010). EUROPE 2020: A strategy for smart, sustainable and inclusive
growth/ COM/2010/2020 final / [online]. Accessed January 10, 2018, from http://eur-lex.
europa.eu/legal-content/LT/TXT/?uri¼CELEX%3A52014DC0446
Haggar, M. H. (2012). Greenhouse gas emissions, energy consumption and economic growth: A
panel cointegration analysis from Canadian industrial sector perspective. Energy Economics,
34, 358–364.
Hwang, Y. H., & Yoo, S. H. (2014). Energy consumption, CO2 emissions, and economic growth:
Evidence from Indonesia. Quality & Quantity, 48, 63–73.
Lacheheb, M., Rahim, A. S. A., & Sirag, A. (2015). Economic growth and carbon dioxide
emissions: Investigating the environmental Kuznets curve hypothesis in Algeria. International
Journal of Energy Economics and Policy, 5(4), 1125–1132.
Lee, C. (2006). The causality relationship between energy consumption and GDP in G-11 countries
revisited. Energy Policy, 34, 1086–1093.
Lee, C., & Chien, M. (2010). Dynamic modelling of energy consumption, capital stock, and real
income in G-7 countries. Energy Economics, 32, 564–581.
Luo, Y., Chen, H., Zhu, Q., Peng, C., Yang, G., Yang, Y., & Zhang, Y. (2014). Relationship
between air pollutants and economic development of the provincial capital cities in China during
the past decade. PLoS One, 9(8), e104013. https://doi.org/10.1371/journal.pone.0104013.
Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 countries, new
evidence from panel cointegration with structural breaks. Energy Economics, 30, 2331–2341.
Ozcan, B. (2013). The nexus between carbon emissions, energy consumption and economic growth
in Middle East countries: A panel data analysis. Energy Policy, 62, 1138–1147.
Shahbaz, M., Khan, S., & Tahir, M. I. (2013). The dynamic links between energy consumption,
economic growth, financial development and trade in China: Fresh evidence from multivariate
framework analysis. Energy Economics, 40, 8–21.
Soytas, U., & Sari, R. (2003). Energy consumption and GDP: Causality relationship in G-7
countries and emerging markets. Energy Economics, 25, 33–37.
The Lithuanian Department of Statistics. (2017). [online]. Accessed October 15, 2017, from https://
osp.stat.gov.lt/statistiniu-rodikliu-analize#/
Wesseh, P. K., & Zoumara, B. (2012). Causal independence between energy consumption and
economic growth in Liberia: Evidence from a non-parametric bootstrapped causality test.
Energy Policy, 50, 518–527.
Yevdokimov, Y. V., Melnyk, L. G., & Kubatko, O. V. (2011). The environmental Kuznets curve
and regional convergence in Ukraine. International Journal of Ecological Economics & Statis-
tics, 22, 72–86.
Zeng, L., Xu, M., Liang, S., Zeng, S., & Zhang, T. (2014). Revisiting drivers of energy intensity in
China during 1997–2007: A structural decomposition analysis. Energy Policy, 67, 640–647.
The Impact of Changes in Time to Maturity
on the Risk of Geometric Options
Ewa Dziawgo
Abstract Asian geometric options are path-dependent exotic options whose pay-off
function is based on the geometric average price of the underlying instrument in the
past (in a fixed period, leading up to the expiration date). This paper presents the
issues connected with the geometric option: the instrument’s structure, types options,
pay-off function, the pricing model, the effect of time to maturity and the price of
underlying instrument on the option price and the value coefficients: delta, gamma,
vega, theta, rho. These coefficients are the sensitivity measures. The sensitivity
measures are important in managing the options risk. They indicate the influence
the change in the option price for a change in the value of a risk factor. The objective
of this paper is to present the effect of time to maturity on the price and the values of
the risk measures (coefficients: delta, gamma, vega, theta, rho). The empirical
illustrations included in the paper are presented based on a simulation of valuations
of currency geometric call options (on the EUR/USD).
Keywords Financial instruments · Risk management · Measures of risk
1 Introduction
The increase of the risk of running a business influences the growth of demand for
new financial instruments and methods that would allow more effective management
of risk. The option offers the buyer the right, but not obligation, to buy (call option)
or sell (put option) an underlying instrument at the agreed price in the option exercise
time. Options, due of the asymmetry of the rights and obligations of the transaction
parties, are a very attractive instrument of risk management. The exotic options are
characterized by the income structure different from structure of standard options
(Ong 1996; Nelken 2000; Zhang 2001; Dziawgo 2013; Musiela and Rutkowski
E. Dziawgo (*)
Faculty of Administration and Social Sciences, Kazimierz Wielki University, Bydgoszcz,
Poland
e-mail: edziawgo@ukw.edu.pl

26 E. Dziawgo
1997; Garman and Kohlhagen 1983). Asian geometric options are path-dependent
exotic options. These options give the holder a pay-off that depends on the geometric
average price of the underlying instrument over some prescribed period.
The objective of the article is analysis the impact of the time to the option expiry
date on the formation of the price geometric call option and value of the risk
measures. In the case of options, it is very important to analyze sensitivity measures.
They are the measures and they define the influence of changes in the risk factor on
the price of an option. The measures of options risk include the following coeffi-
cients: delta, gamma, theta, vega and rho (Hull 2005; Dziawgo 2010).
2 Price of the Geometric Call Options
If on the expiry date the average price of the underlying instrument is higher than the
strike price than the call geometric option is realized. In this case the option is
in-the-money. However, if on the expiry date the average price of the underlying
instrument is lower than the strike price than the call option is out-of-the-money. In
this situation the value of the pay function for this option amounts to zero.
At the expiration date the pay-off function for the geometric call option is the
following form (Zhang 2001; Dziawgo 2013):

W c ¼ max S^T K; 0 ð1Þ
Wc—the pay-off function of the geometric call option,

K—the option’s strike price,
S^T —the geometric average price of the underlying instrument over period [0; T],
T—time to maturity.
The pricing model of the geometric call option is in the form (Vorst 1992):
2

rτþσ6
C ¼ St e0,5 e0,5qτ N ðd1 Þ Kerτ N ðd2 Þ ð2Þ
C—the price of the geometric call option,

St—the price of the underlying instrument in the time t, t 2 [0; T],
N(d )—cumulative probability function for a standard normal variable distribution,
rffiffiffi
1 ln SKt þ 0,5τðr q 0; 5σ 2 Þ
d1 ¼ d2 þ σ , d2 ¼ pffiffi ,
3 σ 3τ
r—the domestic interest rate,

σ—the price volatility of the underlying instrument,
q—the foreign interest rate, and other designations are the same as in the formula (1).
The Impact of Changes in Time to Maturity on the Risk of Geometric Options 27
0.04
0.035
0.03
0.025
0.02
0.015
0.01
0.005
0
02.01
05.01
10.01
15.01
18.01
23.01
26.01
31.01
05.02
08.02
13.02
16.02
21.02
26.02
01.03
06.03
09.03
14.03
19.03
geometric option standard option
Fig. 1 Changes in the price of geometric and standard call options. Source: elaborated by the
author based on own calculations
Table 1 The impact of the price of the underlying instrument and the time to maturity on the
shaping of the price of geometric call options
The price
option
[USD]
The price option Time to The price option
[USD] maturity [USD]
The price of the underlying Time to maturity T¼6 Time to maturity
instrument [USD] T ¼ 3 [month] [month] T ¼ 9 [month]
1.19 0.0004 0.0005 0.0042
1.21 0.0031 0.0048 0.0079
1.22 0.0045 0.0063 0.0102
1.23 0.0055 0.0109 0.0165
1.24 0.0161 0.0179 0.0267
1.25 0.0205 0.0273 0.0329
1.26 0.0312 0.0396 0.0494
Source: elaborated by the author based on own calculations
The considerations are focused on the impact of the price of the underlying
instrument and the time to maturity on the price of geometric and standard call
options. These options are on EUR/USD. The strike price is 1.23 USD. The maturity
time is 4 months. The simulation was carried out for the period: 02 January,
2018–19 March, 2018. Figure 1 shows the shaping of the price of geometric and
standard options.
Table 1 presents the impact of the price of the underlying instrument and the time
to maturity on the shaping of the price analyzed options.
During the analyzed period the call options were out-of-the-money on the
following dates: 02 January 2018–23 January 2018, 08 February 2018–12 February
2018, 22 February 2018, 28 February 2018–02 March 2018, 19 March 2018. In the
28 E. Dziawgo
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
02.01
05.01
10.01
15.01
18.01
23.01
26.01
31.01
05.02
08.02
13.02
16.02
21.02
26.02
01.03
06.03
09.03
14.03
19.03
Fig. 2 Changes in the delta coefficient of geometric and standard call options. Source: elaborated
by the author based on own calculations
other periods the options were in-the-money. The following properties of the
geometric call option result from the analysis of the shaping of the price:
• the standard options are much more expensive than the geometric options,
• the increase/decrease in the price of the underlying instrument influences the
growth/decline in the price of the option,
• the option with a longer expiration date is more expensive.
3 Delta Coefficient of the Geometric Call Options
The delta coefficient is one of the most important risk measures of the option’s price.
This coefficient shows how much the option’s price will change when the price of
the underlying instrument changes by a unit (Dziawgo 2003; Hull 2005; Wilmott
1998). Figure 2 illustrates the changes in the delta coefficient of the geometric and
standard call options.
Table 2 demonstrates the impact of the price of the underlying instrument and
time to maturity on the shaping of the price discussed options.
In the case of the analyzed options, the values of the delta coefficient fluctuate
significantly in time. The delta coefficient of call options takes positive values,
which mean that the increase/decrease in the price of the underlying instrument
influences the rise/fall in the price of option. The values of the delta coefficient for
the call geometric options and standard options belong to the interval [0; 1]. If the
option has a greater value of the delta coefficient, then the growth sensitivity of the
price of the option to changes in the price of the underlying instrument can be
shaping of the delta coefficient of geometric call options
Delta of option Delta of option Delta of option
Time to Time to Time to
The price of the underlying instrument maturity maturity maturity
[USD] T ¼ 3 [month] T ¼ 6 [month] T ¼ 9 [month]
1.19 0.0331 0.1028 0.1983
1.21 0.1897 0.2769 0.3517
1.22 0.3401 0.3984 0.4404
1.23 0.5170 0.5220 0.5235
1.24 0.6927 0.6456 0.6114
1.25 0.8303 0.7534 0.6886
1.26 0.9592 0.8954 0.8117
observed. If the case of the out-of-the-money and at-the-money (when the price
option amounts to the strike price) call options:
• the values of the standard options coefficient are higher than the delta coefficient
of the geometric options,
• the option with the longer expiration date is characterized by a greater value of the
delta coefficient.
If the call options are in-the-money, and then:
• the values of the standard options coefficient are lower than the delta coefficient
of the geometric options,
• the option with the shorter expiration date have the greater value of the delta
coefficient.
The increase/decrease in the price of the underlying instrument contributes to the
growth/decline in the value of the delta coefficient of the call options. When
the options are deep-in-the-money, the values of the delta coefficient are close
to 1. If the options are deep-out-of-the-money, the value of the delta coefficient
decreases to 0.
4 Gamma Coefficient of the Geometric Call Options
Another measure of risk of the options price is the gamma coefficient. It shows by
how much the delta coefficient will change, when the value of the of the price of the
underlying instrument changes by one unit. Figure 3 shows the shaping of the
gamma coefficient of discussed geometric and standard call options. Table 3 pre-
sents the impact of the price of the underlying instrument and the time to maturity on
the forming of the gamma coefficient geometric options.
30 E. Dziawgo
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
02.01
05.01
10.01
15.01
18.01
23.01
26.01
31.01
05.02
08.02
13.02
16.02
21.02
26.02
01.03
06.03
09.03
14.03
19.03
Fig. 3 Changes in the gamma coefficient of geometric and standard call options. Source: elabo-
rated by the author based on own calculations
shaping of the gamma coefficient of the geometric call options
Gamma of Gamma of Gamma of
option option option
1.19 0.0351 0.0608 0.0658
1.21 0.1278 0.1113 0.0854
1.22 0.1719 0.1265 0.0891
1.23 0.1844 0.1284 0.0880
1.24 0.1587 0.1167 0.0822
1.25 0.1102 0.0953 0.0728
1.26 0.0284 0.0465 0.0489
The values of the gamma coefficient of the call options are positive. Then the
increase/decrease in the price of the underlying instrument affects the growth/decline
in the value of the delta coefficient. The highest value of the gamma coefficient is
observed in the option is the at-the-money. Namely, for this type of the option, the
slightest change in the price of the underlying instrument influences in the significant
change of the delta coefficient. In the case of the increase/decrease in the price of the
underlying instrument in relation to the strike price, the gamma coefficient decreases.
If the option is deep-in-the-money and deep-out-of-the-money the value of
gamma coefficient of standard option is greater than the value of gamma of geomet-
ric option. In other cases, the gamma coefficient of the geometric option is greater
than gamma coefficient of the standard option. If the options are deep-in-the-money
0.003
0.0025
0.002
0.0015
0.001
0.0005
0
02.01
04.01
08.01
10.01
12.01
16.01
18.01
22.01
24.01
26.01
30.01
01.02
05.02
07.02
09.02
13.02
15.02
19.02
21.02
23.02
27.02
01.03
05.03
07.03
09.03
13.03
15.03
19.03
Fig. 4 Changes in the vega coefficient of geometric and standard call options. Source: elaborated
and deep-out-of-the-money, the gamma coefficient of the option with the longer
expiration date has a higher value. In the other cases the increase/decrease in the time
to maturity influences the fall/rise in the value of gamma coefficient of the option.
5 Vega Coefficient of the Geometric Call Options
The vega coefficient indicates by how much the option price will change when the
volatility of the price of the underlying instrument changes by one unit. Figure 4
illustrates the development of the vega coefficient of the geometric and standard call
options. Table 4 presents the impact of the price of the underlying instrument and the
time to maturity on the shaping of the vega coefficient analyzed geometric options.
The values of the vega coefficient are positive. The increase/decrease in the price
volatility of the underlying instrument impacts the growth/decline of the options
price. The high value of the vega coefficient demonstrates a significant impact of
fluctuations in the price volatility of the underlying instrument on price of the option.
The highest vega value is reached for the at-the-money option. The value of the vega
coefficient is close to zero if the option is deep-in-the-money and deep-out-of-the-
money. The value of vega coefficient of the standard options are greater than the
value of vega coefficient of the geometric option. The option with the longer time to
maturity has the greater value of the vega coefficient.
32 E. Dziawgo
shaping of the vega coefficient of geometric call options
Vega of option Vega of option Vega of option
1.19 0.0002 0.0008 0.0018
1.21 0.0090 0.0016 0.0024
1.22 0.0012 0.0018 0.0026
1.23 0.0014 0.0019 0.0027
1.24 0.0011 0.0017 0.0024
1.25 0.0008 0.0014 0.0021
1.26 0.0001 0.0006 0.0015
02.01
05.01
10.01
15.01
18.01
23.01
26.01
31.01
05.02
08.02
13.02
16.02
21.02
26.02
01.03
06.03
09.03
14.03
19.03
0
-0.005
-0.01
-0.015
-0.02
-0.025
-0.03
-0.035
Fig. 5 Changes in the theta coefficient of geometric and standard call options. Source: elaborated
6 Theta Coefficient of the Geometric Call Options
The theta coefficient is another measure of risk of the option price. This coefficient is
determining the influence of the decrease in time to expiration on the option price.
Figure 5 illustrates the development of the value the theta coefficient of the geomet-
ric and standard call options. However, Table 5 presents the impact of the price of the
underlying instrument and the time to maturity on the shaping of the theta coefficient
for discussed geometric call options.
The values of the theta coefficient are negative. Therefore, the option with the
longer expiration date is more expensive than the option with the shorter expiration
date. If the option has a greater absolute value of the theta coefficient, then the
shaping of the theta coefficient of geometric call options
Theta of option Theta of option Theta of option
1.19 0.0031 0.0056 0.0062
1.21 0.0120 0.0110 0.0088
1.22 0.0170 0.0129 0.0093
1.23 0.0191 0.0137 0.0099
1.24 0.0173 0.0131 0.0092
1.25 0.0133 0.0115 0.0085
1.26 0.0055 0.0062 0.0071
increase sensitivity of the price of the option to changes in the time to maturity can be
observed. The highest absolute value of the theta coefficient occurs when the option
is at-the-money. If the price of underlying instrument increases/decreases in relation
to the strike price, then the absolute value of the theta coefficient decreases. The
absolute value of theta coefficient of the standard options is greater than the value of
theta coefficient of the geometric option. If the option is deep-in-the-money and
deep-out-of-the-money, the absolute value of theta coefficient of the option with the
longer time to maturity is greater than the absolute value of theta coefficient of option
with the shorter time to maturity. In the other cases the increase/decrease in the time
to maturity influences the fall/rise in the absolute value of the theta coefficient.
7 Rho Coefficient of the Geometric Call Options
The rho coefficient indicates by how much an option’s price will change, if the
interest rate of risk–free assets changes by one unit. Figure 6 illustrates the changes
in the rho coefficient of the geometric and standard call options. Table 6 demon-
strates the impact of the price of the underlying instrument and time to maturity on
the shaping of the rho coefficient discussed geometric options.
The values of the rho coefficient are positive. This means that the increase/
decrease in the interest rate of risk-free assets influences the increase/decrease in
the option price. The high value of the rho coefficient indicates a significant impact
of changes in the interest rate of risk-free assets on price of the option. The values of
the rho coefficient of standard option are higher than the rho coefficient of the
geometric options. The increase/decrease in the price of the underlying instrument
impacts the growth/decline in the value of the rho coefficient. The value of the rho
coefficient of the option with the longer expiration date is greater than the value of
the rho coefficient of the option with the shorter expiration date. Then the option
34 E. Dziawgo
0.0035
0.003
0.0025
0.002
0.0015
0.001
0.0005
0
02.01
04.01
08.01
10.01
12.01
16.01
18.01
22.01
24.01
26.01
30.01
01.02
05.02
07.02
09.02
13.02
15.02
19.02
21.02
23.02
27.02
01.03
05.03
07.03
09.03
13.03
15.03
19.03
Fig. 6 Changes in the rho coefficient of geometric and standard call options. Source: elaborated by
the author based on own calculations
shaping of the rho coefficient of geometric call options
Rho of option Rho of option Rho of option
1.19 0.0001 0.0003 0.0011
1.21 0.0002 0.0008 0.0020
1.22 0.0005 0.0011 0.0025
1.23 0.0007 0.0015 0.0030
1.24 0.0010 0.0019 0.0035
1.25 0.0012 0.0022 0.0039
1.26 0.0014 0.0026 0.0046
with the longer expiration date has the greater sensitivity to fluctuations in the
interest rate.
8 Conclusion
Geometric options are cheaper than the standard options. Due to the cost, geometric
options are attractive instrument used in risk management. Strategies formulated on
the basis of options should be resistant to changes in market conditions. Hence, risk
analyses need to be conducted. The values of the risk measures of the geometric
option fluctuate significantly in time. The time to maturity is more important factor
impact on the price geometric option and on the value of the risk measures. The
properties of the geometric option cause that the options used mostly in hedging
transactions.
References
Dziawgo, E. (2003). Modele kontraktów opcyjnych [Models of the options]. Torun: UMK.
Dziawgo, E. (2010). Wprowadzenie do strategii opcyjnych [Introduction to options strategy].
Torun: UMK.
Dziawgo, E. (2013). Miary wrażliwości opcji jednoczynnikowych [Sensitivity measures of
one-factor exotic options]. Warsaw: CeDeWu.
Garman, M. B., & Kohlhagen, S. W. (1983). Foreign currency options value. Journal of Interna-
tional Money and Finance, 2(3), 231–237.
Hull, J. C. (2005). Options, futures and other derivatives. New Jersey: Pearson Prentice Hall.
Musiela, M., & Rutkowski, M. (1997). Martingale methods in financial modelling. Berlin:
Springer.
Nelken, I. (2000). Pricing, hedging and trading exotic options. New York: McGraw-Hill.
Ong, M. (1996). Exotic options: The market and their taxonomy. In I. Nelken (Ed.), The handbook
of exotic options (pp. 3–44). Chicago, IL: IRWIN Professional Publishing.
Vorst, T. (1992). Prices and hedge ratios of average exchange rate options. International Review of
Financial Analysis, 1(3), 179–193.
Wilmott, P. (1998). Derivatives. Chichester: Wiley.
Zhang, P. G. (2001). Exotic options: A guide to second generation options. Singapore: World
Scientific.
Part II
Tourism
A Conceptual Paper of the Smart City
and Smart Community
Normalini M. D. Kassim, Jasmine Ai Leen Yeap, Saravanan Nathan,

Nor Hazlina Hashim, and T. Ramayah
Abstract This chapter aims to provide some insights on the different definitions of
smart city and smart community concepts which is done through a comprehensive
literature review and gap recognition that exists between these terms. Besides this,
the forthcoming issues and threats as a result of infrastructure dependence during
smart city development are addressed, through integration of smart community
elements to provide a comprehensive and balanced view to improve the quality of
life. The implementation of smart city or community is presented through examples
from China, Japan and Malaysia. Conclusion is drawn at the end of the paper that
there is no absolute answer that which concept is preferred than the other while it is
built upon the desired outcomes of the governments and developers within their own
context that suit well for the country’s needs, social-culture, economic, technology
advancement and values.
Keywords Smart community · Smart city · Smart citizen · Smart government
1 Introduction
The use of Information and Communication Technology (ICT) in cities in various

forms for different activities has led to the increased effectiveness of city operations.
These cities have been labelled using many terms such as “smart community” and
“smart city”. However, Albino et al. (2015) clarified that the smart city concept is no
longer limited to the diffusion of ICT, but it looks at people and community needs.
N. M. D. Kassim (*) · J. A. L. Yeap · T. Ramayah

School of Management, Universiti Sains Malaysia, Penang, Malaysia
e-mail: jasmine@usm.my; ramayah@usm.my
S. Nathan
Telekom Malaysia Berhad, Penang, Malaysia
N. H. Hashim
School of Communication, Universiti Sains Malaysia, Penang, Malaysia
e-mail: nhashim@usm.my

40 N. M. D. Kassim et al.
Lazaroiu and Roscia (2012) defined a smart community as a community of

average technology size, interconnected and sustainable, comfortable, attractive
and secure. Smart community can be characterized as a next generation community
in which the management and optimized control of various infrastructures such as
electricity, water, transportation, logistics, medicine, and information are integrated.
Hence, it presented that the definition of smart city and smart community is not
consistent and apparently a universal definition that shares between these terms does
not exist.
Therefore, this chapter aims to present some insights on definitions of smart city
and smart community concepts, whether there are similarities or differences among
these two concepts. This chapter also discuss on the issues and threats as a result of
infrastructure dependence during smart city development are addressed, through
integration of smart community elements to provide a comprehensive and balanced
view to improve the quality of life. Examples of smart city or community imple-
mentation in China, Japan and Malaysia have also been addressed. It is hoped that
this chapter would be able to capture and determine the concept of smart city or
smart community. This would help scholars to further enhance the substantial vari-
ables and framework of smart city/community in the near future.
2 Definition of Smart City vs. Smart Community
The ‘Smart Community’ will provide comprehensive solutions encompassing

energy, water, and medical systems in order to realize a synergetic balance between
environmental considerations and comfortable living. International Telecommuni-
cation Union—Telecommunication Standardization Sector of ITU (ITU-T) (2014)
Focus Group on Smart Sustainable Cities established a concrete definition for smart
sustainable cities, which can be used worldwide. They reviewed 116 definitions of
smart sustainable city from different sources such as academic, government, and
corporate. In their report, smart community and smart city are considered as a same
term. Similarly, Albino et al. (2015) did not differentiate the terms of smart city and
smart community and they treat these two terms with the same meaning. They
clarified the meaning of the word “smart” in the context of cities through an
approach based on an in-depth literature review of relevant studies as well as official
documents of international institutions. However, a smart city initiative needs to
create a community where all citizens can engage more easily and effectively
(Paskaleva 2009). Ishida and Isbister (2000) debated some similar terms such digital
community, smart community, digital city, information city and e-city. Tanabe et al.
(2002) considered all of those alternative terms are used to refer to a connected
community that combines broadband communications infrastructure. The geograph-
ical dimension (space) of smart communities is varied; it can be extended from a city
district up to a multimillion metropolis (van den Besselaar and Koizumi 2005). And
Harrison et al. (2010) agreed that Instrumented, Interconnected and Intelligent were
the three fundamental factors for a smarter city.
A Conceptual Paper of the Smart City and Smart Community 41
Nam and Pardo (2011) in their study attempted to conceptualise smart city with
multi-dimensions stated that there are various definition of smart city and majority of
them are focusing on hardware development by providing infrastructures and ser-
vices such as education, health care, transportation and etc. which congruent with
other existing literature. Whereas Eger (2005) pointed out that the key factors in
succeeding a smart community is all about collaborations and connectivity where
internet, knowledge creation and innovation and the core elements in the commu-
nity. Apparently, these presented the distinctiveness among smart city and smart
community through definition and gap exists between these concepts that require
further clarifications which agreed by researchers as well (Stratigea 2012). And it is
notable to take note as how it is defined will determine the development path.
3 Smart City Threats and Issues
Gurstein (2014) argued that the current trend of developing more and more smart
cities has deviated from its original objectives that attempt to improve the quality of
live. As for now, many smart cities development planning are emphasising on
installing edge cutting technology rather than shifting its attention on educating
innovative citizen and empowering in community development projects. Eger
(2005) agreed that it should not just about technology and ICTs, it should be
concerning jobs, dollars and quality of life. And emphasising not just deploying
technology as it is but to understand how the local citizens perceive the infrastructure
and facilities to their daily life and works which it acts as one of the objectives of this
study in measuring the impacts ICTs implementation initiatives. Besides, Gurstein
(2014) criticized on current imbalance situation where politicians and major tech-
nology corporation utilise “smart city” as a Public Relations (PR) tool and mainly
focus in urban and desirable area and tend to ignore those rural and less attractive
suburb particularly in less developed countries, where the living standard of the
citizen were barely reach the basic requirement, and government initiative to develop
towards “smart cities” is equal to transferring the resources from the poor to the rich
as much resources is putting on installing high technology and expensive devices,
whereas there are still people who has limited access to basic living facilities such as
health care, environmental management and security.
Incontestably, providing critical and basic infrastructure is essential while it could
be said that smart city development plan should separate to several stages while the
first priority is the provision of basic facilities including healthcare, education,
transportations and security which particularly important for developing countries
as in order to develop a smart city it should first fulfil the requirement to be a city and
thereafter high technology infrastructure such as IoT, broadband and other ICT
initiative could only take place on top of the fundamental and act as catalyst to
drive smarter development (Nam and Pardo 2011). Hence, there are opinions stating
that the development direction should focus on producing smart community rather
than smart city and the ultimate goals of a smart community should not just rely on
high technologies and hardware while nurturing the smarter citizen that could ensure
these infrastructure and facilities able to optimise their daily life and work and at the
same time the community itself able to sustain by its own as they have acquired the
knowledge and are well prepared to be part of the smart community (Eger 2005).
4 Characteristic of Smart Community
4.1 Smart Citizen
Evidently, it shows the needs to shift to develop a smart community rather than smart
city where social inclusion, enabling citizen, supporting community should be
included in the city development agenda (Gurstein 2014). Wongbumru and
Dewancker (2014)’s study focusing on how next-generation technology could be
utilised and integrated in community particularly through improving citizen inno-
vation and participation in reaching the goal of improving quality of life demon-
strating example from Japan that not only focusing on smart energy management,
but going further to smart community by involving all the stakeholders and aims
towards behavioural change through lifestyle innovation. Moreover, author pointed
the challenges where there is situation although infrastructure on smart energy
system is provided, citizen shows lack of participation and concluded that to bring
up “smart citizen” should put as priority before succeeding a smart community
(Wongbumru and Dewancker 2014).
A smarter city should be treated as an organic system - as a network, as a linked
system and smart citizen is part of it (Nam and Pardo 2011). In order to enable this
part of “smart citizen” to be fully integrated to the entire system, first the citizen
should be educated in a way to “infuse” themselves in the smart system. As without
the knowledge, it could not maintain the sustainable cycle of the system and it will
become a huge hinder for long term sustainable development. If only with a smart
and innovative citizen that act as motivator for the entire system to ensure the smooth
network and linkage among the smart initiatives; they themselves could only be the
beneficiary from the smart system.
4.2 Training
Stratigea (2012)’s work focusing on relating smart cities concept to community

development adapting the concepts from Intelligent Community Forum (ICF) that
demonstrated the critical success factors for cities “going smart” and presented in a
pyramid structure. As Broadband infrastructure act as the first fundamental base,
knowledge-based workforce is the second level from bottom proven that apart from
infrastructure and facilities, it is important to educate skilled workforce to support
the further development. As it is agreed by Eger (2005) as well that internet and
broadband access is just the first step and an integrated intelligent community is a
catalyst to economic growth (Hughes and Spray 2002). Indeed, the installation of
internet and broadband could offer citizen the accessibility to be linked and
connected with each other as well as with the government and businesses that
stimulated the local growth in terms of both economy and socially (Nam and
Pardo 2011). Moreover, introducing innovation energy system, information and
communication technology could encourage and support private companies, gov-
ernment and SMEs in providing various services to the community (Wongbumru
and Dewancker 2014).
4.3 Smart Governance
Apart from installing ICTs to the city, the citizens should introduce with a new
decision-making mechanism which incorporate the community into the city plan-
ning (Eger 2005). Hollands (2008) emphasise that the way citizen interacts and
becoming a member to the society is the goal of succeeding a smart community and
information technology is playing a role not just as a physical infrastructure that
drive towards smart cities but offering opportunity to empower and educate “smart
citizen”. Frost and Sullivan (2014), a consulting and research firm identifies eight
key aspects that define a smart city and smart citizen to be part of it which acts as the
main role in building the smart community (Singh 2014).
Besides, argument exists as according to Gurstein (2014) that current situation
was centralised and top down approach and the voices and opinion of the citizen
were put as lowest priority when comes to city development. While in the process of
development towards smarter community, all stakeholders from every segment in
the society should be included and each party should assume the responsibility and
attention as none of the segment should be neglected. Public private partnership to
involve locals and realising a connected society is an example (Hughes and Spray
2002). Smart community that should focus on cooperation, emphasise on shared
governance and participation of the citizen is essential to include the voice and
opinions of the community to local development. The role of government and policy
in providing governance to the city is a strong support for smart city initiative (Nam
and Pardo 2011). Besides, in their study of conceptualising smart city with dimen-
sions pointed the element in institutional factors which includes integrated and
transparent governance, strategic and promotional activities, networking and part-
nership. Other than that, with the launches of e-government in many smart cities as
one of the initiatives, it encourages the participation of citizen to more community
development projects. In such way, government should be more transparent and
accountable to share information to citizen, so they could voice their opinion and be
part of decision making process which affects their daily lives. Smart governance it
set to be the cornerstone for smart city, therefore, partnership and collaboration could
prove as an effective approach to connect public, private and individual towards
structuring an effective bottom-up mechanism where it is the key steps in

transforming citizen towards a smarter way.
5 Implementation of Smart Cities in Asia
5.1 China
Smart city development is favourable by governments and developers as to its

benefits that been proven with the help of ICT it could improve the quality of life
for the people. For instance, many smart cities projects have been carried out around
the world while different developing models have been implemented and various
initiatives were introduced to achieve respective targets. In China, smart community
planning took place in Yishanwan, Jiangxia District, Wuhan. The community was
developed alongside with a comprehensive framework to achieve the targets of
construction of infrastructure, establish a sharing platform, develop and research of
an application system and develop service portal (Anrong et al. 2016). In the
development plan, the synchronous development of informatization, new
industrialisation, agricultural modernisation and new urbanisation act as the core
of developing the smart community. The authority especially emphasis on agricul-
tural modernisation as it plays as an important role in rural area and act as the
fundamental for the suburban area to develop through urbanisation. Anrong et al.
(2016) agreed that it is insufficient to improve only on infrastructure but also stress
on the innovation ability of the society by integrating the concept of sustainable to
city development.
5.2 Japan
In Japan, Smart Community often define as taking full advantage of IT technology to

effectively control power flow and provide new services for power supplies and
demand side users (Gao et al. 2016). And it is different from the definition in other
countries and the smart community model can be described in four parts which are
new information network, new energy system, new transportation system and new
urban development. Emphasis is putting on smart energy grid implementation as a
way to change citizen towards smarted lifestyle in term of daily life, work or office
and transportation. There are four large scale demonstration cities in Japan which
implementing smart community concepts which are Kyoto Keihanna District, Yoko-
hama City, Kitakyushu City and Toyota City. All the demonstration cities having the
similar target which is reducing the emission of Greenhouse Gas (GHG) and with the
assistant of IT technology smart-grid electricity management was introduced and
most of the researches about smart community are about using of renewable
resource. For instance, eco-town project was introduced for the aim to build a system
by using all the waste products of an industry as raw materials for another industry
and realising a zero-waste recycling-oriented society.
5.3 Malaysia
Medini Smart City in Iskandar Puteri, Malaysia was chosen to be the pilot for smart
city projects which focuses on three areas, economy, environment and social and
promotes six dimensions: smart economy, smart governance, smart environment,
smart mobility, smart people and smart living (Ghazali et al. 2016). This is a project
collaborating the university and regional development agency. The objective of this
project was focus on infrastructure provision and change of quality of life and
environment as long term target by developing smart living through engaging
local citizen for sustainable development. However, Gil and Navarro (2013) argued
that in terms of governance and policy context which were one of the factors in
analysing smart city initiatives, the participation of local seems lacking from the
technology partnership. While there was a noticeable effort from the aspect of
education where there are few internationally well-known universities such as
University of Newcastle plan to open up campus in Medini.
6 Conclusion
It could be seen that the countries that mentioned at the above have different
approaches and initiatives in achieving their desired goals and finally realizing a
smart city or community in their own context. Therefore, it is not a total deny that
smart city is distinctive from smart community while it should be integrated as one of
the multi-dimensional aspects of smart city that receive similar attention and develop
simultaneously without neglecting any aspect. Citizens should be provided the
chances and opportunities to prepare themselves through educations, participation
in community development, taking the ownership of their own community and
equipped themselves with soft skills that are needed to face the global challenges
(Eger 2005).
“To be connected” has found to be the fundamental element in realizing both
smart city and smart community and this is what city is all about where people come
and live together to form a concentrated settlement (Kumar and Dahiya 2017). Since
ancient time, through the utilization of horses that form the connected path between
people and cities where information, knowledge, culture and economies are
connected. And for now, the ICT is playing the similar role. And integrating smart
city with community development through provision of affordable broadband and
internet facilities and training for ICT skills should be the priority particularly for
developing countries which are lacking of technology innovation and implementa-
tion of ICT facilities is high investment and returns on investment is major concern.
Hence, the availability of the resources should be utilized and shared among the
community in order to generate the maximum benefit for the citizen (Wongbumru
and Dewancker 2014).
Moreover, there is no a universal template or model of smart city or community
that is suitable for all the countries as the definition and target to be achieve for a
specified city may be varied from another while the development model of smart city
for Europe countries might not suit well for countries in Southeast Asia as they are
different from the aspect of social-culture, political background, economic, techno-
logical situation and values.
Acknowledgement The authors acknowledge all reviewers for their comments on this manuscript
and are grateful to the committee members of the 24th Eurasia Business and Economic Society
(EBES) Conference - Bangkok for organizing a beneficial conference that provided a good platform
for research. This article is supported by the USM- MCMC Grant (No: 304/PMGT/650865/M147).
References
Albino, V., Berardi, U., & Dangelico, R. M. (2015). Smart cities: Definitions, dimensions,
performance, and initiatives. Journal of Urban Technology, 22(1), 3–21.
Anrong, D., Li, G., Li, J., & Kong, X. (2016). Research on smart community planning of
Yishanwan, China towards new urbanization. International Review for Spatial Planning and
Sustainable Development, 4(1), 78–90.
Eger, J. M. (2005). Smart communities, universities, and globalization: Educating the workforce for
tomorrow’s economy. Metropolitan Universities, 16(4), 28–38.
Frost and Sullivan. (2014). Smart Cities – Frost & Sullivan Value Proposition. Accessed May 12,
2018, from https://ww2.frost.com/wp-content/uploads/2019/01/SmartCities.pdf
Gao, W., Fan, L., Ushifusa, Y., Gu, Q., & Ren, J. (2016). Possibility and challenge of smart
community in Japan. Procedia-Social and Behavioral Sciences, 216, 109–118.
Ghazali, M., Okamura, T., Abdullah, T., Sunar, M.S., Mohamed, F., & Ismail, N., (2016, May). In
the quest of defining smart digital city in Medini Iskandar Malaysia, Iskandar Puteri, Malaysia.
In Proceedings of the SEACHI 2016 on smart cities for better living with HCI and UX
(pp. 19–23). ACM.
Gil, O., Navarro, C., Gil, O., & Navarro, C. (2013, July). Innovations of governance in cities and
urban regions: Smart cities in China, Iskandar (Malaysia), Japan, New York and Tarragona
(Spain). In EURA conference: Cities as Sheedbeds for innovation (pp. 4–6).
Gurstein, M. (2014). Smart cities vs. smart communities: Empowering citizens not market eco-
nomics. The Journal of Community Informatics, 10(3).
Harrison, C., Eckman, B., Hamilton, R., Hartswick, P., Kalagnanam, J., Paraszczak, J., & Williams,
P. (2010). Foundations for smarter cities. IBM Journal of Research and Development, 54(4),
1–16.
Hollands, R. G. (2008). Will the real smart city please stand up? Intelligent, progressive or
entrepreneurial? City, 12(3), 303–320.
Hughes, C., & Spray, R. (2002). Smart communities and smart growth-maximising benefits for the
corporation. Journal of Corporate Real Estate, 4(3), 207–214.
International Telecommunication Union – Telecommunication Standardization Sector of ITU.
(2014). Smart sustainable cities: An analysis of definitions. Geneva: International Telecommu-
nication Union.
Ishida, T., & Isbister, K. (Eds.). (2000). Digital cities: Technologies, experiences, and future
perspectives (Vol. 1765). Berlin, Germany: Springer.
Kumar, T. V., & Dahiya, B. (2017). Smart economy in smart cities (pp. 3–76). Singapore: Springer.
Lazaroiu, G. C., & Roscia, M. (2012). Definition methodology for the smart cities model. Energy,
47(1), 326–332.
Nam, T. & Pardo, T.A., (2011, June). Conceptualizing smart city with dimensions of technology,
people, and institutions. In Proceedings of the 12th annual international digital government
research conference: Digital government innovation in challenging times (pp. 282–291). ACM.
Paskaleva, K. A. (2009). Enabling the smart city: The progress of city e-governance in Europe.
International Journal of Innovation and Regional Development, 1(4), 405–422.
Singh, S. 2014. Smart cities – A $1.5 trillion market opportunity. Forbes. Accessed February
14, 2018, from http://www.forbes.com/sites/sarwantsingh/2014/06/19/smart-cities-a-1-5-tril
lion-market-opportunity/#3b9495237ef9
Stratigea, A. (2012). The concept of ‘smart cities’. Towards community development? Netcom.
Réseaux, Communication et Territoires, 26(3/4), 375–388.
Tanabe, M., van den Besselaar, P., & Ishida, T. (2002). Digital cities II: Computational and
sociological approaches. Berlin: Springer.
van den Besselaar, P., & Koizumi, S. (Eds.). (2005). Digital cities III. Information technologies for
social capital: Cross-cultural perspectives. Berlin: Springer.
Wongbumru, T., & Dewancker, B. (2014). Smart communities for future development: Lessons
from Japan. International Journal of Building, Urban, Interior and Landscape Technology, 3,
70–75.
Tourist Destination Assessment by Revised
Importance-Performance Analysis
Olimpia I. Ban, Victoria Bogdan, and Delia Tușe
Abstract The goal of this research is to improve the Importance-Performance

Matrix by more accurately fitting the attributes of quality into matrix quadrants.
The working methodology implied the use of the mathematical apparatus, respec-
tively of five validated mathematical indexes (Dunn validity index, Silhouette
validity index, validity index Calinski-Harabasz, Pakhira-Bandyopadhyay-Maulik
validity index and Davies-Bouldin validity index). It will consider the position of an
attribute in a quadrant validated if it resulted in all five index-generated situations. It
was tested the method for the data collected from the customers accommodated in
the International Hotel in Băile Felix Spa, Romania. The result shows that the
number of attributes that retain their quadrant position in all situations is greatly
reduced, but the certainty about the position of the attributes is greatly increased.
This method increases the rigor of IPA and helps managers in their decision-making
about quality of services.
Keywords Importance-Performance Analysis · Critics · Validation index · Method ·

Touristic destinations · Romania
1 Introduction
A marketing tool with strategic valences that also has the capacity to be widely used
by theoreticians and practitioners is the Importance-Performance Analysis (IPA),
created by Martilla and James (1977). Through this tool, the quality attributes of
O. I. Ban (*)
Department of Economics and Business, University of Oradea, Oradea, Romania
V. Bogdan
Department of Finance and Accounting, University of Oradea, Oradea, Romania
e-mail: vbogdan@uoradea.ro
D. Tușe
Department of Mathematics and Informatics, University of Oradea, Oradea, Romania
e-mail: dmerca@uoradea.ro

50 O. I. Ban et al.
Table 1 Some IPA application domains

Authors who applied the Importance-
Application domain Performance Analysis
Supply of medical services Dolinsky and Caputo (1991), Hawes and Rao
(1985), Yavas and Shemwell (2001)
Education Alberty and Mihalik (1989), Ford et al. (1999),
Nale et al. (2000), Ortinau et al.(1989)
Service quality Ennew et al. (1993)
On-campus catering services Aigbedo and Parameswaran (2004)
Service quality and strategic development of Matzler et al. (2003)
banks
E-business strategies and resource allocation Lavenburg and Magal (2005)
Cultural services Baker and Draper (2013)
Service quality on national highways Huang et al. (2006)
Computer industry Lee et al. (2009)
Tourism (tourist accommodation services, Bush and Ortinau (1986), Lin et al. (2005),
tourist guide, strategy development, the image Deng (2007), Chu and Choi (2000), Pike
and the performance of the destination etc.) (2002), Lee and Lee (2009), Oh (2001),
O’Leary and Deegan (2005), Smith and Cos-
tello (2009), Wade and Eagles (2003), Caber
et al. (2012), Hudson and Shephard (1998)
Evaluation of the performance of suppliers Lee et al. (2009)
Recreational services Ko and Pastore (2007)
Source: created by authors
products or services are analyzed in terms of perceived importance and performance

to enable marketing managers to take the decisions necessary to raise the quality of
supply and increase in consumer satisfaction. The obviously importance of con-
sumer satisfaction determines firms to conduct periodically surveys for established
what satisfies the consumers (Wu 2014). IPA has been applied in different domains
and in various tourism sectors (see Table 1).
The Importance-Performance Analysis method proposed by Martilla and James
(1977), is building a matrix that is a instrument for developing marketing strategies
based on the importance and performance of each attribute of service quality. The
key objective of this method is to diagnose, identify the attributes with a determined
importance that have a performance below or above expectations. Thus, the vertical
axis will represent the “importance of attributes” while the horizontal axis will
represent the “performance of attributes”. The two axes will divide the array into
four quadrants through a point that is given by the mean of values obtained in
importance and performance. Each quadrant has some strategic recommendations
from “keep up the good work”, “concentrate here”, “low priority”, and “possible
overkill”.
Satisfaction is an important component of behavior of tourist (Moll-de-Alba et al.
2016). For tourist destinations, the comparison of the perceived importance and
performance represented in the IPA matrix allows managers and tourism authorities
to identify the characteristics that contribute to the success of destinations (Zhang
Tourist Destination Assessment by Revised Importance-Performance Analysis 51
and Chow 2004, p. 82 cited in Caber et al. 2012). Many studies carried out at the
tourist destination level have been limited to classifying attributes by the perfor-
mance at tourist destinations. The comparison of perceived importance and perfor-
mance, represented in the IPA matrix, allows managers and tourism authorities to
identify the characteristics that contribute to the success of destinations (Zhang and
Chow 2004 cited in Caber et al. 2012) and to the success of companies.
2 Weaknesses of Importance-Performance-Analysis:
Theoretical Approaches
In tourism literature, the Importance-Performance Analysis (IPA) was used to

measure the quality of services, image and performance of the destination by
numerous researchers (Table 1).
Although it is a very used tool, the IPA has often been criticized and improved,
also questionable. Criticisms of the original IPA variant of Martilla and James
(1977):
• the use of direct data collection on the importance of attributes (Likert scale or
metric scale), has the disadvantages that it makes data collection difficult, the
scores have a small inter-item variation, the values of the answers are raised
uniformly, therefore unnecessary (Bacon 2003);
• using direct data collection on the importance of attributes that has many leaks,
with few respondents knowing the real answer concerning them (Van Ryzin and
Immerwahr 2007);
• inaccuracies related to registering the importance of attributes. “When consumers
evaluate attributes, it is not clear whether the attribute is important for its presence
or its absence” (Slevitch and Oh 2010, p. 561);
• the assumption that the relationship between the perceived performance of each
attribute and global satisfaction is symmetrical, when in fact it is actually asym-
metric (Kano et al. 1984; Deng and Pei 2009; Matzler and Sauerwein 2002;
Matzler et al. 2003);
• not taking into account the possibility that the relationship between the perceived
attribute performance and global satisfaction is non-linear and asymmetric for the
basic attributes and the qualitative stimulus attributes, while for the performance
attributes, the relationship is linear and symmetrical (Deng 2007);
• not taking into account the fact that the relationship between the performance of
attributes and the importance of attributes is causal (Matzler et al. 2003; Oh 2001;
Ryan and Huyton 2002; Sampson and Showalter 1999);
• evaluation of the performance without taking into account the competition (Burns
1986; Keyt et al. 1994);
• IPA building for all audiences and not for each segment, as it would be right
(Abalo et al. 2006, 2007; Caber et al. 2012) (this observation concerns the
application of the IPA and not its construction);
52 O. I. Ban et al.
• traditional IPA erroneously implies that quality attributes are independent, in

reality some influence others, therefore the matrix interpretation generates deci-
sions with unpredictable impact (Hu et al. 2009);
• the grid partition into areas with distinct significance for decision-makers. The
majority of the attributes can fell into the category, like “Keep up the good work”
with not clear implications (Milman and Xu 2012);
• in connection with the above observation, we can add the very common IPA
situations where many attributes are positioned in the matrix at the boundary
between two dials. This position at the border raises issues of correct interpreta-
tion (Ban et al. 2016);
• the arbitrary tracing of the axes, which leads to arbitrary managerial decisions
(Sever 2015; Ortinau et al. 1989; Mount 2000; Martilla and James 1977; Cromp-
ton and Duray 1985);
• another criticism is related to the number of IPA quadrants that in the original
form are four, but it is considered that there should be another number to cover the
possible situations (starting with Burns 1986). The serious criticism is that in the
Martilla and James version the quadrants are subjectively constructed (Mount
2000).
Burns (1986) proposes transforming IPA into SIPA by including and reporting to
competition, proposing a method of prioritizing the attributes by comparing the
consumer scores to importance and performance. The attributes are given degrees of
“low, medium or high” and performance grades (“satisfaction” is used here) differ-
entiated by “A, B and C”. In the original IPA matrix there is a gray area (also called
an area of indifference) that includes the attributes to which the respondents show
indifference, both in terms of importance and performance. In the model proposed
by Albrecht and Bradford (1990) nine quadrants are obtained. Keyt et al. (1994) used
a single-score z-test on average scores to determine the remarkable (salient) attri-
butes. Those attributes that had values significantly higher than the mean scores for
importance were considered remarkable. This procedure has led to the placement of
the attributes in one of the sixteen cells in Keyt’s matrix. Ortigueira-Sánchez et al.
(2015) propose the Importance-Performance Matrix with a priority line, the so-called
“diagonal pattern.”
The method of drawing axes in building the Importance-Performance Matrix by
the point that represents the average of the values obtained is the most widely used.
Oh (2001) suggests drawing the axes by the point representing the mean of the
measurement scales (4 points, 5, 7 etc.) and not by the mean of the recorded values.
The proposed method has the disadvantage of placing (almost totally) the attributes
in the upper areas of importance and performance, which makes it impossible to
distinguish between them. In addition, the division would be the same for all the
studies regardless of the data recorded and for the same study different interpreta-
tions can be obtained depending on the chosen scale (Araña and León 2013).
Azzopardi and Nash (2013) and Ziegler et al. (2012) use an iso-valuation line
dividing the plan into two. Above the line there are the attributes that have a higher
performance than importance and those below the line require improvement.
Abalo et al. (2006) modify the original IPA in the sense that it forms a partition
that combines the dials diagonally, widening the top left dial. The newly formed area
extends over the entire surface above the diagonal that divides the Importance-
Performance Matrix into two. Thus, any attribute with greater importance than the
performance is a candidate for improvement. Under the diagonal, the three quadrants
are reconstructed, but the mathematical rule used to construct them is not specified.
To build the performance matrix we need to evaluate the importance of the attri-
butes/resources and their performance associated with the Băile Felix destination.
We have chosen to perform the Classical Importance-Performance Analysis pro-
posed by Martilla and James (1977) as compared to Abalo’s Revised Importance-
Performance Analysis (Abalo et al. 2006).
The tourist destination chosen for the research of the quality attributes is a
balneoclimatic resort, Băile Felix. This resort is the largest from Romania in terms
of accommodation capacity. Băile Felix resort is positioned in the northwestern part
of Romania, in Bihor county, near Oradea and 22 km from the border crossing point
to Hungary. It has a ideal climate for balneary tourism. The resort is open all year
with a great influx of tourists in the especially in summer months. Băile Felix resort
supplies conditions for relaxation, vacation, break and recuperation. The resort’s
very valuable natural resources are the thermal waters. The temperature of the
thermal waters is between 20–49 C. The thermal waters in the resort are used to
treat diseases such as: inflammatory rheumatic diseases; degenerative rheumatic
diseases; abarticular rheumatic disorders; post-traumatic conditions; peripheral neu-
rological and gynecological disorders; associated diseases. The resort has numerous
accommodation structures: 16 hotels (of which 1 are 5 stars), boarding houses, villas
(4), etc. with a total of over 7000 accommodation places. The International Hotel is a
four-star hotel and has a modern spa and a modern conference center, recently
renovated. The International Hotel is renowned for its therapy programs and is the
only hotel unit in Romania that has been awarded the EUROPESPA-med logo,
which attests the fulfillment of the standards of the European Association of Spa
Resorts (ESPA) on the general infrastructure of therapies, hygiene and safety of
tourists (Turism Felix 2013).
The research method used was that of the survey based on the questionnaire. The
research was exploratory on the basis of a sample based on availability. Between
November and December 2016 a questionnaire was applied to 120 tourists accom-
modated at the International Hotel in Băile Felix. The questionnaire was applied at
the reception of the International Hotel in Băile Felix, observing the condition that
the respondent stayed in the resort for at least one night.
The questionnaire used in this research was that one applied by Mihalič (2013)
and adapted at this survey conditions. It was tested before application on 20 people.
Following the test, the questionnaire was simplified by removing the questions
54 O. I. Ban et al.
considered secondary in terms of importance for the research objectives. The final
form of the questionnaire includes 13 questions divided as follows: 5 questions
about how visitors have chosen and arrived at Băile Felix; 2 questions about the
global evaluation of the destination; 2 questions about the importance of destination
attributes/resources and the performance of Băile Felix destination on these attri-
butes/resources and 4 questions related to the respondent profile. We have decided to
directly determine the importance of attributes, although there is also the possibility
of indirect determination with very good results (Ban 2012; Ban and Bogdan 2013).
The questionnaire was applied in Romanian for the Romanian tourists and in
English for foreign tourists. The destination was evaluated from the perspective of
19 attributes/resources as proposed by Mihalič (2013) and their importance and
performance was recorded with a 5-step Likert scale. Despite the simplification of
the questionnaire, its completion rate was 80% for the 120 questionnaires prepared at
the hotel reception. The assessment of the importance and satisfaction of Băile Felix
destination was achieved with a 5-step Likert scale.
4 Results and Discussions
The socio-demographic characteristics of the respondents were: nationality, socio-

professional status, age and gender. The structure of the respondents by nationality is
that of Table 2 with 76% of Romanians and 24% of foreign visitors.
We have found among those surveyed a high share of employees and entrepre-
neurs (70%), only 16% are retired and the rest are students /pupils or do not have a
job. Employability is also explained by the age of visitors between 40 and 60 years
old for 45%, between 20 and 40 years old 36%, only 19% over 60 years old. The
male/female ratio is balanced (52% men and 48% women). The overall satisfaction
assessment regarding Băile Felix destination received an average score of 4.35 out of
a maximum of 5.00, with 44 maximum ratings. The evaluation of Băile Felix
destination on attributes/resources in terms of importance and performance can be
seen in Table 3.
We calculated the intersection of the Importance-Performance Matrix axes as a
point of the mean of the values for the value and the mean of the performance values.
On the vertical axis we represented the importance of the researched resources/
attributes and on the horizontal axis we represented the performance of the destina-
tion from the point of view of the researched resources/attributes. The Importance-
Table 2 Structure of Country of residence of tourists Weight in total (%)

respondents by country of
Romania 76
residence
Israel 15
Germany 9
Table 3 The importance of resources and the performance of Băile Felix destination from the
perspective of these resources
Importance
associated to Performance of destination
Resources/attributes resources from the resurge perspective
1. “Personal safety and security” 4.15 3.25
2. “The destination can be easily reached” 4.14 4.17
3. “Overall cleanliness of the destination” 4.23 4.28
4. “Unspoiled nature” 3.36 3.51
5. “Climate conditions” 3.02 3.69
6. “Diversity of cultural/historical attrac- 3.40 3.21
tions” (architecture, tradition and customs. . .)
7. “The quality of the accommodation 4.08 4.15
(hotel, motel, apartment. . .)”
8. “Friendliness of the local people” 3.63 3.65
9. “Organization of the local transportation 3.63 3.48
services”
10. “The supply of local cuisine” 3.64 3.62
11. “Possibilities for shopping” 3.13 3.17
12. “Night life and entertainment” 3.17 3.07
13. “Opportunity for rest” 4.31 4.30
14. “Availability of sport facilities and 3.32 3.26
recreational activities”
15. “Supply of cultural and other events” 3.21 3.31
16. “Thermal spa supply” 4.67 4.58
17. “Wellness supply” 4.49 4.63
18. “Casino and gambling supply” 2.62 2.67
19. “Conference supply” 3.12 3.25
Mean of values 3.64 3.64
Performance Analysis performed for Băile Felix destination is shown in Fig. 1

(Importance-Y axis, Performance-X axis).
The results of the Importance-Performance Analysis after Martilla and James
(1977) show the following distribution of quality attributes/resources (Fig. 1):
• quadrant I “Keep up the good work”—six attributes (16. “Thermal spa supply”,
17. “Wellness supply”, 2. “The destination can be easily reached”, 3. “Overall
cleanliness of the destination”, 7. “The quality of the accommodation (hotel,
motel, apartment. . .)”, 13. “Opportunity for rest”);
• quadrant II “Concentrate here”—one attribute (1. “Personal safety and security”);
• quadrant III “Low priority”—nine attributes (18. “Casino and gambling supply”,
19. “Conference supply”, 11. “Possibilities for shopping”, 12. “Night life and
entertainment”, 14. “Availability of sport facilities and recreational activities”,
6. “Diversity of cultural/historical attractions (architecture, tradition and
customs. . .)”, 15. “Supply of cultural and other events”, 4. “Unspoiled nature”,
56 O. I. Ban et al.
5
4.634.58
4.5
4.3
4.28
4.17
4.15
4
3.69 3.65
3.64
3.62
3.5 3.51 3.48
3.31
3.253.26
3.21 3.25
3.17
3.07
3
2.67
2.5
1.5
0.5
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Fig. 1 Martilla and James Importance-Performance Matrix (1977) representing the attributes/
resources of Băile Felix destination with four quadrants (the top right quadrant I, the top left
quadrant II, the bottom left quadrant III, the bottom right quadrant IV). Source: created by authors.
Note: the graph shows the values of Performance
9. “Organization of the local transportation services”, 10. “The supply of local

cuisine”);
• quadrant IV “Possible overkill”—două attributes (5. “Climate conditions”,
8. “Friendliness of the local people”).
Three attributes are very close to the quadrant demarcation axes. These attributes
are: 8.”Friendliness of the local people”, 10. “The supply of local cuisine”, 9. “Orga-
nization of the local transportation services”. Attribute 10. “The supply of local
cuisine” is right on the vertical axis, being either in the quadrant III or in quadrant
IV. The results show the strengths of Băile Felix destination through the most
appreciated attributes: thermal spa supply, wellness supply, personal safety and
security, overall cleanliness of the destination, the quality of the accommodation
(hotel, motel, apartment), opportunity for rest. We note that these resources are in
direct correlation with the main motivations of the chosen destination. When asked
about the main motivation for the destination of Băile Felix, 59% mentioned “rest
and relaxation”, 33% said “health”, only 8% having other reasons.
Quadrant II is the main strategic base for increasing consumer satisfaction by
improving the quality of resources that are positioned here. Positioning in this
quadrant the “Personal safety and security” attribute draws the attention to a very
sensitive issue, which also enters the attractiveness of the accommodation. The issue
of personal safety and security is demotivated tourism. Romania, generally as a
tourist destination, has a problem promoted in the international media-that of
personal insecurity and travelers’ goods. This issue must also be solved as a problem
in itself and as a way of communication. The eight attributes located in quadrant III
were distributed there circumstantially, in a close relationship with the interests of

the surveyed tourists. It is about the low interest in: conferences, shopping, casino,
sports, sightseeing and even unspoiled nature. An additional reason for the tourists’
disinterest could be the period of the year when they used the tourist product, namely
November and December. This is also the reason why “climatic conditions” were not
too important for the respondents, being located in quadrant IV.
We note that three attributes are located very close to the quadrant demarcation
axes. These attributes are: “Friendliness of the local people”, “Local cuisine supply”,
“Organization of local transport services”. This sensitive positioning raises many
issues because an error of completeness can lead to dramatically different strategic
solutions. For example, “Friendliness of the local people” is an attribute that always
enjoys the appreciation of the public as an asset (Ban 2012) and here it has an
uncertain positioning. The situation may be the result of an error in completing the
questionnaire.
In Fig. 2(a) we applied the solution proposed by Oh (2001) to divide the quadrant
matrix into the point representing the mean of the scale chosen. As the Likert scale
applied to the research was a 5-stage, the mean is 2.5. The definite disadvantage of
the method is that it determines the positioning of all the attributes in the top right
quadrant “keep up the good work” (Fig. 2). According to this positioning, all the
attributes can be maintained at the current quality level. This situation is not isolated,
it occurs frequently due to the positioning of responses, in many cases, in the upper
part of the scale (Bacon 2003). Consequently, the method does not prove its
usefulness in this study.
Abalo et al. (2006) modifies the original IPA by drawing a diagonal through the
points where the importance is equal to the performance. He believes that everything
above the diagonal is a candidate for improvement. The attributes located under the
diagonal are divided into three quadrants, yet the division rule is not specified. In the
case of the study undertaken, most of the attributes are near the diagonal (Fig. 2(b))
which means that decision are discussable. We note that the strategic decision is
absolutely different from that obtained by Oh’s method (2001). The major differ-
ences noticed call into question the validity of the methods, at least for this particular
case. There are other methods of attribute distribution, as mentioned in the first part
of the paper It is necessary to find a verifiable axis tracking method that works for
each specific case.
5 Determining the Axes in the Importance-Performance

Matrix Using the Validity Indices
In Ban et al. (2016) it is proposed an approach based on classification theory

methods. Thus, it eliminates the possibility of positioning the attribute on axes or
near axes in the Importance-Performance Matrix.
58 O. I. Ban et al.
a
5.00
4.67
4.50 4.49
4.31
4.23
4.15 4.14
4.08
4.00
3.64
3.63
3.63
3.50 3.40
3.32 3.36
3.17 3.21
3.13
3.12
3.00 3.02
2.50 2.62
2.00
1.50
1.00
0.50
0.00
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
b
5.00
4.67
4.50 4.49
4.31
4.23
4.15 4.14
4.08
4.00
3.64
3.63
3.63
3.50 3.40
3.32 3.36
3.17 3.21
3.13
3.12
3.00 3.02
2.50 2.62
2.00
1.50
1.00
0.50
0.00
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Fig. 2 (a) Importance-Performance Matrix representing the attributes/resources of Băile Felix

destination after the quadrants division proposed by Oh (2001). (b) Importance-Performance Matrix
representing the attributes/resources of Băile Felix destination after the quadrants division proposed
Abalo et al. (2006). Source: created by authors. Note: the graph shows the values of Performance
The central problem of the classification theory is that starting from a set of
objects X ¼ {x1, . . . , xn} in general elements of ℝs, that is each characterized by
s parameters, we determine a position of that, i.e. a set P ¼ {A1, . . . , Ac} so that:
i.
Ai 6¼ ∅, 8i 2 f1; . . . ; cg;
ii.
Ai \ Ai ¼ ∅, 8ij 2 f1; . . . ; cg, i 6¼ j;
iii.
c
U i¼1 Ai ¼ X:
Validity indices have been introduced to measure the quality of a partition

generally obtained from a classification algorithm. Taking into account their sim-
plicity and the comparative results obtained in Arbelaitz et al. (2013) and Milligan
and Coofer (1985), we use the following indices in this paper: Dunn validity index
(V_D), Silhouette validity index (V_S), Calinski-Harabasz validity index (V_CH),
Pakhira-Bandyopadhyay-Maulik validity index (V_PBM) and Davies-Bouldin
validity index (V_DB).
Dunn validity index (V_D): An old validity index having many subsequent
variants and often used in applications in the Dunn index (denoted V_D) introduced
as follows:

min min δ A j ; Ak
iЄf1;...;cg kЄf1;...;cg\ fig
V DðPÞ ¼ ð1Þ
max ΔðAi Þ
iЄf1;...;cg
where

δ A j ; Ak ¼ min min d x j ; xi ð2Þ
x j ЄAi xi ЄAk
and

ΔðAi Þ ¼ max d x j ; xi ð3Þ
x j , xi ЄAi
Considering “d” the Euclidean distance between two elements of Rs, both in (2),
(3) and further on. We mention that an upper value of V-D means a better partition.
60 O. I. Ban et al.
Silhouette validity index (V_S): According with some criteria the Silhouette
index it is the best validity index. It is defined as follows:

1X c X
b x j ; Ai a x j ; Ai
V SðPÞ ¼ ð4Þ
n i¼1 x ЄA max a x j ; Ai ; b x j ; Ai
j i
where
1 X
a x j ; Ai ¼ d x j ; xk ð5Þ
jAi j xk ЄA i
1 X
b x j ; Ai ¼ min d x j ; xk ð6Þ
Ak ЄP\ fAi g jAk j xk ЄAk
and |M| denotes the cardinality of M.

An upper value of V_S means a better partition.
Calinski-Harabasz validity index (V_CH): it is obtained the best results in some
comparative studies and it is defined as follows:
Pc
n c i¼1 jAi jdðvi, vÞ
V CH ¼ Pc Pc ð7Þ
c i¼1 x j ЄAi d x j, vi,
Where v denotes the center of the entire set x and vi denotes the center of the atom Ai
and i 2 {1, . . . , c}. An upper value of V_CH means a better partition.
Pakhira-Bandyopadhyay-Maulik validity index (V_PBM): By comparison with
other well-known measures (Davies-Bouldin, Dunn and Xie-Beni validity indices)
this cluster validity index gives better results. The validity index, denoted by
V_PBM, is defined as follows:
2
1 E
V PBM ðPÞ ¼ D ð8Þ
c J
Where,
Xn
E¼ d x j, v
j¼1
ð9Þ

D¼ max d vi, v j ð10Þ
i, jЄf1;...;cg
Xn Xc
J¼ j¼1 i¼1
u ij d x j ; v i ð11Þ
and uij ¼ 1 if xi 2 Ai, uij ¼ 0 if xi 2

= Ai, i 2 {1, . . . , c}, , j 2 {1, . . . , n}, v and vi,
i 2 {1, . . .c} being introduced above. An upper value of V-PBM means a better
partition.
Davies-Bouldin validity index (V_DB): it is one of the most used indices in

comparative studies. Its value (denoted by V_DB) seems to give very good results.
It is defined as follows:
0 1
max ðSðAi Þ þ SðAk ÞÞ
1 X c @kЄf1;...;cgfig A
V DBðPÞ ¼ ð12Þ
c i¼1 min d ð vi ; vk Þ
kЄf1;...;cg\ fig
where
1 X
SðAi Þ ¼ d ð xk ; vi Þ ð13Þ
jAi j xkЄA
i
for every i2 {1, . . . , c} with above notations. A lower value of V_DB means a better
partition. Let {a1, . . . , an} be a set of attributes. By denoting xj, j 2 {1, . . . , n} the
pairs (performance, importance) corresponding to the attribute aj, that is xj ¼ ( pj, wj),
the problem is to find the optimum choice of axes p and w such that for the partition
P ¼ {A1, A2, A3, A4} of the set X ¼ {x1, . . . , xn}, obtained as:

A1 ¼ xi ¼ p j ; w j : p j > p; w j > w ð14Þ

A2 ¼ xi ¼ p j ; w j : p j < p; w j > w ð15Þ

A3 ¼ xi ¼ p j ; w j : p<j p; w j < w ð16Þ

A4 ¼ xi ¼ p j ; w j : p j > p; w<j w ð17Þ
has the maximum or minimum value of a fixed validity index. Of course, the result
depends from the fixed validity index V and we consider the maximum value if an
upper value of V means a better partition (is the case of V_S, V_D, V_CH, V_PBM)
and the minimum value if a lower value of V means a better partition (V_DB). In the
present paper we benefit from the method elaborated in Ban et al. (2016). As a result,
in Figs. 3, 4, 5, 6, and 7 we obtain the positioning of axes with respect to validity
indices described above, for the data set collected in Băile Felix spa.
Table 4 shows the distribution of quality attributes on quadrants based on the
criterion used to divide the axes. We compared the axis distribution proposed by
Martilla and James (the mean of the values obtained in the study) with the division of
the axes by five indexes of validity.
The quality attributes that maintain their position in at least four of the six
situations are as follows:
quadrant I-Keep up the good work- 16. Thermal spa supply, 17. Wellness supply;
quadrant II-Concentrate here- 1. Personal safety and security;
quadrant III-Low priority- 18. Casino and gambling supply;
quadrant IV-Possible overkill- 5. Climate conditions.
62 O. I. Ban et al.
5
4.5 4.67
4.49
4.15 4.31
4.23
4 4.14
4.08
3.86
3.5 3.64
3.63
3.63
3.4
3.323.36
3.173.21
3.13
3.12
importance
3 3.02
2.5 2.62
2
1.5
1
0.5
0
0 1 2 3 4 5
performance
Fig. 3 Importance-Performance Matrix representing the attributes/resources of Băile Felix desti-

nation after dividing the quadrants according to V_CH Index. Source: created by authors. Note: the
graph shows the values of Performance
5
4.5 4.67
4.49
4.31
4.23
4 4.15 4.14
4.08
3.5 3.64
3.63
3.63
3.4
3.323.36
3.173.21
3.13
3.12 3.07
importance
3 3.02
2.5 2.62
2
1.5
1
0.5
0
0 1 2 3 4 5
performance

nation after dividing the quadrants according to V_D Index. Source: created by authors. Note: the
We notice that in five of the six cases, the same attributes are assigned in the
quadrant I. Thus, in the first five situations of Table 4, the quadrant I contains the
attributes: 2. The destination can be easily reached; 3. Overall cleanliness of the
destination; 7. The quality of the accommodation (hotel, motel, apartment. . .; 13.
Opportunity for rest; 16. Thermal spa supply, 17. Wellness supply. The attributes 16.
Thermal spa supply, 17. Wellness supply are found in all six cases in the quadrant I
which validates their position.
Quadrant I defines the position of the attributes (Keep up the good work), which
are well appreciated by consumers, their quality can be maintained. We note that in
5
4.5 4.67
4.44.49
4.31
4.15 4.23
4.14
4.08
4
3.5 3.64
3.63
3.63
3.4
3.323.36
3.173.21
3.13
3.12
importance
3 3.02
2.5 2.62
2
1.5
1
0.5
0
0 1 2 3 4 5
performance

nation after dividing the quadrants according to V_DB Index. Source: created by authors. Note: the
5
4.5 4.67
4.49
4.31
4.23
4 4.15 4.14
4.08
3.5 3.64
3.63
3.63
3.4
3.323.36
3.173.21
3.13
3.12 3.07
importance
3 3.02
2.5 2.62
2
1.5
1
0.5
0
0 1 2 3 4 5
performance

nation after dividing the quadrants according to V_PBM Index. Source: created by authors. Note:
the graph shows the values of Performance
all the situations, the attributes referring to the thermal water supply and spa supply
are appreciated by the respondents, being the main reason for choosing Băile Felix
destination. Attributes 16 and 17 retain their position in quadrant I irrespective of the
method. They are “thermal spa supply” and “wellness supply”.
In quadrant II we find attribute 1 “personal safety and security” in five of the six
cases. This positioning recommends concentrating the efforts on this attribute
(concentrate here). This result is in line with the signals received from tourists,
claiming insecurity in relation to Romania in general and thus also to Băile Felix.
Also, the positioning of the attribute 18 “casino and gambling supply” in the
64 O. I. Ban et al.
5
4.5 4.67
4.49
4.31
4.23
4 4.15 4.14
4.08
3.5 3.64
3.63
3.63
3.4
3.323.36
3.173.21
3.13
3.12
importance
3 3.02
2.82
2.5 2.62
2
1.5
1
0.5
0
0 1 2 3 4 5
performance

nation after dividing the quadrants according to V_S Index. Source: created by authors. Note: the
Table 4 Distribution of attributes on quadrants by axial division (see the numbering of attributes in
Table 3)
Mean of
values
obtained in V_PBM V_D V_CH
Quadrant the study V_S index index index index V_DB index
I 16, 17, 3, 7, 16, 17, 13, 16, 17, 13, 16, 17, 13, 16, 16, 17
13, 2 3, 2, 7 3, 2, 7 3, 2, 7 17, 13,
3, 2, 7
II 1 1, 4, 5, 6, 9, 1, 4, 6, 1, 4, 6, 1 –
10, 11, 9, 10, 9, 10,
12, 14, 11, 12, 11, 12,
15, 19 14, 15, 19 14, 15, 19
III 18, 19, 11, 18 18 18 6, 1, 2, 3, 4, 5, 6, 7,
12, 14, 11, 12, 8, 9, 10, 11,
6, 15, 4, 9, 14, 15, 12, 13, 14, 15,
10 18, 19 18, 19
IV 5, 8 – 5 5 4, 5, 9, –
10
quadrant III, which means that it has a low priority, is acceptable given the main
motivations of the movement mentioned by the respondents. Positioning the attri-
bute 5 “climate conditions” in quadrant IV means possible overkill. This recom-
mendation kept in the four out of six situations is credible, given that the destination
taken into account is a balneoclimatic resort, less influenced by the climate factor. In
addition, this attribute cannot be influenced by the hotel managers. We have decided
to keep it in the analysis to see to what extent the hotel guests are affected by this
feature.
Analyzing the comparative situation of the distribution of quality attributes
(Table 4), we cannot ignore the extreme situations occurred. For example, in
Quadrant II there appears a single attribute after the division proposed by Martilla
and James (1977) while the V_S, V_PBM and V_D indices in the same quadrant are
10 and 11, respectively. A relatively similar situation is also for Quadrant III. The
only operational solution would be to consider only the attributes that are in the same
position in all or almost all the situations.
6 Conclusion
The issue of positioning quality attributes at the boundary between quadrants in the
Importance-Performance Matrix is a common one with major implications for the
decision-making process. Positioning an attribute in one of the four quadrants of the
original Importance-Performance Matrix recommends a certain managerial decision
with respect to that attribute. In order to avoid wrong decisions or eliminate
uncertainties, we performed the check of the position with five validity indices.
We chose these five indices according to the frequency of their use and the excellent
results obtained in comparative studies. The comparative analysis of the positioning
of the attributes in the six situations (by the method proposed by Martilla and James
(1977) and after the five indexes of validity) showed that certain attributes retain
their position irrespective of the method of dividing the quadrants chosen
(i.e. attributes: 16, 17, 1 in five cases, 18, 5 in four cases). We can appreciate that
there are few five constant attributes out of a total of 19 yet, these five have a stable,
difficult to challenge position.
We can conclude that applying the five validity indices in parallel with the
original method: allows identifying attributes that maintain their position in all the
cases or in four or five of the six analyzed. In addition, the stable identified attributes
irrespective of the method used are credible as positioning and as a recommended
strategic measure, and this leads to a reduction in the number of attributes on which
to act, which facilitates the process of increasing consumer satisfaction. The limits of
the research are given only by the small size of the study sample. This limit is not an
inconvenience because the proposed method should work under any circumstances.
These are also the important benefits of the method, and can be applied irrespective
of the positioning of the answers on the scale, regardless of the number of respon-
dents, irrespective of the mean of the values of the answers or the mean of the scale.
Another possible limit would be to choose the validity indices. We propose repeating
the analysis for other validation indices used in classical mathematics.
Acknowledgments The funding organization is Executive Agency for Higher Education,

Research, Development and Innovation Funding, Researcher mobility projects, PN-III-P1-1.1-
MC2017-1193, Project Director Olimpia I. Ban.
66 O. I. Ban et al.
References
Alberty, S., & Mihalik, B. J. (1989). The use of importance-performance analysis as an evaluative
technique in adult education. Evaluation Review, 13(1), 33–44.
Abalo, J., Varela, J., & Rial, A. (2006). El análisis de Importancia—Valoración aplicado a la gestión
de servicios. [The analysis of Importance-Valuation applied to the management of services].
Psichotema, 18(4), 730–737.
Abalo, J., Varela, J., & Manzano, V. (2007). Importance values for importance-performance
analysis: A formula for spreading aut values derived from preference rankings. Journal of
Business Research, 60, 115–121.
Aigbedo, H., & Parameswaran, R. (2004). Importance-performance analysis for improving quality
of campus food service. International Journal of Quality & Reliability Management, 21(8),
876–896.
Albrecht, K., & Bradford, L. J. (1990). The service advantage: How to identify and fulfil customer
needs. Homewood, IL: Dow Jones-Irwin.
Araña, J. E., & León, C. J. (2013). Correcting for scale perception bias in tourist satisfaction
surveys. Journal of Travel Research, 52(6), 772–788.
Arbelaitz, O., Gurrutxaga, I., Muguerza, I., Pérez, I. M., & Perona, I. (2013). An extensive
comparative study of cluster validity indices. Pattern Recognition, 46, 243–256.
Azzopardi, E., & Nash, R. (2013). A critical evaluation of importance-performance analysis.
Tourism Management, 35, 222–233.
Bacon, D. R. (2003). A comparison of approaches to importance/performance analysis. Interna-
tional Journal of Market Research, 45(1), 55–71.
Baker, K. L., & Draper, J. (2013). Importance-performance analysis of the attributes of a cultural
festival. Journal of Convention & Event Tourism, 14(2), 104–123.
Ban, O. (2012). The construction of importance-performance grid in tourist services research
without the direct determination of the attributes importance. The Annals of The University of
Oradea, 1(1), 474–480. ISSN 1582-5450, Economic Series.
Ban, O., & Bogdan, V. (2013). Using partial correlation coefficient to assess the importance of
quality attributes: Study case for tourism romanian consumers. International Journal of Social
Science and Humanity, 1(1), 21–24.
Ban, A. I., Ban, O. I., & Tușe, D. (2016). Calculation of the fuzzy importance of attributes based on
the correlation coefficient, applied to the quality of hotel services. Journal of Intelligent and
Fuzzy Systems, 1, 583–596.
Burns, A. C. (1986). Generating marketing strategy priorities based on relative competitive
position. Journal of Consumer Marketing, 3(4), 49–56.
Bush, R. P., & Ortinau, D. J. (1986). Discriminating first time and repeat patrons of a retail service
hotel complex: A case study. In R. L. King (Ed.), Marketing in an environment of change.
Southern Marketing Association Proceedings (pp 281–285).
Caber, M., Albayrak, T., & Matzler, K. (2012). Classification of the destination attributes in the
content of competitiveness (by revised importance-performance analysis). Journal of Vacation
Marketing, 18(1), 43–56.
Chu, K. R. S., & Choi, T. (2000). An importance-performance analysis of hotel selection factors in
the Hong Kong hotel industry: A comparison of business and leisure travelers. Tourism
Management, 21, 363–377.
Crompton, J. I., & Duray, N. A. (1985). An investigation of the relative efficacy of four alternative
approaches to importance-performance analysis. Journal of the Academy of Marketing Science,
13(4), 69–80.
Deng, W. J., & Pei, W. (2009). Fuzzy neural based importance-performance analysis for determin-
ing critical service attributes. Expert Systems with Applications, 36, 3774–3784.
Deng, W. (2007). Using a revised importance-performance analysis approach: The case of Taiwanese
hot springs tourism. Tourism Management, 28, 1274–1284.
Dolinsky, A. L., & Caputo, R. K. (1991). Adding a competitive dimension on importance-

performance analysis: An application to traditional health care systems. Health Marketing
Quarterly, 8(3/4), 61–79.
Ennew, C. T., Reed, G. V., & Binks, M. R. (1993). Importance–performance analysis and the
measurement of service quality. European Journal of Marketing, 27(2), 59–70.
Ford, J. B., Joseph, M., & Joseph, B. (1999). Importance-performance analysis as a strategic tool for
service marketers: The case of service quality perceptions of business students in New Zealand
and the USA. Journal of Services Marketing, 13, 171–186.
Hawes, J. M., & Rao, C. P. (1985). Using importance–performace analysis to develop health care
marketing strategies. Journal of Health Care Marketing, 5(4), 19–25.
Hu, H. Y., Lee, Y. C., Yen, T. M., & Tsai, C. H. (2009). Using BPNN and DEMATEL to modify
importance–performance analysis model–A study of the computer industry. Expert Systems with
Applications, 36(6), 9969–9979.
Huang, Y. C., Wu, C. H., & Hsu, C. J. (2006). Using importance-performance analysis in evaluating
Taiwan medium and long distance national highway passenger transportation service quality.
Journal of American Academy of Business, 8, 98–104.
Hudson, S., & Shephard, G. W. H. (1998). Measuring service quality at tourist destinations: An
application of importance-performance analysis to an alpine ski resort. Journal of Travel &
Tourism Marketing, 7(3), 61–77.
Kano, N., Seraku, N., Takahashi, F., & Tsuji, S. (1984). Attractive Quality and Must-Be Quality.
Journal of the Japanese Society for Quality Control, 41, 39–48.
Keyt, J. C., Yavas, U., & Riecken, G. (1994). Importance-performance analysis: A case study in
restaurant positioning. International Journal of Retail & Distribution Management, 22(5),
35–40.
Ko, Y. J., & Pastore, D. L. (2007). An instrument to assess customer perceptions of service quality
and satisfaction in campus recreation programs. Recreational Sports Journal, 3(1), 34–42.
Lavenburg, N. M., & Magal, S. R. (2005). Applying importance-performance analysis to evaluate
E-business strategies among small firms. E-service Journal, 3, 29–48.
Lee, G., & Lee, C. K. (2009). Cross-cultural comparison of the image of Guam perceived by Korean
and Japanese leisure travelers: Importance–performance analysis. Tourism Management, 30(6),
922–931.
Lee, Y. C., Cheng, C. C., & Yen, T. M. (2009). Integrate Kanos model and Ipa to improve order-
winner criteria: A study of computer industry. Journal of Applied Sciences, 9, 38–48.
Lin, C. H. N., Tsai, L. F., Su, W. J., & Shaw, J. C. (2005, May). Using the Kano two-dimensional
model to evaluate service quality of resort hotels. IJCSNS International Journal of Computer
and Network Security, 11(5), 84–87.
Martilla, J. A., & James, J. C. (1977). Importance-performance analysis. Journal of Marketing, 41
(1), 77–79.
Matzler, K., Sauerwein, E., & Heischmidt, K. A. (2003). Importance-performance analysis
revisited: The role of the factor structure of customer satisfaction. Service Industries Journal,
23(2), 112–129.
Matzler, K., & Sauerwein, E. (2002). The factor structure of customer satisfaction: An empirical test
of the importance grid and the penalty-reward-contrast analysis. International Journal of
Sservice Industry Management, 13(4), 314–332.
Milligan, G. W., & Coofer, M. C. (1985). An examination of procedures for determining the
number of clusters in a data set. Psychometrika, 50, 159–179.
Milman, A., & Xu, L. (2012). Examining the guest experience in themed amusement parks:
Preliminary evidence from China. Journal of Vacation Marketing, 18(4), 313–325.
Mihalič, T. (2013). Performance of Environmental Resources of a Tourist Destination: Concept and
Application. Journal of Travel Research, 52(5), 614–630.
Moll-de-Alba, J., Prats, L., & Coromina, L. (2016). The need to adapt to travel expenditure patterns.
A study comparing business and leisure tourists in Barcelona. Eurasian Business Review,
[e-journal], 6(2), 253–267. https://doi.org/10.1007/s40821-016-0046-4.
68 O. I. Ban et al.
Mount, D. J. (2000). Determination of significant issues: Applying a quantitative method to

importance-performance analysis. Journal of Quality Assurance in Hospitality and Tourism,
1, 49–63.
Nale, R. D., Rauch, D. A., Wathen, S. A., & Barr, P. B. (2000). An exploratory look at the use of
importance–performance analysis as a curricular assessment tool in a school of business.
Journal of Workplace Learn, 12(4), 139–145.
O’Leary, S., & Deegan, J. (2005). Ireland’s image as a tourism destination in France: Attribute
importance and performance. Journal of Travel Research, 43(3), 247–256.
Oh, H. (2001). Revisiting importance-performance analysis. Tourism Management, 22, 617–627.
Ortigueira-Sánchez, L. C., Ortigueira-Bouzada, M., & Gómez-Selemeneva, D. (2015). Derived
importance-performance analysis and diagonal model in a Spanish municipality. International
Review of Administrative Sciences, 83(3), 481–502.
Ortinau, D. J., Bush, A., Bush, R. P., & Twible, J. L. (1989). The use of importance–performance
analysis for improving the quality of marketing education: Interpreting faculty-course evalua-
tions. Journal of Marketing Education, 11(2), 78–86.
Pike, S. (2002). The use of importance-performance analysis to identify determinant short-break
destination attributes in New Zealand. Pacific Tourism Review, 6(1), 23–33.
Ryan, C., & Huyton, J. (2002). Tourists and aboriginal people. Annals of Tourism Research, 29(3),
631–647.
Sampson, S. E., & Showalter, M. J. (1999). The performance-importance response function:
Observations and implications. The Service Industries Journal, 19(3), 1–25.
Sever, I. (2015). Importance-performance analysis: A valid management tool? Tourism Manage-
ment, 48, 43–53.
Slevitch, L., & Oh, H. (2010, December). Asymmetric relationship between attribute performance
and customer satisfaction: A new perspective. International Journal of Hospitality Manage-
ment, 29(4), 559–569.
Smith, S., & Costello, C. (2009). Culinary tourism: Satisfaction with a culinary event utilizing
importance-performance grid analysis. Journal of Vacation Marketing, 15(2), 99–110.
Turism Felix S.A., (2013). Hotel International. Accessed October 2, 2016, from http://www.
felixspa.com/ro/hoteluri/hotel-international.
Van Ryzin, G. G., & Immerwahr, S. (2007). Importance–performance analysis of citizen satisfac-
tion surveys. Public Administration, 85, 215–226.
Wade, D., & Eagles, P. F. J. (2003). The use of importance–performance analysis and market
segmentation for tourism management in parks and protected areas: An application to
Tanzania’s National Parks. Journal of Ecotourism, 2(3), 196–212.
Wu, M. L. (2014). Cross-border comparative studies of service quality and consumer satisfaction:
Some empirical results. Eurasian Business Review [e-journal], 4(1), 89–106.
Yavas, U., & Shemwell, D. J. (2001). Modified importance-performance analysis: An application to
hospitals. International Journal of Health Care Quality Assurance, 14(3), 104–110.
Ziegler, J., Dearden, P., & Rollins, R. (2012). But are tourists satisfied? Importance-performance
analysis of the whale shark tourism industry on Isla Holbox, Mexico. Tourism Management, 33
(3), 692–701.
Part III
Public Economics
Corrupt Practices in Public Procurement:
Evidence from Poland
Arkadiusz Borowiec
Abstract Contracts and management of public investment contracts are particularly

vulnerable to fraud and corruption. This is due in large part to the large scale of these
investments, which are followed by huge amounts of money and sometimes the
difficulties associated with effective oversight of a large number of contracts.
Disclosure of illegal payments often hinders public investment, leads to their failure
or improper implementation. As a result, there are big losses incurred by the state
budget. This paper examines 75 companies involved in the procurement process to
identify the most common corrupt practices used by awarding entities at various
stages of the proceedings. The paper also attempts to formulate recommendations
concerning the economic policy of the state in the examined area.
Keywords Public procurement · Policy making · Corruption
1 Introduction
The phenomenon of corruption in state administration concerning officials and

public figures has been one of the growing problems of the modern world. Its
dimensions are disturbing not only for the authorities, politicians or institutions,
but for ordinary citizens, above all. Currently, corruption activities often constitute a
kind of system that functions in a well-thought-out and organized form, has its own
rules and has little in common with applicable law, and acts to the detriment of the
state and its residents.
Corruption refers to demanding, suggesting, giving or receiving, directly or
indirectly, bribes or any other undue advantage or promise that distorts the proper
performance of any obligation or behavior required of a person receiving a bribe, or
an undue advantage or promise (Council of Europe 1999). Areas particularly
exposed to the occurrence of this unfavorable phenomenon include the following:
A. Borowiec (*)
Faculty of Engineering Management, Poznan University of Technology, Poznan, Poland
e-mail: arkadiusz.borowiec@put.poznan.pl

72 A. Borowiec
restructuring and privatization processes, management of public property, activities

of special purpose funds and agencies, functioning of health care, education. The
risk of corruption mainly arises in places where the authority acts in a discretionary
manner, and also where public officials conclude contracts with private entities and
when supervisory and control functions are exercised (Dobrowolski 2001). There
exists a threat that a dishonest official may make his decision conditional on material
or personal gain and companies competing for public tenders will dishonestly tip the
scales in their favor and that a person who is afraid of the consequences of their
actions will be willing to get rid of the problems in exchange for a bribe.
Considering that in 2010 public sector expenditures made up about 20% of EU
GDP, of which public procurement amounted to 19%, this area seems to be
exceptionally exposed to corrupt practices. Abuses occurring here can mainly take
the following forms: (1) bribes paid to officials and by awarding contracts to favored
contractors, (2) collusion among contractors, (3) submitting untrue offers aimed at
distorting competition (European Commission 2017).
It is also worth emphasizing that the phenomenon of corruption reaches beyond
the public sphere (Makowski 2008). An example of this is the famous equation,
formulated at the end of the 1980s, capturing corruption as the sum of monopoly,
discretionary decisions in the absence of accountability, and in short: C (corrup-
tion) ¼ M (monopoly) + D (discretion) A (accountability) (Klitgaard 1988). In
this approach, there is no longer any doubt as to whether corruption is related to the
performance of any public functions or any other functions that involve making
decisions and exercising power.
Bearing in mind the above arguments, the article includes research on 75 Polish
enterprises participating in the public procurement procedure in order to identify the
most common corruption practices used by awarding entities in various stages of
proceedings. Data was collected in the first quarter of 2017. A questionnaire was sent
to companies. The deliberate selection of the sample was used in connection with the
need to avoid responses that would not be verified by economic practice. It is
common knowledge that enterprises that do not engage in the public procurement
market usually provide corruption processes as the reason for not participating in
tenders. The article also attempts to formulate recommendations regarding state
policy in the studied area.
2 Corruption in the Light of Literature
Corruption is a reflection of economic, legal and political institutions of a given state

(Svensson 2005). Institutional theories regarding this phenomenon can be divided
into two groups. The first group makes the quality of the institution (including the
level of corruption) conditional upon economic factors. Their development depends
on the level of national income and needs (Lipset 1960; Demsetz 1967). This theory
is very similar to the view that an increase in human capital and income leads to
institutional development (Glaeser et al. 2004).
Corrupt Practices in Public Procurement: Evidence from Poland 73
The second group places more emphasis on the institutions themselves. A thesis
is arised by Acemoglu et al. (2001), which suggests that institutions in former
colonies were shaped to protect the interests of the colonizer, while the benefits for
the inhabitants appeared where the Europeans settled. This, in turn, was determined
by the conditions of natural environment. According to this theory, corruption is
greater in colonies where the aforementioned conditions were unfavorable. In the
light of these theories, the impact of economic institutions on corruption is achieved
by limiting market competition. The variables that describe market restrictions
include the degree of openness to competition on behalf of imports (Ades and Di
Tella 1999) and the degree of market entry regulation for start-ups (Djankov et al.
2002).
As it has already been mentioned, corruption in public procurement occurs on a
large scale. For example, research carried out in Uganda in the 1990s proved that
only 13% of the total amount dedicated to helping schools by central budget reached
the educational institutions themselves (Reinikka and Svensson 2004). Using a
similar methodology Olken (2003, 2004) established that during the implementation
of Indonesia’s poverty-reduction program, 29% of funds for road construction and
18% of subsidized rice got stolen. Despite considerable interest in the phenomenon
of corruption, its identification and quantification in literature is poorly represented.
The vast majority of numerical comparisons do not claim that all manifestations of
corruption in given programs or sectors have been identified. There is also a lack of
linking microeconomic research on the scale of corruption and macroeconomic
literature on institutional determinants of corruption.
The literature lists raising the salaries of the clerical staff as one of the most
important factors in the fight against corruption (Lindbeck 1975). Evidence for this,
however, is not unambiguous. Some authors find such evidence in their research
(Van Rijckeghem and Weder 2001) while others do not (Rauch and Evans 2000).
Wage incentives, however, under certain conditions may limit the phenomenon of
corruption. In this case it is necessary to operate the law enforcement apparatus
efficiently and to make sure a bribe is not a function of the official’s remuneration.
Another common approach to curbing corruption is to increase competition between
enterprises. However, the relationship between corruption and competition also
remains vague from the analytical point of view. Competition in the provision of
public services will not necessarily lead to reduced corruption.
Most anti-corruption programs are based on legal and financial institutions—law
enforcement, police, financial supervision—whose task is to enforce and strengthen
accountability in the public sector. Meanwhile, a more radical approach to corrup-
tion does not always work. There is also little evidence that directing additional
funds to existing legal and financial public institutions, whose task is to monitor
compliance with law, would result in a decreased level of corruption. There are also
alternative approaches to combating corruption. One of them is to replace public
institutions, at least for some time, with private ones, whose task would be to enforce
public law by resolving disputes (Hay and Shleifer 1998). However, litigation, as
well as deregulation, carries its own limitations. Their analysis on data suggests that
improving citizens’ access to information and providing them with more powers to
74 A. Borowiec
act can actually lower corruption. Yet another strategy to fight corruption is to
delegate competences or borrow honesty from the private sector. Over the past
two decades over 50 countries have employed private (international) enterprises to
carry out inspections prior to the collection of imported goods, and several of them
have delegated responsibility for charging customs duties (Yang 2005).
The previous literature also contains opinions that corruption is a positive phe-
nomenon. It can facilitate the settlement of affairs in an economy with too much
bureaucracy and little flexibility regarding the needs of entrepreneurs (Leff 1964;
Huntington 1968). In most models that link corruption to slower economic growth,
corrupt practices are not in themselves the most serious social cost. The basic social
losses caused by corruption consist of supporting ineffective enterprises and
disrupting the allocation of talents, technologies and capital by extracting these
factors from the most productive (from a social point of view) applications (Murphy
et al. 1991, 1993).
Referring to the Santhanam Commission report, created in 1962 to investigate the
extent of corruption in India, it was indicated that it is an economic irrationality.
Corrupt officials deliberately delay their decision to enforce bribes from entrepre-
neurs (Myrdal 2005). In the 1990s, the hypothesis that corruption promoted eco-
nomic growth was falsified by more sophisticated scientific methods by an
economist of the International Monetary Fund, who based his work on quantitative
data from 63 countries. Came to a conclusion that corruption in bureaucracy reduces
private investment, which leads to a slowdown in economic growth (Mauro 2005).
In turn, on the basis of three international surveys in the years 1996–1997, analyzing
the relationship between paying bribes and bureaucratic harassment. It was found
that they were more and more often, more time was also lost, “capital costs were
higher and regulations perceived as more nagging” (Kaufman and Wei 1998).
3 Identification of Corrupt Practices in Public Procurement

in the Light of Own Research
The public procurement system has been a sphere exposed to the occurrence of
pathological phenomena and a high risk of corruption. Under Polish decentralized
public procurement system the quality and integrity of public procurement pro-
cedures depend not only on the quality of the law, but also on the professionalism
and honesty of thousands of people involved in specific procedures both on behalf of
contracting authorities as well as contractors. For entrepreneurs’ public procurement
has always been and will always be an extremely attractive form of obtaining jobs,
mainly because entities utilizing budgetary means are good, reliable and always
solvent contracting parties. They do not face bankruptcy or liquidation, and if the
payment is late, it usually arrives with due interest. It is also extremely important that
the proceedings leading to obtaining public contracts follow clearly and legibly
specified procedures and should therefore be predictable for participating suppliers
and contractors. For these reasons, more and more entrepreneurs are nowadays
applying for public contracts. The owner study involved enterprises from various
industries located in the territory of Poland. The research was carried out in the first
half of 2017. Seventy-five enterprises from various industries took part in them. 30%
of enterprises represented construction industry, 12% transport, 13% food, 10%
electronic, 9% education, 8% chemical, 6% printing, 4% metallurgy, 4% automo-
tive, 2% clothing, 2% telecommunications. A deliberate selection of the sample was
used to identify the most common corrupt practices applied by procuring entities at
various stages of the proceedings. As it turns out, the surveyed companies are
consistent in answering the question about corruption processes occurring on the
public procurement market, because as many as 86% responded positively. When
asked about the mechanisms for fixing tenders, the most frequently mentioned were
the following: biased evaluation criteria, unintelligible specifications, unjustified
awarding to one contractor, short notification time, incorrect information, unequal
treatment of contractors and leakage of confidential information. Forty-seven per-
cent of contractors participating in the survey highlighted the biased evaluation
criteria. As the most frequent abuses in this respect, they recognized the application
of experience criteria by the awarding entities (61% of those pointing to biased
assessment criteria) and the contractor’s knowledge of a specific industry gained
during similar contracts (25%). It is worth emphasizing that in Polish law these
criteria may, however, constitute conditions for participation in the proceedings.
Thus, the contractor’s experience in carrying out specific public contracts is not
without significance for the assessment of the possibility of being awarded one. The
contracting authority has an option of specifying the conditions for participation in
the procedure so as to ensure that the contractor is awarded a contract that guarantees
its proper execution. However, the contracting authorities cannot demand the criteria
for the offer evaluation referring to the entity executing the contract. While
discussing the results of the study, it is also worth noting that virtually all construc-
tion companies participating in the survey focused on the criterion of experience as
being tendentious in the assessment of an offer. This is an important observation, as
often in this sector experience determines whether the contractor can participate in
the tender at all, and its absence eliminates entities that cannot demonstrate similar
jobs from the past.
Twenty-one percent of respondents drew attention to an incomprehensible spec-
ification of essential terms of the contract as a document used procuring entities to fix
tenders. Simultaneously, they drew attention to three warning signs indicating
irregularities in this document. The closest similarity between the specification and
the product or service of the winning contractor was considered as the most serious
threat (64% of respondents who paid attention to the incomprehensible specifica-
tion). In addition, their anxiety is caused by a poorly prepared, vague or ambiguously
understood specification (32%) and a relatively small competition related to the
restrictions on the description of the subject of the contract (12%). The aforemen-
tioned remarks seem to be correct, because in a competitive market for goods and
services, any specification terms that seem to be drawn up to favor a company
require a closer examination. For example, specifications with too few details can be
76 A. Borowiec
used to exclude other contractors or justify the awarding of the contract to a sole
contractor. Excessively vague or extensive specifications allow contractors who do
not meet the conditions to apply for a contract or justify unfair changes to the terms
of the contract introduced after the contract is awarded. It sometimes happens that
the officials participating in tenders even allow the favored contractor to prepare the
specifications themselves.
The unjustified awarding of a contract to one contractor as a corruption mecha-
nism was recognized by 13% of the respondents. Direct purchase of goods and
works and the acquisition of individual consultants may be lawful. However, such
methods may be used to award contracts to favored contractors, bypassing the
competitiveness of tender selection. A short time reserved for notification about
tenders on behalf of ordering parties was noticed in the survey by 7% of respondents.
Although in this case there are procedures related to the determination of the
minimum number of days to submit bids, the contracting authorities often stick to
minimal values. This fact means that with complicated and complex tender pro-
cedures, not all interested contractors are able to prepare themselves in a professional
way. Those who earlier learn about the tender informally are able to prepare a better
and more professional offer, which leaves them with greater advantage over poten-
tial competitors. An additional difficulty related to short deadlines for submitting
offers is also the participation in several parallel tender proceedings.
The surveyed entrepreneurs also indicated incorrect information as one of the
mechanisms of corruption. It is true that only 5% of respondents paid attention to this
eventuality, but they clarified what it may actually concern. According to own
research unreliable information may refer to the following actions on the part of
the ordering party:
– posting incomplete information about the contact in order to deliberately make it
difficult and sometimes even impossible to submit appropriate explanations,
– placing a vague description of the required works, supplies or services that would
not attract too many contractors,
– preparing a description of the required works in a very superficial manner, in
order to judge other contractors in a discretionary manner or to completely
exclude them from the tender.
Another potentially corruptive mechanism for those participating in the study is
the unequal treatment of contractors. Such a possibility was noticed by 4% of
respondents. By using this mechanism, the officials participating in the project
provide their favored contractor with information to which other contractors have
no access. For example, that one of the items will not be required after the order is
awarded or some low-cost solution will be acceptable. Such information may
provide some contractors with an undue advantage and the opportunity to lower
the price or other details of the offer, and thus overcome uninformed competitors.
Officials participating in the project may facilitate this mechanism by formulating
the specification to the detriment of competitors. Unequal bidding opportunities are
also used to describe practices used by contractors, who offer prices well below or
well above costs for different items of the contract, hoping that the ordering party
will need a lot more of those expensive items. Ultimately, as agreed at the time of
awarding the contract, the cheapest contractor does not have to propose solutions
with the lowest costs.
The leak of confidential information as one of the mechanisms of corruption in
public procurement was noticed by 3% of respondents. To provide favored contrac-
tors with an unfair advantage, officials can send them information about estimated
costs and competitive offers, thus allowing them to adjust offers adequately in order
to win. Entrepreneurs participating in the survey also mentioned the following
symptoms indicating the leak of confidential information:
– exact matching of one of the offers to solutions and/or budget preferred by the
ordering party in the project,
– involvement in tender procedures, of the so-called “Intermediary,”
– incorrect tender procedures, i.e. interruptions during the opening of offers
(to make the content of some offers available or to make changes),
– communicating with each other (e.g. by means of electronic mail—ordering
officials with their favored contractor).
In addition to the identified mechanisms favoring corruption in public procure-
ment, respondents also pointed to the problem of the preference of large entities by
procuring authorities. Among the most common reasons for the advantage of large
companies in tendering procedures the following were listed: easier access to loans,
better logistics facilities, competitive prices and dumping, own transport, high
security deposits, lower labor costs, long payment terms and short delivery times,
high technical and economic potential, reputation on the market, possibility of larger
discounts, more experience and higher turnover. However, it should be objectively
stated that the size of a company is not directly correlated with corruption activities,
but nevertheless the scale of activity and the possibility of using the effects of scale
certainly and undoubtedly facilitate such activities.
They are also facilitated by the procedure allowing exclusion of enterprises that
do not meet the criteria set by awarding authorities, as well as Polish legislator’s
significant limitation of the possibility of appealing to the President of the Public
Procurement Office. It should also be emphasized that any appeal involves high
costs, which significantly limit the entrepreneurs’ possibilities in this respect. The
most frequent reasons for the protests and appeals were the following: lost tender
despite providing the best price, errors by officials, violation of specification condi-
tions by the ordering party, errors in competitors’ offers, or incorrect calculation of
economic credibility indicators.
4 Recommendations Regarding National Economic Policy
In the light of empirical research presented in the previous chapter, it is worth

considering how to minimize corruption in procurement procedures. A very special
and probably the most important institution with an impact on limiting corruption is
78 A. Borowiec
the law, which constitutes a set of rules defining the rules of conduct of citizens and
the operation of public and private institutions. The prosecution and punishment of
corruption phenomena primarily remains the task of the police, the judiciary, tax and
customs administration, supervisory bodies and control institutions. Individual goals
and tasks are also implemented in specially formed departments and teams, for
example in the Department of Counteracting Corruption, Terrorism and Organized
Crime at the Internal Security Agency. Among governmental bodies the Public
Procurement Office plays an extremely important role in counteracting corruption.
Its activities are aimed at ensuring transparency and cleanliness in the process of
awarding public contracts naturally minimizing the risk of corruption at the interface
between business and public zone.
A very important role in counteracting corruption is also played by public
institutions independent of the government. One of these institutions is the Ombuds-
man, who thanks to his independence, represent citizens impartially in disputes with
the public administration. It seems that the main goal of changes in Polish law is to
improve the system of absorption of EU funds. Thanks to the amendment of the
Public Procurement Law, the Polish legislator has created a system much more
restrictive and complicated than the one previously in force. This has been largely
due to the fact that with large funds, which have begun to flow into Poland since May
1, 2004, some concerns have emerged as to how they would be used. Therefore, the
rules on public procurement should be simplified, because the simpler the system,
the fewer the opportunities for corruption. Unfortunately, the framework of this
study does not allow describing specific regulations that need to be liberalized.
Nevertheless, regarding the legislative we can provide changing solutions
concerning the following:
– limiting barriers and discouraging ordering parties to use open procedures, and,
above all, to formalize procedures,
– introducing full transparency in awarding public contracts by obliging the order-
ing parties to publish information about orders in non-competitive procedures,
– increasing the efficiency of public procurement proceedings by limiting the
circumstances in which the obligation to reject the most economically advanta-
geous tender is required,
– limiting barriers hindering contractors’ access to public procurement procedures
resulting from the requirements regarding submitted documents.
Moreover, the division of competences should be very clear and the responsibility
for decisions should be clearly defined. An effective control system is also neces-
sary. The control mechanism is effective if sanctions are enforced and severe enough
to deter corruption amateurs. It seems that one of the remedial measures should also
be to increase the interest in training and education of employees of the public
procurement department, as well as the Ministry of Finance elaborating the fastest
possible procedure for informing budget organs about the funds allocated to them for
a given year. The legislator should also consider developing and implementing a
code of ethics for public procurement and propagating an anti-corruption pact for
business and administration operating in the system.
An important part of the whole set of elements hindering the development of

corruption behavior among the clerical staff is the internal control system. It is
certain that no external control carried out by institutions such as the Regional
Audit Chamber or the Supreme Audit Office can replace systematic and compre-
hensive internal control. For example, the Control Office in Gdansk has concentrated
different control departments previously dispersed over various departments. The
office is systematically strengthened by personnel and intellectually through the
continuous training of its employees in order to professionally control 240 organiza-
tional units of the city—all different in terms of structure and tasks.
Corruption phenomena in the area of public procurement can be counteracted by
electronic tools, such as electronic auctions and electronic communication of
contracting entities with contractors, so as to ultimately create a public electronic
tendering platform. The use of electronic tools in the area of public procurement can
fundamentally reduce the phenomenon of corruption. This is connected with at least
two issues. Firstly, thanks to electronic tools the level of discretionary decision-
making on behalf of the ordering party is minimized, and secondly, electronic tools
favor the implementation of the principle of transparency, and this in itself is a
significant obstacle to the spread of corruption. Counteracting the phenomena of
corruption in public procurement must be connected with the development of a
desired model of behavior of individual persons participating in the procedures as
well as a firm social disapproval. In addition to a specific system of values, it is also
important to substantially prepare the involved individuals, in particular on the side
of the ordering party. Only well-qualified people who complement their knowledge
and are properly rewarded, and who feel secure with their jobs can ensure that the
public procurement system will be a transparent, well-functioning and free of
corruption. It seems that such a result could be achieved by the creation of a
profession of a public procurement specialist.
Creating ethical and moral attitudes among employees of the public finance sector
seems to be a controversial topic. Employees of this sector, by definition, should
have high morale and flawless attitude, and the word “ethics” should not be known
to them only as a dictionary term. Unfortunately, in reality there exist numerous
factors that can cause the breakdown of such a claim. One of them is the aforemen-
tioned fact of too low wages in the public sector. However, it should be remembered
that raising wages reduces this type of corruption, which originates from the pursuit
of basic needs, while it does not reduce (and often even increases) the type, which is
caused by simple greed. Here are selected rules from employee’s code of conduct for
performing official duties. Following issues can be helpful in the fight against
corruption:
– they are guided by professional principles of good and customer satisfaction,
remembering about the obligation to comply with the law,
– they work diligently and conscientiously, performing tasks entrusted to them in
the most effective way,
– they must be aware of substantive and legal responsibility for their actions and
decisions,
80 A. Borowiec
– they indicate any irregularities in procedures, processes and activities carried out
at the office, aiming to improve its functioning (Olszewska 2007).
There are numerous ways to disclose and condemn corruption. Media is of great
importance in the fight against it. In the era of broadly understood information,
media has a significant spectrum of opportunities to disclose corruption scandals,
which in turn affects public opinion. Many corruption scandals have been revealed
by journalists who, in pursuit of sensational news, facilitate the work of law
enforcement agencies and the administration of justice. They can also make life
difficult for those suspects who, for lack of evidence, often walk away unpunished.
The actions of specially appointed independent anti-corruption agencies remain one
of the most important opportunities to fight corruption. They include investigative
and monitoring units that possess appropriate qualifications.
An important contribution to the disclosure of corruption (and also to combat this
phenomenon) has also been brought by Interpol—the International Criminal Police
Organization, which is above all a network enabling a rapid flow of information
between the police of different countries. Another example of organizations
involved in the fight against corruption is Transparency International—an organiza-
tion dealing with combating corruption and the World Bank, which for several years
has been involved in counteracting and fighting corruption phenomena. Both of
these organizations are the authors of reports and summaries illustrating the prob-
lems of corruption in individual countries.
5 Conclusion
The widespread use of entrusted public functions for private purposes has become a
problem widely discussed both in the media and in parliament. Corruption is not
limited to handing cash (“bribes”) to persons performing public functions today. As
already mentioned, currently corruption activities often constitute a kind of system
that functions in a very well-thought-out, organized form and has its own rules.
Government spending and public procurement to a large extent stimulate economic
activity, simultaneously affecting the economic recovery of the state. At the same
time, however, according to the literature analysis and available research data, their
character facilitates corruption. For many people, public procurement is associated
today with pathological behavior of procuring entities and bidders, manipulation of
the law or “fixing” tenders.
Public procurement involves long and complicated procedures with multiple
stages before any project finally becomes implemented. Therefore, it is exposed to
corruption at any time, starting with the initial decision on its implementation and
ending with its management just after the contract is finalized. In the light of the
objectives set in this article, we should consider the main tasks on which public
administration activities should focus regarding the reduction of adverse behavior
and corruption phenomena in the area of public procurement. In the legislative
sphere, one should consider altering the existing legal regulations. Such a change of
law should primarily concern the following: (1) limiting barriers and solutions
discouraging ordering parties to use open procedures, and above all, demoralizing
procedures, (2) introducing full transparency in awarding public contracts by oblig-
ing the ordering parties to publish information about orders in non-competitive
procedures, (3) increasing the efficiency of public procurement proceedings by
limiting the circumstances in which the obligation to reject the most economically
advantageous tender is required, (4) limiting barriers hindering contractors’ access to
public procurement procedures resulting from the requirements regarding submitted
documents.
In the field of disseminating knowledge about the rules of public procurement,
public administration should focus on the following: disseminating ‘good practices’
in the application of public procurement procedures, for example by developing
reference documents and disseminating case law; in addition, conducting trainings in
the field of public procurement, with particular emphasis on areas that are particu-
larly exposed to the occurrence of corruption phenomena, and thus: the choice of the
mode of awarding the contract, formulating assessment criteria, and examining and
evaluating offers.
The conducted research should be considered a pilot, as it concerns business
entities based solely in Poland. As you know, the level of corruption in various
countries is not the same; hence it is difficult to generalize the results unequivocally.
The author is also aware of the limitations in the scope of various legal systems
concerning the awarding of public procurement around the world. It is worth
emphasizing, however, that the presented research results may be of high cognitive
significance, connected with the identification of corrupt practices used on the public
procurement market. They can also act as a reference point for further research into
the phenomenon of corruption in other countries.
References
Acemoglu, D., Robinson, J. A., & Johnson, S. (2001, December). The colonial origins of compar-
ative development: An empirical investigation. American Economic Review, 91, 1369–1401.
Ades, A., & Di Tella, R. (1999). Rents, competition, and corruption. American Economic Review,
89(4), 982–993.
Council of Europe. (1999). Civil law convention on corruption (European Treaty Series No. 174).
Strasburg.
Demsetz, H. (1967). Towards a theory of property rights. American Economic Review, 57(2),
347–359.
Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2002). The regulation of entry.
Quarterly Journal of Economics, 117(1), 1–37.
Dobrowolski, Z. (2001). Corruption in public life. Zielona Góra: Organon.
European Commission. (2017). European semester – Summary of information theme. Public orders
[pdf]. European Commission. Retrieved from November 20, 2017, from https://ec.europa.eu/
info/sites/info/files/file_import/european-semester_thematic-factsheet_public-procurement_pl.
pdf
82 A. Borowiec
Glaeser, E., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2004). Do institutions cause growth?
Journal of Economic Growth, 9(3), 271–303.
Hay, J., & Shleifer, A. (1998). Private enforcement of public laws: A theory of legal reform.
American Economic Review, 88(2), 398–403.
Huntington, S. P. (1968). Political order in changing societies. New Haven, CT: Yale University
Press.
Kaufman, D., & Wei, S.-J. (1998). Does “grease money” speed up the wheels of commerce? The
World Bank. Washington, DC. Retrieved November 20, 2017, from http://siteresources.
worldbank.org/INTWBIGOVANTCOR/Resources/grease.pdf
Klitgaard, R. (1988). Controlling corruption. Berkley, CA: University of California Press.
Leff, N. H. (1964). Economic development through bureaucratic corruption. American Behavioral
Scientist, 82(2), 8–14.
Lindbeck, A. (1975). Swedish economic policy. London: Macmillan.
Lipset, S. M. (1960). Political man: The social basis of modern politics. New York: Doubleday.
Makowski, G. (2008). Corruption as a social problem. Warszawa: Wydawnictwo “Trio”.
Mauro, P. (2005). Corruption and growth. In A. Mishra (Ed.), The economics of corruption.
Oxford: Oxford University Press.
Murphy, K., Shleifer, A., & Vishny, R. (1991). The allocation of talent: Implications for growth.
Quarterly Journal of Economics, 106, 503–530.
Murphy, K., Shleifer, A., & Vishny, R. (1993). Why is rent-seeking so costly to growth? American
Economic Review, 83(2), 409–414.
Myrdal, G. (2005). Corruption: Its causes and effects. In A. Mishra (Ed.), The economics of
corruption. Oxford: Oxford University Press.
Olken, B. (2003). Corruption and the costs of redistribution: Micro evidence from Indonesia.
Cambridge, MA: Harvard University Press.
Olken, B. (2004). Monitoring corruption: Evidence from a field experiment in Indonesia. Cam-
bridge, MA: Harvard University Press.
Olszewska, M. (2007). Public procurement monitor. Wydawnictwo Forum Sp. z o.o., No. 12.
Rauch, J., & Evans, P. (2000). Bureaucratic structure and bureaucratic performance in less
developed countries. Journal of Public Economics, 75(1), 49–71.
Reinikka, R., & Svensson, J. (2004). Local capture: Evidence from a central government transfer
program in Uganda. Quarterly Journal of Economics, 119(2), 1–28.
Svensson, J. (2005). Eight questions about corruption. Journal of Economic Perspectives, 19(3),
19–42.
Van Rijckeghem, C., & Weder, B. (2001). Bureaucratic corruption and the rate of temptation: Do
wages in the civil service affect corruption, and by how much? Journal of Development
Economics, 65(2), 307–331.
Yang, D. (2005). Integrity for hire: An analysis of a widespread program for combating customs
corruption. In R. Gerald (Ed.), Ford school of public policy. Ann Arbor, MI: University of
Michigan.
Evaluation System for the Public
Institutions Employees
Stefania Cristina Mirica, Liliana Mihaela Moga, and Bucur Iulian Dediu
Abstract This paper reviews the trends in the evaluation system used for public
administration in the context of adopting the New Public Management principles in
public administration in order to evaluate the gaps and underline the future devel-
opments. The research is focused on theoretical and practical aspects and proposes a
new approach for the evaluation of governmental services. The proposed evaluation
system is mainly focused on indicators connected with the evaluation of the
employees of the public institutions activity and gives a central role to the opinion
of citizens, as main beneficiaries of the governmental services. It quantifies both
aspects concerning policy and culture quality and human resources. The develop-
ment and implementation can contribute to the improvement of overall evaluation of
the public sector governance.
Keywords Public administration · Public sector employees · New public

management · Legal framework · Human resources · Evaluation
1 Introduction
Public sector governance is recognized as the key goal of reducing poverty and
inequities between citizens. The public administration is facing many challenges at
national and international level, which include the instability of the political and
economic environment, the necessity of lowering the costs for public services, an
increase in the demands of citizens, as representatives of the community, the loss of
S. C. Mirica (*)
Department of Juridical Sciences, The School for Doctoral Studies in the Socio-Humanities,
L. M. Moga
Department of Economics, Dunarea de Jos University of Galati, Galati, Romania
B. I. Dediu
The School for Doctoral Studies in the Socio-Humanities, Dunarea de Jos University of Galati,
Galati, Romania

84 S. C. Mirica et al.
motivation and the aging of the working population. The public administration has
the mission to protect and promote the general interests of the citizens, and in order
to achieve this challenge, the public administration authorities are acting in a public
power regime. It is shown that the public power regime involves conferring certain
powers on the public administration authorities through which they can impose the
general interest upon the particular interests (Vedinas 2017). Through the specific
nature of entrusted missions, namely enforcing the laws and providing public
services, the public administration authorities and, implicitly, their management,
have characteristic particular elements in relation to private companies.
Under these circumstances, it is being forwarded a new approach, which should
replace the classical approach oriented towards service providing institutions,
towards the needs of citizens and business environment as beneficiaries, focused
on so-called life events. Starting from 1980s, it has emerged the concept of New
Public Management, whose wide acceptance has brought attempts of reforming the
government, which had the result of redefining the role of public institutions.
Acceptance of the New Public Management on a large scale highlights the failures
and the poor performance of the public services. They are mainly caused in theory
and practice by the way in which the activities are organized in the traditional public
administration, dominated by bureaucracy (Kalimullah et al. 2012). Plumb and
Androniceanu (2003) include in the public management definition its aim as being
to provide services that satisfy the public interest. Public Management is presented
as the entirety of processes and management relations existing between the admin-
istrative systems components, through which, in a public power system, laws are
enforced and/or activities are planned, organized, coordinated, managed and
controlled.
In Romania, the New Public Management concept and its characteristics have
been accepted. This is reflected in documents through which the public management
implementation is made, such as the legislative framework in the Romanian public
administration. The legislative framework was adapted to the new economic and
social conditions after 1990, as well as supporting the process of accession to the
European Union and the Standards of managerial control for public institutions. To
that effect, it was developed the Code of Internal/Managerial Control of Public
Entities (General Secretariat of the Government 2015). The features of the new
public management, which reshape the approach of the evaluation system for the
public institutions employees, are focusing on the satisfaction of the public services
end-user, who is the citizen, as a representative of the community and on taking
public services out of the politics influence, as well as on eliminating bureaucracy
and centralization (Plumb and Androniceanu 2003; Beia Consult 2008). The legis-
lative efforts for introducing performance indicators designed to measure the degree
of goals achievement are a formal recognition of the importance of the management
performance evaluation for increasing the results of the public services and
reshaping the public sector management.
On the other hand, the development agencies evidenced the failure of their efforts
to support the reforms in the public sector governance. It is difficult to monitor or
notice the progress at the public sector governance level which covers the
Evaluation System for the Public Institutions Employees 85
management at the center of the government and civil service system performance,
due to its complexity (Turner 2013). The existing evaluation systems for the public
administration reveal their limits, being based more on quantitative indicators than
on measuring the beneficiaries’ satisfaction. Also, the reform of the public sector
governance attempts a fundamental transformation of the relationship between the
government, public administration and citizens, which requires that the evaluation
systems focuses on new issues, more qualitative then quantitative, and taking into
consideration the opinion of citizens as main final beneficiaries of the governmental
services and the activity of civil servants as the connection between government and
beneficiaries. The benchmarking evolution requires a new approach of the policy
issues and political realities and their impact on citizens’ satisfaction. Therefore, the
trends in developing the evaluation systems are centered on human factors, such as
citizens, as public service beneficiaries, and civil servants, as providers.
The aim of the research is to develop and validate an evaluation system for
adapting to the new requirements which bases mainly on the evaluation of the
delivered services made by the citizens and focuses on the civil servants’ activity.
The research is based on the current trend existing at international level.
2 Methodology
There are various approaches for measuring the governmental services which cover
a wide range of services and beneficiaries and, even though it is perceived the system
complexity, the analyses carried out are limited. The aspects analyzed in different
evaluation systems lead to different outcomes and give only a partial evaluation. The
research is focused on the review of the evolution of the evaluation systems used for
the governmental services. In order to identify the gaps, it is conducted a review of
the national and international literature and the legal frameworks at European level.
It is underlined the lack of importance of the human factor in the analyzed evaluation
systems. In correlation with the evolution and the new trends in public administra-
tion entered by the New Public Management implementation, it is augmented the
necessity of introducing civil servants’ evaluation as part of the system for govern-
mental services evaluation.
The core research is focused on the analysis of recent approaches and trends in
human resource management in the public sector based on literature, legal frame-
work and case study review. The goal is to determine the indicators for evaluating
the public management efficiency through the evaluation of human resources from
an end-user perspective. The proposed evaluation system has to represent the
viewpoint of the main stakeholders involved and thus, the evaluation system of the
citizens and society satisfaction, with the civil servants’ activity oriented towards
citizens satisfaction, has to quantify both policy and culture quality aspects and
human resources ones.
3 New Public Management and Citizen-Focused

Governance
With a view to substantiating the value system in public administration, the New
Public Management recommends, in approaching the mission content of the public
institution, to combine in a balanced manner the common values and aspirations of
all public institutions, as well as the specific ones, ranked by the representatives of
the public management as essential in relation with the consumers of products and
services—citizens (Plumb and Androniceanu 2003). The public sector governance
depends on a complex system of interdependent institutions and it is difficult to
evaluate. Ultimately, the public administration management evaluation needs a
fundamental transformation of the relationship between the government, public
administration and citizens (Turner 2013).
The New Public Management is being implemented in the public institutions of
the European Union countries and aims to be an instrument for increasing the public
services performance of and contributes to the success of the reform in the public
governance sector. At European Union level it is established the right to a good
administration as one of the rights that are guaranteed for all European Union
citizens. This right imposes adequate measures in order to create the conditions
that will ensure that citizens will receive a fair and impartial treatment regarding their
petitions addressed to the European Union institutions. Also, this right entails that
the citizens’ affairs should be solved within a reasonable period of time which can be
determined by the complexity of the problems involved (Commission Directive
2000/C364/01 2000).
Public administration oriented towards the beneficiaries of public services is a
long-term priority of the European Union, established through the strategies devel-
oped over time, updated by Strategy 2020: Empowered Citizens, an Accountable
Europe (Transparency International 2016). The orientation is taken up and updated
in the Strategy for Strengthening Public Administration 2014–2020. The reform
promoted in the public administration aims at adapting to the changes of the world
economy and the requirements imposed by the integration of Romania into the
European Union. The need to find solutions for reinventing the public administra-
tion, by replacing the bureaucracy with a collaboration with the external environ-
ment and citizens, is the basis for introducing eGovernment (Tat-Kei Ho 2002).
In the Romanian legislation, there are established, through the provisions of Law
188/1999 on the Statute of Civil Servants (Civil Servants Statute Act 1999) the
principles that underlie the public office carrying out, and one of those expressly
mentioned is the principle of orientation towards citizens. In the public law literature,
it is shown that such a rule should govern all aspects referring to the activities carried
out by the public administration authorities and should not be limited only to
accomplishing the responsibilities of the public servants (Vedinas 2009).
The principle of orientation towards citizens involves, on the one hand, provision
of high-quality public services and, on the other hand, adoption, by the public
servants, of attitudes meant to establish proper relations with citizens, considering
that the ultimate purpose of public administration activities is to appropriately satisfy

their needs (Vedinas 2009).
In order to require ethical duties, the Romanian Parliament adopted Law 7/2004
on the Code of Conduct for Civil Servants and one of the objectives set in this
normative act is to create “an environment of trust and mutual respect between
citizens and public servants, on the one hand, and between citizens and public
administration authorities, on the other hand” (Civil Servants Code of Conduct
Act 2004). Thus, it can be observed a constant concern of the legislative with a
view to creating the premises for the functioning of an efficient administration that
would answer the desiderata of the European Union and the New Public
Management.
A strengthening of the services should be supported by mechanisms of institu-
tional coordination and collaboration within the structures of public administration.
The functional integration of services is one of the mechanisms that can influence the
lessening of bureaucracy, inter-institutional coordination and assuming responsibil-
ities. Even if less directly, such an approach will have also benefic effects on the
society as a whole, by increasing the capacity of public administration to deliver
quality services, to generate, manage and promote change for the purpose of
development, to treat beneficiaries more as partners than as administrated/taxpayers
and to respond with solutions adequate not only to punctual problems, but also to the
issues that affect the community in general.
Decreasing the bureaucracy and streamlining the procedures for citizens, business
and administration are measures targeting to increase efficiency in public adminis-
tration (as concerns the cost and answer time), as well as to enhance the degree of
transparency and integrity in service provision, which can contribute to growing the
citizen satisfaction, as a final beneficiary of the activities undertaken by the public
administration, and to improving the public administration perception. While for the
business environment the situations are more advanced, for some areas the admin-
istrative costs being already measured and the simplification plans being drafted, for
citizens and at inter and intra-institutional level, it is required to be carried out
detailed analyses in order to identify the problems and a pertinent substantiation of
the solutions for simplification.
4 Evaluation of the Civil Servants Performances
The specific nature of the activities that the administration is required to perform
generates particularities with regard to the structure and responsibilities of the staff
within the public institutions. Thus, the public administration authorities include
several categories of staff whose legal status is different, depending on the specific
responsibilities conferred. The most important category of staff within the public
administration authorities is represented by the civil servants, and their status is
derogatory from the common law that is applicable to employees. According to the
rules of national law laid down by Law 188/1999 (Civil Servants Statute Act 1999),
the public office includes the duties conferred for achieving the public power pre-
rogatives with which public administration authorities are invested.
At the European Union level, the legal status of office holders within the
institutions is regulated by Regulation 31 (EEC), 11 (EAEC) (Council Regulation
1962) laying down the Staff Regulations of Officials and the Conditions of Employ-
ment of Other Servants of the European Economic Community and the European
Atomic Energy Community. The European Union institutions have shown a con-
stant preoccupation for the personal policy and the quality of the services provided to
the citizens.
Taking into consideration the size and number of activities, the public sector has a
major role in the states. In comparison with the private sector, the public sector is
characterized by a lower efficiency. The efficiency of state and municipal authorities
depends not only on the education, competence and abilities of public officials. The
efficiency of human resources motivation system has a significant impact on the
effectiveness of the state and municipal authorities. The authorities’ efficiency
depends on the education and abilities of the public officials and also on the
human resources motivation. The problem of the institutional performance effec-
tiveness and of the effectiveness of public officials is a fact.
A new approach of the public sector management, which is based on the
principles of higher efficiency, effectiveness, responsibility and quality, in accor-
dance with the new public management, is emerging (Raudeliūnienė and Meidut-
ė-Kavaliauskienė 2014). In the public sector there is a growing focus on efficiency
and that includes the public servants’ activity (Chlivickas and Raudeliūnienė 2007).
The principles forwarded by the New Public Management were adopted by the
Romanian legislation through the provisions of Law 188/1999 (Civil Servants
Statute Act 1999). According to this legal provision, a public office is governed by
the following principles: legality, impartiality and objectivity, transparency, effi-
ciency and effectiveness, responsibility, orientation towards the citizens, stability in
the exercise of the civil service and hierarchical subordination.
The assessment of employees of the public institutions becomes a most demand-
ing process and it is undergoing a continuous improvement, together with the
permanent efforts for increasing the public services efficiency. In the traditional or
classic approach, the public sector is considered a specific type of activity that
implies bureaucracy, staff hired for life and capable of working under any political
regime. The new approach is consistent with the characteristics of the New Public
Management as they are reflected in the literature and practice (legal framework and
strategies) by taking into consideration mainly the viewpoint of the services bene-
ficiaries—citizens.
The evaluation system proposed has to represent the point of view of the main
stakeholders involved and thus, the evaluation system of the citizens and society
satisfaction, with the public servants’ activity oriented towards citizens’ satisfaction,
has to quantify both policy and culture quality aspects and human resources ones.
The policy and culture quality indicators include quality leadership, quality man-
agement, and the perception of the citizens.
A review of the literature is presented in Tables 1 and 2.
Table 1 Human resources constructs

Constructs for human resource Literature review
Quality of the public servants
Efficient, skillful, professional, and committed Staats (1988) and Hart and Grant (1989)
public servants
Quality of the leadership
There is an explicit link between leaders and the Webb and Blandin (2006)
public servants’ performance
The quality of leadership and management has a Lane (1987)
significant influence
Stress
Negative relationship between a supportive Punch and Tuetteman (1996), El-Bassel et al.
environment and reduced levels of stress (1998) and De Simone et al. (2016)
Positive relationship between public servants
motivation and work-related stress
Stressful public service conditions caused by Eldor (2017)
demanding citizens
Source: Authors’ own study or based on the literature review
Table 2 Policy and culture constructs

Constructs for policy and culture Literature review
Entrepreneurship
Highlights the openness of the authority Vigoda-Gadot (2007)
Towards new ideas
Ethics
Ethics and fairness directly influence the relationship De Leon (1996), Lui and Cooper
between the public servants and the citizens (1997) and Vigoda-Gadot (2007)
Source: Authors’ own study or based on the literature review
5 Conclusions
The evaluation system for the public institutions employees is introduced and
discussed in accordance with the characteristics of the New Public Management,
which is being under implementation in the public institutions of the European
Union countries, including Romania, therefore it is adapted at national level and
correlated with the practice in the European Union.
Despite the fact that the legal framework established is focused on the values
proposed by the New Public Management, however, in Romania, the activity of the
public administration is a subject of criticism and dissatisfaction both for the citizens
and the international partners. The reforms proposed and entered by the legal
framework need a long period of time for being implemented and still there are
many problems and negative aspects in regard of the recruitment, promotion and
evaluation of the civil servants which are mainly caused by the political involvement
in the activity of the public administration authorities. Another important aspect is
related to the compliance with the ethical rules that are imposed to the public
servants by the legal provisions adopted at national and European level.
Acknowledgements This research was financed by the Programme P1—The Development of the
National System of Research and Development of the National Plan for Research, Development and
Innovation (PN III), funded by the Ministry of Research and—Executive Agency for Higher
Education, Research, Development and Innovation Funding (MESR—UEFISCDI), Contract
no. 409/15.12.2017.
References
Beia Consult. (2008). Developing a smart and transparent model for local public administration in
relation to citizens [pdf]. Bucharest: Beia Consult. Retrieved February 20, 2018, from http://
www.miteapl.ro/r1/studiu-9.pdf
Chlivickas, E., & Raudeliūnienė, J. (2007). Human resources potential in the public sector: The
system of evaluation. Public Administration, 4(16), 44–52.
Civil Servants Code of Conduct Act. (2004). (c4). Bucharest: RP.
Civil Servants Statute Act. (1999). (c10). Bucharest: RP.
Commission Directive 2000/C364/01 of 7 December 2000 on Charter of Fundamental Rights of the
European Union.
Council Regulation 31 (EEC), 11 (EAEC) of 14th of June 1962 laying down the Staff Regulations
of Officials and the Conditions of Employment of Other Servants of the European Economic
Community and the European Atomic Energy Community.
De Leon, L. (1996). Ethics and entrepreneurship. Policy Studies Journal, 24, 495–510.
De Simone, S., Cicotto, G., Pinna, R., & Giustiniano, L. (2016). Engaging public servants: Public
service motivation, work engagement and work-related stress. Management Decision, 54(7),
1569–1594.
El-Bassel, N., Guterman, N., Bargal, D., & Su-Kuo, H. (1998). Main and buffering effects of
emotional support on job and health related strains: A national survey of Israeli social workers.
Employee Assistance Quarterly, 13, 1–18.
Eldor, L. (2017). Public service sector: The compassionate workplace. The effect of compassion
and stress on employee engagement, burnout, and performance. Journal of Public Administra-
tion Research and Theory, 28(1), 86–103.
General Secretariat of the Romanian Government Order 400/2015 of 22 June 2015 for the approval
of the Code of Internal/Managerial Control of Public Entities [pdf]. Bucharest. Retrieved March
20, 2018, from http://www.ub.ro/files/scim/Ordin_400_2015.pdf
Hart, D. K., & Grant, N. K. (1989). A partnership in virtue among all citizens: The public service
and civic humanism; response to David Kirk Hart. Public Administration Review, 49, 1–7.
Kalimullah, N. A., Alam, K. M., & Nour, M. M. A. (2012). New public management: Emergence
and principles. BUP Journal, 1(1), 1–22.
Lane, J. E. (1987). Public and private leadership. In J. Kooiman & K. A. Eliassen (Eds.), Managing
public organizations (pp. 47–64). London: Sage.
Lui, T. T., & Cooper, T. L. (1997). Values in flux: Administrative ethics and the Hong Kong public
servant. Administration & Society, 29(3), 301–324.
Plumb, I., & Androniceanu, A. (2003). Chapter 6. Modern elements in public management. In
O. Nicolescu, I. Plumb, M. Pricop, I. Vasilescu, & I. Verboncu (Eds.), Modern approaches in
the organization management and economics. Bucharest: Economica.
Punch, K., & Tuetteman, E. (1996). Reducing teacher stress: The effect of support in the work
environment. Research in Education, 56, 63–72.
Raudeliūnienė, J., & Meidutė-Kavaliauskienė, I. (2014). Analysis of factors motivating human

resources in public sector. Procedia-Social and Behavioral Sciences, 110, 719–726.
Staats, E. B. (1988). Public service and public interest. Public Administration Review, 48, 601–605.
Tat-Kei Ho, A. (2002). Reinventing local governments and the E-government initiative. Public
Administration Review, 62(4), 434–444.
Transparency International. (2016). Strategy 2020: Empowered citizens, an accountable Europe
[pdf]. Transparency International. Retrieved March 20, 2018, from https://transparency.eu/wp-
content/uploads/2016/10/04-09-2016-Strategy-2020-web.pdf
Turner, M. (2013). Summary report of public sector governance evaluation; a study commissioned
by the department for international development [pdf]. Department for International Develop-
ment. Retrieved March 15, 2018, from https://www.gov.uk/government/uploads/system/
uploads/attachment_data/file/199777/Public-sector-gov-reform-eval-summary.pdf
Vedinas, V. (2009). The statute of civil servants. Comments, doctrine, legislation, case law.
Bucharest: Universul Juridic.
Vedinas, V. (2017). Administrative law (10th ed.). Bucharest: Universul Juridic.
Vigoda-Gadot, E. (2007). Leadership style, organizational politics, and employees’ performance:
An empirical examination of two competing models. Personnel Review, 36(5), 661–683.
Webb, N. J., & Blandin, J. S. (2006). Evaluating executive performance in the public sector.
International Public Management Review, 7(1), 98–117.
Part IV
Regional Studies
An Overview of the Trends
in the Evaluation System for the Public
Management Performance
Bucur Iulian Dediu, Liliana Mihaela Moga, and Stefania Cristina Mirica
Abstract The evaluation of the public management performance is the support for
the public administration strategies and reforms. The paper reviews the trends in the
management of the public administration which conduct to the New Public Man-
agement acceptation and implementation and explores the implication on the struc-
ture of the evaluation systems used to measure the performance of the public
services. The research is focused on the theoretical and practical aspects and reviews
the literature and the case studies in order to argue the necessity, the incentive factors
and the general structure of an updated system of indicators for the public manage-
ment performance who reflects the point of view of all the stakeholders as benefi-
ciary of the public services and the influence of the new public management. The
main influence factors that reshape the evaluation system are the change in the role of
government in society and in the relationship between government and citizens, and
the increasing importance given to the beneficiaries.
Keywords New public management · Characteristics · Performance · Incentive

factors · Necessity · Evaluation
1 Introduction
The management is considered as being based on scientific knowledge about dealing

with the problems at the organization level, in the most rational and efficient way.
Public management is presented as the theoretical base necessary for the
B. I. Dediu
The School for Doctoral Studies in the Socio-Humanities, Dunarea de Jos University of Galati,
Galati, Romania
L. M. Moga (*)
Department of Economics, Dunarea de Jos University of Galati, Galati, Romania
S. C. Mirica
Department of Juridical Sciences, The School for Doctoral Studies in the Socio-Humanities,

96 B. I. Dediu et al.
implementation of changes in public institutions, for the adaptation to the new

requirements generated by the evolution of the economic and social environment
(MITEAPL 2008). Public management forms into an integrative system, being
strongly influenced by the political factor. It has a marked character of diversity
and is one of the most complex systems available at the national economy level.
These features make public management a complex system, whose efficiency has
proved to be difficult to evaluate. The public institutions become providers of public
goods and services whose purpose is to satisfy the social needs of natural and legal
persons, while complying with the conditions of the economic efficiency and it is
subject of transformations (Plumb and Androniceanu 2003).
The implementation of the new trends in the public management involves much
more than the public services reform. It means the improvement of the ways that
public services operate, of the scope of governmental activity, and changes to the
academic study of the public sector. According to Hughes (2003), the new public
management is not simply a matter of reform or a minor change of the management
style, but a change in the role of government in society and in the relationship
between government and citizens. The implementation of the government reforms
involves the improvement of public services quality and an increase in the benefi-
ciary satisfaction. Public administration needs the introducing of the professional
management. The vision of the reform process in public administration is based on a
large modernization process. It includes the evaluation of four important aspects,
among which is mentioned the social effectiveness analysis of the specific activity of
public administration. Efficiency and effectiveness are improved when civil servants
involvement increases, when the responsibilities are transferred to the lower levels of
government, along with establishing the system of responsibilities corresponding to
each level.
In the last few decades, public administration had to respond to higher exigencies.
The organization of the delivery of the public services based on science and
continuous improvement of its activities and structures, as well as the efficient use
of all resources, can lead to getting maximum results with minimum effort
(MITEAPL 2008). Dahler-Larsen (2000) states that the evaluations conducted in
the public sectors often do not fulfill the democratic potential. A study of the Danish
municipal sector reveals that less than 1% of the evaluations led to termination of the
evaluated activities, whereas 78% of the evaluations led to adjustments of program
activities. For this reason is recommended managerial support system introduction
as an alternative view of evaluation. Modern public administration has as a common
denominator the permanent innovation, the responsibility, the continuous satisfac-
tion of public service beneficiaries, the improvement of the transparency, to respond
as closely as possible to the increasing demands of citizens, professionals and
politicians, on maximum efficiency terms (Hood 1991; Boston et al. 1996;
Khademian 1998). Public services are intended for satisfying the interests of citizens
as end-users. A similar approach for the business environment belongs to Wu
(2014), who conducted a study for services quality and consumer satisfaction
evaluation through interviewing the consumers about their consumption experiences
in some selected services in order to identify the patterns of service quality and
An Overview of the Trends in the Evaluation System for the Public. . . 97
consumer satisfaction. The process of measuring performance in the public sector is

recognized by most specialists as being particularly difficult for many reasons, such
as the multitude and diversity of stakeholders in a public institution. It is about the
current and the potential customers, citizens who have a vote, elected representa-
tives, professional groups, trade unions, public managers, the state, differences in
values and perceptions as concerns the efficiency of various stakeholders and the
nature of the public service provided, which confers it complexity (Plumb and
Androniceanu 2003).
The aim of the public administrations is to deliver services for citizens and
organizations, which is subject for the evaluation of their performance as the public
management outputs, which is influenced by the evolution of the characteristics of
the management performed in the public administrations. The researches reveal that
the worldwide tendency in the evaluation of the public management is developing
certain systems of indicators, which differ from country to country, being focused on
distinct issues according particular interests. The Governments recognized the
importance of the evaluation which has to be made in accordance with in the public
management evolution and needs of all the stakeholders.
The research identifies the main approaches of the public management evalua-
tions and the evolution of the indicators used for this aim. The public management
evaluation systems need to be composed by indicators that cover the points of view
of all the stakeholders, who have different positions and different interests. The main
categories and their roles and expectations are identified. Also, it is argued the
influence of the characteristics of the new public management on the structure of a
complete and useful evaluation systems. Some certain directions for its development
are identified once with the identification of the necessity of an updated evaluation
system, its specificity and incentive factors in correlation with the introduction of the
new public management in the worldwide public administrations.
2 Methodology
The research is focused on the theoretical and practical aspects of the public
management evaluation systems and reviews the literature, the case studies, regula-
tions, and strategies in order to argue the necessity, the incentive factors and the
general structure of an updated system of indicators who has to reflect the point of
view of all the stakeholders as beneficiary of the public services and the influence of
the new public management. In this purpose, a review of national and international
literature is conducted. The stakeholders in the public management administration
and their interest are identified in correlation with the influence on the evaluation
system. The characteristics of New Public Management are listed and the new
requirements are evidenced and foreshadow the manner in which is influenced the
system of indicators for evaluating public management performance.
The aim of the research is to propose a structure for the evaluation system of the
public management through all the transformations who took place over the last
decades and by an end-user perspective in order to increase the effects of the

evaluations conducted on the improvement of the governmental activity and the
result of the reforms.
3 The Characteristics of New Public Management
Management is an important tool for ensuring excellence in both private organiza-

tions and public institutions. Determining the concrete measures that public institu-
tions should take in order to ensure an efficient management is a complex task,
which involves refining the theoretical framework of public management that will be
validated by the results of applying new concepts, rules, principles and methods in
practice. The general inclination in the evolution of the manner in which public
administration activities are carried out is the elimination of bureaucracy, a concept
that has long underlain the public system structure. New Public Management is
introduced as an “administrative argument” and an “administrative philosophy”
(Hood 1991).
Public administration, based on traditional concepts, has been discredited both
theoretically and practically, and the adoption of new forms in public management is
the moment of emerging a new paradigm in the public sector. This was developed as
a brief description of the way to reorganize public sector structures in order to draw
closer the approaches of the management practiced here, to the methods of the
commercial enterprise. Under these circumstances, the shift to the new public
management, beyond criticism, seems to be an irreversible transformation that will
mark, along with the beginning of the new century, a new period of public manage-
ment development and reform of public system at global level (Hughes 2003).
The evolution of management applied in public organizations converges towards
the acceptance of the following guidelines in public administration management,
which confers it certain features and which directly influence the system of public
management evaluation:
• introduction of modern management techniques, such as Total Quality
Management;
• evaluation of efficiency and effectiveness—a term that, in Public Management, is
defined by combining the quality of public services, social efficiency and eco-
nomic efficiency;
• focusing on the satisfaction of the public services end-user—the citizen, as a
representative of the community;
• introduction of performance indicators for measuring the achievement of objec-
tives (Plumb and Androniceanu 2003; MITEAPL 2008).
In Romania, some of these guidelines appear in the Code of Internal, Managerial
Control of Public Entities (General Secretariat of the Government 2015). The
document states the internal and managerial control standards for public institutions,
which, according to the regulations, are not subordinated to a superior public entity
and the compulsoriness to draw up summarizing reports as documents proving the

development of internal and managerial control.
4 Necessity, Specificity and Incentive Factors in the Public

Management Evaluation
At the beginning of the public management recognition as a field of study, it was

considered that the concept of performance cannot be applied in the public sector,
being argued that through the content itself of the fundamental objective of public
management it is eliminated the possibility to accept this concept. Thus, it was
considered that the mission of a public institution went beyond these performance-
related aspects, and targeted to enforce the normative acts in force and thus to ensure
the resolution of social problems, regardless of the cost involved. In many develop-
ing countries, this perception is in effect. Currently, in developed countries, the
limits of such thinking have been overcome in the theory and practice of the public
management and the evaluation system is introduced and discussed in accordance
with the New Public Managements and its characteristics, which is under imple-
mentation in the public institutions of the European Union countries, including in
Romania (Plumb and Androniceanu 2003). Also, a study conducted in Australia by
Cuganesan et al. (2014) find that the actual public sector performance measurement
practices are not supportive of intra-governmental networks and therefore the
improvement of performance measurement will deliver public value.
The general direction is for accepting that the role of public institutions is to
supply the highest quality public goods and services in order to meet the general and
specific social needs of natural and legal persons, in terms of economic efficiency.
The quality of public services is a major objective of the reforms promoted by New
Public Management that are taking place throughout the Europe. The initiative of
Citizens’ Charter, launched by the United Kingdom of Great Britain in 1991, has
been an example of promoting reforms in the public administration for European
countries (Lo Schiavo 2000). It is stated by the Department for International
Development (2013) that the services provided by the public administration “are
difficult to measure accurately and that government organizations resist efforts to
measure what they are doing, how they are doing it and what they are”. Because the
Governments publicly affirm the need for evaluation, it is accepted the need of
evaluating according the specific issues and reforms in the public management. One
solution is based on the agreement on an evaluation framework of all the stake-
holders, which means that the public management evaluation systems needs to
consist in a system of indicators that covers all the points of view.
According Dahler-Larsen (2007), the evaluation in the public management covers
a dynamic set of criteria. The relation between evaluation and public management
outputs is reflected in the evaluation wave, which is present in the western countries
during the last decade or two. The approaches of the evaluations analysis in most
western countries during the last decade lead to the identification of goal-oriented
evaluation, theory-based evaluation, and responsive/participatory approaches to
evaluation as the most significant trends. Also, there are identified different current
interests in public management evaluation that leads to different views on evaluation
and different expectations. The tendency is to use indicators that serve particular
interests, predilections or ideological orientations and to ignore economic and
financial criteria, and to ignore political, social and ethical indicators.
According Nuti et al. (2013), in the context of the new public management is
necessary the adoption of a sophisticated and comprehensive multidimensional
performance measurement system, based on the strategies developed by organiza-
tions. According the same authors who reviewed a case study conducted in Italy, in
the last decade, each Italian development region developed its own management
tools, some of them introducing performance evaluation systems considered as
innovative and comprehensive. The authors investigated the new systems, and the
means developed to measure the effectiveness of performance evaluation system and
discussed the critical factors that could have led to success of the performance
evaluation system. Another approach for the evaluation of government efficiency
is promoted by Voghouei and Jamali (2018) who are taking in consideration the
effects of information technology, along with transparency and control corruption,
and government expenditure.
In Romania, the decrease in bureaucracy and streamlining the procedures for
citizens, business environment and administration are measures with the purpose of
increasing the efficiency of the public administration activity (as concerns costs and
response time). It have been included in the National Strategy for Strengthening
Public Administration, which can be seen as a recognition of applying the concept of
performance in public administration. According to Plumb and Plumb and
Androniceanu (2003) it should be started from a first premise according to which
public managers’ thinking should be somewhere on the border between social logic
and competitive logic. The social logic is because any initiative of the public
management representatives, as regards the quantity and quality of the services
provided, must be determined by the general public interest and an entire orientation
towards its satisfaction. The elements of this type of logic are called performance
criteria and they are expressed through economy, efficiency, and effectiveness.
Public institutions, through a defined legislative framework, have responsibilities
as concerns the management of public resources for the achievement of certain
public interest objectives. Public management has evolved and, starting from the
last decade of the last century, specialists have demonstrated that its fundamental
objective is the one that should determine the reorientation of the value system for
performance appraisal. Over time, the ideas have been developed and in many public
institutions, there have been drafted performance indicators in order to estimate on a
value scale up to what level public interests have been fulfilled and at what costs. The
performance of a public organization is established depending on how human,
material, informational and financial resources are used to achieve the objectives
proposed at the level of the expectations of service beneficiaries.
Inputs Activities Outputs
Results:
Efficiency Effectiveness Value of Money
Fig. 1 Measuring management performance according to the “value for money” approach. Source:
Plumb and Androniceanu (2003)
Efficiency is the achievement of maximum results with a determined level or low

level of resources and is measured as a ratio between inputs and outputs, which was
subsequently supplemented with the increase in final performance while maintaining
the same level of inputs. Nevertheless, the correlation most agreed by the central
management representatives is the constant performance while decreasing the level
of attracted resources. Efficiency consists in achieving the objectives defined by
public managers at the highest level. This can be measured by the results obtained
and by the impact that the objectives achievement has on the customers. A model
proposed for measuring management performance according to the approach based
on the “value for money” concept is presented in Fig. 1.
Applying such an approach requires the development and implementation of a
performance monitoring system in all public institutions from developed countries,
as part of the process of achieving the best possible performance.
In a research conducted in ten countries was founded a strong evidence for
national distinctiveness (Pollitt and Bouckaert 2000). Wollmann (2003) evidences
that the public management conducted in different countries is affected by the
politico-administrative systems, administrative cultures of each country, which
confers the international features. He concluded that the New Public Management
is present in many countries, and affected the evaluation of the public management
but the dimension differs, because some are affected much more than others are.
Common issues like efficiency, quality and trust conceal path-dependent develop-
ments, in according a particular order of national priorities.
In the context of higher demands and lower resources, an important part in
increasing the efficiency and effectiveness of public services is played by the
implementation of Total Quality Management in public administration. From the
perspective of the process, high quality means that a process must give satisfaction,
as the maximum production variable of any process (Dediu et al. 2017). Bovaird and
Löffler (2002) define Total Quality Management as a comprehensive and structured
approach to the organizational management that aims to improve the quality of
products and services, in order to obtain a continuous feedback. The introduction of
the specific instruments and processes Total Quality Management in the public
sectors involves the updating of the public management performance evaluation
with indicators introduced by the Total Quality Management.
5 Conclusion
From the analysis of the trends shown in the evolution of the public administration,
we find that, at international level it is accepted that an important role is played by the
modernization of the practiced management, which took shape through the New
Public Management. In the last few decades, public administration has had to
respond to higher exigencies, and organizing based on science and permanent
improvement of the activities and structures, as well as an efficient use of all
resources, can lead to maximum results with minimal efforts. Under these circum-
stances, the evaluation of the public management performance is the support on
which are based the public administration strategies, whose main purpose is to
promote the performance in the public management. Therefore, the performance
evaluation of the Public Management it is consistent with the characteristics of the
New Public Management reflected in the literature and practice in what concern the
legal framework and the strategies and, in the European countries, it is adapted at
national level and correlated with the European practice.
According the trends, the Public Management Performance evaluation needs to
develop an evaluation framework based on quantitative and qualitative indicators
accepted by all stakeholders, the introduction of modern management techniques,
such as total quality management, the evaluation of efficiency and effectiveness. It
has to be focused on the satisfaction of public services end user, and the introduction
of performance indicators to measure the achievement of objectives. Because the
public services are designed for citizens and companies, and they are many stake-
holders who shape the public management the evaluation system has to be on all the
stakeholders’ interest like managers from the Public Administration, society through
citizens, businesses environment through companies, and policy makers.
Acknowledgements This research was partially financed by the Programme P1—The Develop-
ment of the National System of Research and Development of the National Plan for Research,
Development and Innovation (PN III), funded by the Ministry of Research and Executive Agency
for Higher Education, Research, Development and Innovation Funding (MESR—UEFISCDI),
Contract no. 286/8.12.2017.
References
Boston, J., Martin, J., Pallot, J., & Walsh, P. (1996). Public management: The New Zealand model.
Oxford: Oxford University Press.
Bovaird, T., & Löffler, E. (2002). Moving from excellence models of local service delivery to
benchmarking of good local governance. International Review of Administrative Sciences, 67
(I), 9–24.
Cuganesan, S., Jacobs, K., & Lacey, D. (2014). Beyond new public management: Does perfor-
mance measurement drive public value in networks? In J. Guthrie, G. Marcon, S. Russo, &
F. Farneti (Eds.), Public value management, measurement and reporting (Studies in public and
non-profit governance) (pp. 21–42). Bingley: Emerald Group Publishing Limited.
Dahler-Larsen, P. (2000). Surviving the routinization of evaluation: The administrative use of

evaluations in Danish municipalities. Administration & Society, 32(1), 70–92.
Dahler-Larsen, P. (2007). Evaluation and public management. In E. Ferlie, L. E. Lynn Jr., &
C. Pollitt (Eds.), The Oxford handbook of public management (pp. 615–639). Oxford: Oxford
University Press.
Dediu, B. I., Moga, L. M., & Neculita, M. (2017). Quality in the public administration management.
Quality Access to Success, 18(159), 105–111.
Department for International Development. (2013). Summary report of public sector governance
evaluation; a study commissioned. Retrieved February 12, 2018, from https://www.gov.uk/
government/uploads/system/uploads/attachment_data/file/199777/Public-sector-gov-reform-
eval-summary.pdf
General Secretariat of the Government Order 400/2015 for the approval of the Code of Internal/
Managerial Control of Public Entities of 22 June 2015. Retrieved March 18, 2017, from http://
www.ub.ro/files/scim/Ordin_400_2015.pdf
Hood, C. (1991). A public management for all seasons. Public Administration, 69(1), 3–19.
Hughes, O. E. (2003). Public management and administration. An introduction (3rd ed.).
Basingstoke: Palgrave Macmillan.
Khademian, A. M. (1998). What do we want public managers to be? Comparing reforms. Public
Administration Review, 58, 269–273.
Lo Schiavo, L. (2000). Quality standards in the public sector: Differences between Italy and the UK
in the citizen’s charter initiative. Public Administration, 78(3), 679–698.
MITEAPL. (2008). Elaborarea unui model inteligent şi transparent pentru administraţia public
locală în relaţia cu cetăţenii (Romanian) [Developing a smart and transparent model for local
public administration in relation to citizens] [pdf]. Bucharest. Retrieved February 20, 2018,
from http://www.miteapl.ro/r1/studiu-9.pdf
Nuti, S., Seghieri, C., & Vainieri, M. J. (2013). Assessing the effectiveness of a performance
evaluation system in the public health care sector: Some novel evidence from the Tuscany
region experience. Journal of Management & Governance, 17(1), 59–69.
Plumb, I., & Androniceanu, A. (2003). Modern elements in public management. In O. Nicolescu,
I. Plumb, M. Pricop, I. Vasilescu, & I. Verboncu (Eds.), Modern approaches in the organization
management and economics. Bucharest: Economica.
Pollitt, C., & Bouckaert, G. (2000). Public management reform: A comparative analysis. Oxford:
Oxford University Press.
Voghouei, H., & Jamali, M. A. (2018). Determinants of government efficiency: Does information
technology play a role? Eurasian Business Review, 8(3), 285–298.
Wollmann, H. (2003). Evaluation in public sector reform: Towards a ‘third wave’ of evaluation? In
H. Wollmann (Ed.), Evaluation in public-sector reform (pp. 1–11). Cheltenham and Northamp-
ton: Edward Elgar Publishing.
Wu, M. L. (2014). Cross-border comparative studies of service quality and consumer satisfaction:
Some empirical results. Eurasian Business Review, 4(1), 89–106.
Assessment of the Importance of Agri-Food
Products Trade Between the European
Union and China
Aneta Jarosz-Angowska
Abstract Following the United States, China is the second largest trade partner of
the European Union (EU). In turn, the EU is China’s biggest partner in general
trade. The prospects for the development of mutual trade relations are promising.
Citizens of the EU and China constitute a quarter of the entire population of the
world. The rapidly developing trade exchange between these two entities is subject
of the analysis in this dissertation. The main objective of the dissertation is to assess
the importance of agri-food products in trade turnover between the EU and China
and to identify the main determinants of mutual trading. Three main factors deter-
mining the dynamic development of mutual turnover in the field of agri-food
products were identified: (1) dynamic growth of GDP and demand for food products
in China, (2) admission of China to the WTO, (3) Chinese policy of “New opening”
in trade cooperation with the EU countries.
Keywords Agri-food trade · Trade policy · Trade turnover
1 Introduction
The Chinese policy of development and economic reforms allowed China to transform
from a backward agricultural country into the world’s second economic power after
the United States and world’s biggest exporter. The rate of the economic growth of
China over the span of last 30 years is impressive. It fluctuates at rate of approximately
10% annually and is characterized by unprecedented long-term stability. China, along
with the United States (U.S.) and the European Union are responsible for half of the
global production output. According to the World Bank, in 2014 the EU, the U.S. and
China accounted for 58.2% of the Gross Domestic Product (GDP) measured at market
exchange rates (the UE—22.6%; the US—22.3%; China—13.3%). In 2014, in the
A. Jarosz-Angowska (*)
Department of Economics and Agribusiness, University of Life Sciences in Lublin, Lublin,
Poland
e-mail: aneta.angowska@up.lublin.pl

106 A. Jarosz-Angowska
terms of purchasing power parity, the EU-28 accounted for 17.1% of global GDP, the
US accounted for 15.9%, and China for 16.6%. According to Eurostat, in 2014 the
EU-28 accounted for 15.5% of world imports and exports, the United States for
16.6%, and China for 13.5%, together constituting 45.6% of global trade (JOIN
2016/30). The EU is China’s biggest trading partner, whereas China is EU’s second
largest trading partner after the United States. In 2015 trade in goods between the EU
and China was estimated at well over €1.5 billion per day, with the EU exports
amounting to €170 billion and imports amounting to €350 billion (European Com-
mission 2016a).
The main objective of this article is to analyze the trade turnover between the
European Union and China in years 2002–2017 in the field of agri-food goods in
comparison to the general trade turnover and verifying the following research
hypothesis: there is a constant growth of the trade turnover between the European
Union and China with the trade deficit in general trade between European Union and
China growing whereas agri-food trade presents the opposite trend as supported by:
increasing wealth and consumption of the Chinese society and limited possibilities
for the development of agricultural production, China joining World Trade Organi-
zation (WTO) and opening for trade relations with European Union.
The objectives of the paper are as follows: (1) the analysis of the importance of
the European Union and China in global economy, particularly the analysis of the
rapidly changing position of China; (2) the assessment of the terms and conditions of
the trade exchange between China and the European Union in the light of the
multilateral negotiations on the WTO forums and bilateral agreements entered into
by the discussed parties; (3) the analysis of import, export and trade balance of the
agri-food goods in comparison to the general trade between China and the European
Union; (4) the analysis of the dynamics of China-EU agri-food trade turnover; (5) the
comparison of the total share of Chinese and European Union agri-food export in
relation to trade in general; (6) the analysis of the competitive position of China and
the European Union in agri-food trade utilizing export specialization index (calcu-
lated for years 1975–2015).
2 Position of the People’s Republic of China

and the European Union in Global Economy
In the past China was a grand agricultural civilization. For ages Chinese agricultural
technology was far more advanced than in Europe. In the sixth century BC., more
than 2000 years earlier than in Europe, Chinese farmers cultivated crops in rows and
meticulously weeded fields. Also in the same period Chinese farmers utilized tools
for separating grain from the chaff and numerous Chinese inventions were intro-
duced to Europe as late as in the eighteenth century AD. Only then European
farming reached the standards comparable with the standards of the Middle King-
dom. It was in ancient China where the institutions with competences similar to the
Assessment of the Importance of Agri-Food Products Trade Between the. . . 107
contemporary intervention agencies were created. These institutions controlled

prices of cereals and purchased cereals to be further stored in warehouses located
in each of the Chinese provinces. In case of natural calamities, the stored cereals
were distributed among the population (Pyffel and De Xing 2014).
Following the conclusion of World War II China developed its economy focusing
on heavy industry and centrally planned economy. The state dictated the assortment
of the goods available and the production volume. Limits on the numbers of
employees and the arbitrary system of determining salary levels were in effect.
Split of the output and the division of profits of the companies involved were
established through the central budget. International trade was not utilized as a
mean of capital accumulation nor as a mean of affecting national income structure
in a manner stimulating effective economic growth. Under the contemporary global
situation Chinese economy was almost self-sufficient. Export, not exceeding ten
billion dollars, was dominated by agricultural goods and raw materials. As a result,
the development of the Chinese economy until the 1970s occurred extensively
excluding China from the international division of labor. In 1978 China was one
of the world’s poorest countries. National income per capita did not exceed 250 dol-
lars and domestic consumption grew by approximately 1.6% annually.
The rapid economic development of China occurring since 1978 has been dubbed
the Chinese Economic Miracle and is, to a certain degree, even more impressive than
the economic boom of Japan or the Four Asian Tigers (Hong Kong, Taiwan,
Singapore, South Korea) (Chen et al. 2018). According to Faostat Statistic Database
(2017) between 1978 and 2015 Chinese Gross Domestic Product per capita rose by
approximately 3500% rising from $227 in 1978 to $8109 in 2015. In comparison the
average world GDP per capita rose less than fivefold from $2063 to $10,055
similarly to the GDP per capita of the EEC/EU member countries where it rose
from $6065 to $32,163, barely more than 500% increase. This indisputable success
of the Chinese economy is the result of ambitious economic reforms initiated by
Deng Xiaoping. The reforms consisted mainly of liberalization of the domestic
market, reforming fiscal and banking systems, introduction of currency convertibil-
ity and opening economy for foreign entities.
Along with the per capita GDP increase the food supply, protein supply and fat
supply quantities changed as well. This change is particularly visible in the case of
China and, to a lesser extent, in the European Union. The comparison of consump-
tion in the EU and in China is presented in Table 1. In 2013 the food supply in China
Table 1 Comparison of the EEC/EU, China and World food balance sheet
Element Unit Year EEC/EU China World
Food supply Kcal/capita/day 1975 3210 1909 2396
2013 3409 3108 2884
Protein quantity g/capita/day 1975 95.52 47.33 64.95
2013 103.85 98.02 81.23
Fat supply g/capita/day 1975 120.12 25.16 54.53
2013 139.97 95.12 82.76
Source: FAOSTAT database
Table 2 Comparison of the EEC/EU, China and world main agricultural indicators
The EEC/EU China World
GVAP/ RP/ GVAP/ RP/ GVAP/ RP/
GDP TP GVAP/ GDP TP GVAP/ GDP TP GVAP/
Year (%) (%) RP (%) (%) RP (%) (%) RP
1975 11.39 31.93 1632.2 72.08 81.94 151.5 16.01 62.18 417.8
1980 6.31 30.66 1818.8 44.21 79.84 170.1 9.63 60.55 437.2
1985 7.98 29.94 1939.0 57.86 76.51 220.8 10.06 58.69 473.1
1990 3.38 29.18 1966.5 56.75 73.12 263.9 6.56 56.95 492.7
1995 2.66 28.96 1829.0 40.92 68.90 352.9 5.25 55.18 509.9
2000 3.04 28.47 1952.9 31.22 63.98 462.0 5.52 53.24 560.8
2005 1.84 27.57 1944.0 19.42 57.33 591.9 4.37 50.67 622.9
2010 1.56 26.49 1991.3 8.85 50.78 777.3 3.56 48.07 696.9
2014 1.49 25.73 2126.4 5.61 45.71 929.9 3.26 46.09 759.5
Source: Own calculation, based on FAOSTAT database
grew by 160% in comparison to 1975, the protein supply increased by 200% and the
fat supply increased by 380%. However, the global balance of consumption grew to
a lesser extent than in China. Global food supply increased by 20%, global protein
supplies by 25% and global fat supply by 51%. The balance of consumption in the
EEC/EU member countries changed the least: food supply grew by 6%, protein
supply by 8% and fat supply by 16%.
When the European Economic Community was established in the mid-1950s of
the twentieth century the agriculture had a significantly bigger share in the econo-
mies of the founding countries of the EEC in comparison to the contemporary state
of affairs. However, this share was still smaller than in China. The comparison of
share of the Gross Value of Agricultural Production in Gross Domestic Product
(GVAP/GDP), the share of Rural Population in Total Population (RP/TP) and the
volume of the agricultural production manufactured by the Rural Population
(GVAP/RP) expressed in American dollars (USD) are presented in Table 2. The
share of agricultural production in total production decreased the most in the case of
China. China transformed from agricultural country into industrial country but it still
has higher share of agricultural production in total production than the EU and other
countries. The EEC/EU possesses the smallest share of agricultural production in
total production. Furthermore, EEC/EU has the smallest number of people employed
in agriculture coupled with the highest efficiency of agriculture production, a trait of
a highly developed economy. The Chinese farmers are half as efficient as the
EEC/EU equivalents but it is worth noting that in less than 40 years China improved
the efficiency of agricultural production by more than 600%.
Attaining self-sufficiency in the field of food production was, on its own, not the
goal of the founding members of the European Economic Community because the
costs of the production of food articles produced by the EEC member countries
exceeded costs incurred by the specialized international food manufacturers. The
aim was to properly balance the volumes of imports of foodstuffs and the domestic
produce. However, the memories of the food shortage during the World War II were
still fresh when the basic premises of the Treaty of Rome were being established.
This resulted in the common goals of agricultural policy resulting in the excessive
growth of agricultural output and further protectionist actions oriented towards the
protection of agricultural products markets and farmers. However, in the course of
the EEC/EU development a number of common agricultural policy reforms were
introduced which curbed the tempo of production and export growth and stabilized
agricultural markets (Jarosz-Angowska 2017).
The situation is opposite in the developing countries, China is one of which,
where the protectionist tendencies in agriculture are intensifying. The problems
experienced by the developed countries at an earlier stage of development are
currently plaguing developing countries. The process of economic transformation
and rapid industrialization of Asian economies results in increasing income disparity
between farmers and individuals employed outside of agricultural sector. The
increasing discontent of farmers and simultaneous necessity to provide food prod-
ucts for growing populace of cities may lead to more forceful political pressure and
introduction of mechanisms supporting agricultural manufacturers. The future of
agricultural and trade policy regarding foodstuffs in the developing Asian countries,
including China, is of significant importance for food manufacturers across the
globe, particularly for food manufacturers in the developed countries (Poczta-
Wajda and Pawlak 2017).
3 China Joining the World Trade Organization
In December 2001 China joined the WTO. While giving China access to the global
market, the event simultaneously obliged China to adjust Chinese international trade
norms, practices and regulations to the WTO standards. Joining WTO obliged China
to equal treatment of all members of the WTO in trade and commerce related
matters, to remove double duty charges and differences in treatment of goods
allocated for domestic market and export, to abolish price control as a form of
protection of national entities, to induct changes into current legislation and intro-
duce new bills in order to meet the conditions of the WTO Membership Agreement
and, finally, to prohibit the use of export subsidies in regard to agricultural com-
modities. Admission to the WTO forced China to forfeit the practice of binding trade
entities with the unpublished stipulations of the central government. Furthermore,
the agreement concerning China joining the WTO obliged China to indicate or
establish procedures and courts of law responsible for resolving domestic disputes
concerning applying and utilizing WTO standards.
One of the obstacles in the economic cooperation with China is the issue of
Market Economy Status (MES) China would like to obtain. This type of status
assures calculable benefits in the form of the ability to dismiss the anti-dumping
proceedings. The protocol of WTO admission allowed China to be treated as a
non-market economy for the following 15 years, up to 2016. It made possible for the
EU to initiate anti-dumping proceedings in order to protect EU manufacturers and to
impose protective customs tariffs. The EU holds that the Chinese economy cannot be
deemed market economy due to the unacceptably high level of government involve-
ment, regulated currency market and lack of free market, transparent accounting
regulations and clear definitions of ownership rights. Chinese party regarded the
issue of MES to be significant obstruction in the development of bilateral relations.
The major reduction of duty rates imposed on the goods imported from China
resulted in the initiation of anti-dumping proceedings and imposing anti-dumping
customs duties as the main form of protection of the EU markets. In turn, the same
proceedings and duties became the main cause of the trade and commerce disputes.
The EEC initiated its first anti-dumping proceeding as early as in 1979 and up to
2001 there were 90 proceedings imitated in total (Białowąs and Kąkol 2009), the
highest number among all trade partners. Between 2002 and 2008 there were 48 anti-
dumping proceedings initiated which indicates that this form of protection of the
domestic market is, in comparison with the previous period, gaining popularity. On
numerous occasions the mere threat of initiating proceedings restricts the importers
operations effectively for a relatively long, at least 12 months, period and, meta-
phorically speaking, “clips importer’s wings”. Anti-dumping duties were imposed
primarily on the chemical and industrial goods and products, mostly steel products
and significantly less often on foodstuffs and agricultural commodities. By the end
of 2016 anti-dumping measures in the form of duty on citrus fruits (Council Reg.
(EU) No 158/2013) and duty on tartaric acid (Council Reg. (EC) No 130/2006) were
in effect against China.
Accepting China into the WTO resulted in better clarification, predictability and
neutrality of legal regulations and, in turn, improved economic relations between the
European Union and China. From the legal perspective China has good reputation
with the WTO; the number of disputes is relatively low. China is fulfilling its
obligation no worse than other member countries. As of the February 2018 China
participated in 142 disputes as a third party, in 15 disputes as the complaining party
with all of the complaints lodged against the USA (10 complaints) or the EU
(5 complaints), including one complaint concerning particular poultry products,
and in 39 disputes as the respondent (with the EU lodging 8 complaints). The
complaint lodged against China by the United States deserves particular attention.
On 13 September 2016, the US requested discourse with China regarding particular
measures apparently employed by China to provide domestic support in favor of
agricultural producers of wheat, India rice, Japonica rice and corn. The US held that
the measures appeared to be inconsistent with some Articles of the GATT/WTO
Agreement on Agriculture. On 29th of September 2016, the EU joined the dispute.
The EU and the USA are involved in more disputes than China. As a complaining
party the UE took part in 97 disputes, as a respondent in 84 disputes, and in
169 disputes as a third party. The USA participated in 116, 136 and 142 disputes
respectively (World Trade Organization 2018).
In 2001, along with admitting China into WTO, a new instrument of trade and
commerce policy, more effective and severe than an anti-dumping duty, was intro-
duced. Until the 10th of December 2013 the Transitional Product Specific Safeguard
Mechanism allowed all WTO members to impose temporary restrictions on
commodities and goods imported from China. These restrictions could have been,
among other forms, limits imposed on the import quota or increased duty tax. The
safeguards in question were to be introduced when: (1) Chinese commodities were
imported in volumes or under conditions which could disturb and disrupt domestic
market, (2) other member country of the WTO imposed safeguard measures on the
Chinese import which led to the danger of creating aberrations in trade and com-
merce. The safeguards were regulated by China-specific Council Regulation
(EC) No 427/2003 on a transitional product-specific safeguard mechanism which
was later replaced with Regulation (EU) 2015/755 of the European Parliament and
of the Council of 29 April 2015 obligatory for all third countries. On the grounds of
the regulation the European Union is able to adapt appropriate safeguards when
import of a particular good or commodity increases significantly or occurs under
conditions resulting in the possibility of major detriment to the manufacturers of
competitor commodities. In such cases the European Commission can, in order to
protect interests of the European Union, change the regulations concerning
importing particular commodity through making introduction of the commodity to
the market dependent on presenting import permits (European Commission 2016b).
China joined the Doha Round negotiations. In the opening stages of the negoti-
ations China remained less active than the USA, the EU, Brazil or India but in
Cancun China supported India and Brazil in blocking the USA and the EU propo-
sition concerning deregulation of agricultural products and foodstuffs trade offered
by the USA and the EU in an attempt to break the impasse in the negotiations. China
and India, both possessing major agriculture sector employing millions of citizens,
cooperated against the deregulation of agriculture as proposed by the WTO. This
cooperation also bore fruit during the WTO Bali Summit in the December 2013.
During the summit India, defending its right to carry out own policy concerning
ensuring food security, supported by China, negotiated temporary exemption from
the general WTO regulations regarding the discussed issue (Thorstensen and
Oliveira 2014).
Chinese membership in WTO denotes orienting efforts of the country towards
liberalization of trade and services turnover, capital turnover and technology which
results in intensification of trade and commerce. This fact signifies the possibility of
forging closer economic relations between China and the European Union due to the
majority of obstructions being removed or significantly reduced since China joining
the WTO. It applies not only to tariff and non-tariff barriers but also to various
administrative restrictions hindering the access of commodities, services and factors
of production to the Chinese market. According to the existing ascertainment of the
WTO workgroups and bilateral agreements Chinese economy is undergoing contin-
uous liberalization. As a consequence, not only customs duty rates were reduced but
also new economic sectors, previously unavailable for member countries of the
European Union, were opened. And thus telecommunication services market was
opened and retail trade, automotive dealership and agro-food commodities market
were liberated. Before China joins the WTO some agricultural commodities, such as
fruits and vegetables, livestock, meat and rice, have encountered so-called negative
protection in 1995, which was the result of export restrictions. The analysis of the
weighted average of duty rates imposed for 1995 and 2001 and in the period after the
introduction of the final commitment of duty rates agreed in the commitment lists,
suggests that during this period significant liberalization of trade in many goods took
place and there was an important decrease in weighted average duty rates for wheat,
beverages and tobacco (Garred 2018).
Membership in the WTO does not exclude the possibility of participating in
various liberalization initiatives of the nature of regional groupings. As Pasierbiak
(2016) notes, China’s approach to regionalism has changed radically. In the 1970s,
the People Republic of China was the enemy of all regional initiatives, while since
the 1990s, and especially since the global financial crisis, China has been active in
the development of regional links. China’s activity in regional integration is signif-
icant compared to the activity of other countries in the region. Due to the economic
potential of China, it can even be said that Asian regionalism is increasingly Sino
centric. The geographical range of Chinese regionalist initiatives is wider than that of
other countries of East Asia. This is manifested both in the negotiation of trade
agreements and in the various institutional links that China is a participant in,
especially with the European Union.
4 The Development of the Cooperation Between

the European Union and China in the Framework
of Trade Agreements and Settlements
The diplomatic relations between the European Economic Community (EEC) and
the People’s Republic of China were established in May 1975 after the visit of the
European commissioner Christopher Soames (Griese 2006). This event directly led
to signing cooperative agreement between the EEC and the People’s Republic of
China in 1978 (Trade Agreement 1978). The agreement was signed for a period of
5 years and regulated the fundamental stipulations concerning trade flow, primarily
opening European markets for Chinese textiles. Due to the low level of the Chinese
economic growth the EEC decided to confer general customs privileges on the
People’s Republic of China (in accordance with Generalized System of Prefer-
ences—GSP) and starting with the 1st of January 1980 the majority of Chinese
products, excluding a number of particularly sensitive goods, were granted duty-free
access to the EEC markets (within the limits of the established quotas).
The development of the commercial exchange with the People’s Republic of
China and China’s continuously strengthening ties with the global economy
prompted the EEC to form a closer economic relationship and sign a trade and
economic cooperation agreement with China. The agreement came into effect on the
1st of October 1985 replacing the previous document signed in 1978 (Agreement on
Trade and Economic Cooperation 1985). The primary goals of the agreement are to
promote and intensify the mutual trade exchange and to support and expand the
scope of economic cooperation. The most important objectives in trade relations
with China were conferring China with the highest level privileges pertaining to
customs and other forms of import and export charges between the EEC and the
People’s Republic of China, China creating and fostering the conditions favorable to
importing goods from the EEC, streamlining the flow of commerce-related person-
nel and ensuring that prices shall be based solely on the free market mechanisms
(Białowąs and Kąkol 2009). Parties to the agreement expressed interest in develop-
ing cooperation in the fields of industry, agriculture, energy industry, transport and
shipping, environmental protection and researching new technologies. The agree-
ment entered into by the parties was more of a collection of declarations outlining
common direction for the development of cooperation between the EEC and China
rather than the strict code regulating trade conduct between parties. Member coun-
tries were allowed to govern their trade relations with the People’s Republic of China
through bilateral agreements which enabled member countries to pursue individual
policies.
Since 1992 EEC had been engaged in dialogue with China concerning trade and
focusing on promoting economic and trade-related reforms as well as on securing
better access to Chinese markets for European goods. In July 1995 the European
Commission presented the document concerning long-term policy of European-
Chinese relations pertaining to trade and commerce relations between the parties
and presenting comprehensive strategy of the European Union member countries
towards China (COM 1995/279). The strategy reflected the growing importance of
China as world’s economic and political power. Since then the relations between the
European Union and China focused on three major issues: political dialogue,
economic and trade relationship and the European Union-China cooperation pro-
gram. Further documents of this nature were published in 1998—Building a Com-
prehensive Partnership with China (COM 1998/181), in 2001—EU Strategy towards
China: Implementation of the 1998 Communication and Future Steps for a more
Effective EU Policy (COM 2001/265) and in 2003—A Maturing Partnership:
Shared Interests and Challenges in EU-China relations (COM 2003/533). In docu-
ment published on the 24th of October 2006 titled EU-China: Closer partners,
growing responsibilities (COM 2006/631), the Commission stated that the Middle
Kingdom once again became global economic and political power. In this document
commitment and partnership were indicated as the grounds for mutual Union-China
relations. Closer strategic partnership represents the escalation of reciprocal expec-
tations and obligations as well as responsibilities of the involved parties. Forging
closer bilateral cooperation, particularly in the fields of science and technology, was
deemed, among other issues, a priority (see COM 1998, 2001, 2006; Council
Regulation (EU) 2003; Council Regulation (EC) 2006).
In September 2006, during the ninth Union-China summit, the result of growing
importance of China in European policies was making a decision concerning
initiating negotiations pertaining to signing a new Partnership and Cooperation
Agreement sanctioning and establishing strategic partnership between parties and
covering more than 20 areas of cooperation. This document was supposed to be the
symbol of change in the Union-China relations and an evidence of entering the new
stage of relations. The Partnership and Cooperation Agreement negotiations begun
in mid-January 2007 but in the span of several years reached a standstill and the
mutual trade relations are still regulated by the 1985 trade agreement. The impasse in
the Union-China negotiations concerning the Partnership and Cooperation Agree-
ment can be, according to Robert Putnam’s theory of two-tier international negoti-
ations (1988), explained with the insignificant scale of the overlapping successes of
the both parties. Partnership and Cooperation Agreement belongs to the type of
mixed agreements with European Union and member countries sharing competences
and therefore the Partnership and Cooperation Agreement must be negotiated and
ratified by both EU institutions and member countries which grants each member
country the right to veto the agreement. According to Young and Peterson (2014),
more agents are able to influence the change of policy the more difficult it is to effect
the change.
In 2016 the EU adopted a new strategy in relations with China. The discussed
strategy stipulates that the EU should: (1) utilize new openings to bolster its relations
with China, (2) include China in the EU reform process in a practical manner,
(3) advocate and support reciprocity, equal opportunities and fair competition in all
areas of cooperation, (4) move for the timely completion of the negotiations
concerning Comprehensive Agreement on Investment and creation of the new market
opportunities (negotiations concerning the Investment Agreement began in 2013),
(5) make advances in infrastructure and trading, establish digital and interpersonal
connectivity between Europe and China based on an open, rules-based platform,
(6) promote global public goods, sustainable development and international security
(JOIN 2016/30). The EU and China discuss policies and issues regarding trade and
investments in a range of forms of dialogue: the annual EU-China Summit, the
EU-China High Level Economic and Trade Dialogue—during which EU vice-
president and Chinese Vice Prime Minister, accompanied by EU Commissioners
and Chinese Ministers, meet to discuss various issues and subjects, Joint Committee
on Trade—an annual ministerial level meeting and Economic and Trade Working
Group—a discourse meeting between experts. Furthermore, the EU and China are
engaged in a joint venture under the name EU-China Trade Project—Support to
China’s Sustainable Trade and Investment System as part of which Annual Work
Plans are being prepared.
The European Union and China relations are constantly intensifying as a result of
the agreements, strategies and work plans entered into (Maher 2016; Christiansen
and Maher 2017). To a certain extent development of the relations between the EU
and China is the natural consequence of the Chinese impressive economic growth
and rising importance of China as a major political ally on the international political
scene. The significant push towards rapidly developing mutual relations also comes
from the common goals and interests of the European Union and the People’s
Republic of China. Complementarily of the European Union and the Middle King-
dom interest is also noticeable in such fields as multi-faceted and balanced devel-
opment of international relations.
The comparison of the EU and China protectionism in the field of agri-food products
in 2016 shows that the average rate of customs duty rate on agriculture related products
in China was 15.7%, higher than the average 11.9% customs duty rate in the European
Union. Since 2006 the European Union has lowered the average level of customs duty
rate on agricultural goods by 3.5% whereas China retained customs duty rates on a level
similar to the year 2006. In 2016 in the European Union the percentile shares of the
imported agricultural products not subjected to customs duty was, in comparison to
China, far higher (EU: 31.4%, China: 6%). In 2006 the European Union imported
marginally more duty-free agricultural goods—32.5%—while the Chinese duty-free
import of agricultural products remained at the same level. In 2016 China imported
more agricultural goods with customs duty rate exceeding 15–35.5%—whereas UE
imported 24.3% of such products. In 2006 China imported 35.9% of products with
customs duty rate exceeding 15% and UE imported 29.5% of similar products,
therefore it is noticeable that the UE reduced customs duty rates to a larger degree.
The maximum customs duty rates in China are maintained in the regard of cereal
preparations (65%), beverages and tobacco (65%), sugars and confectionery (50%) and
cotton (40%). The European Union imposes the highest customs duty rates on oilseeds
and oilseeds preparations (170%), fruits, vegetables and plants (157%), beverages and
tobacco (152%). In general, China safeguards its agricultural market significantly more
strongly than the European Union. Nevertheless, the level of tariff protection lowered in
the span of the last 10 years (World Tariffs Profiles 2006, 2017).
5 The Assessment of the Significance of the European Union

and China in the International Agri-Food Trade
According to the World Trade Organization statistic database (2017) the dynamism
of China is evidenced by the fact that China entered the group of top ten trading
countries as late as in 1998 but still Chinese share in the global trade rapidly grew in
the period of reforms and increased from less than 1% when the reforms were
initiated to more than 11.7% in 2013 and continues to dynamically grow. The
magnitude of this dynamism is evidenced by the fact that, excluding year 1995,
the rate of growth of the Chinese total merchandise products export exceeded the
global rate. By contrast, the Chinese export of agri-food products to third countries,
in comparison to the global world agri-food products’ export, also increased but to a
lesser extent than the export of merchandise products. It increased from 1.9% in
1975 to 3.3% in 2013. The rate of growth of the Chinese agricultural export outpaced
the rate of growth of world agricultural exports only in years 1977, 1983–1987,
1990, 1993, 1999, 2001, 2006, 2009 and 2011. The share of agricultural export of
the European Union in global agricultural export is rather significant and amounts to
39.6%, however, the export encompasses the intercommunity trade as well as the
trade with third countries. The share of the European Union in export of foodstuffs
remains at a level similar to the level observed in the 1970s of the twentieth century
and its growth could be observed in the late 1970s and throughout the 1980s of the
twentieth century.
The Export Specialization Indicator (SI) was calculated for the products belong-
ing to the SITC 0 + 1 group and it compares the export share of the SITC 0 + 1 group
of products (Exp agr.) in total export of the country/group concerned (Exp tot) with
the share of the group of concerned products in global, worldwide export (Exp w).
Export Specialization Indicator was calculated for the EU and China according to the
following formulas (1) and (2) (Laursen 2015):
Exp agr EU Exp agr W

SI EU ¼ : ð1Þ
Exp tot EU Exp tot W
Exp agr CH Exp agr W

SI CH ¼ : ð2Þ
Exp tot CH Exp tot W
The share of food export in total export of the EEC/EU did not change signifi-
cantly in the analyzed period of years 1975–2013 and it decreased by merely 2.6%
points. These insignificant decreases of share occurred in the 1990s of the twentieth
century when the resolutions of Mac Sharry’s reform concerning common agricul-
tural policy were executed. The 1970s and the 1980s were the period of the
enormous surplus of agricultural production in the territories of the European
Communities. The agricultural surplus was, aided by the export subsidies, exported
to third countries. On the contrary, the significant share of the agri-food products in
Chinese export, constituting 31.7% in 1975, dropped to merely 2.1% in 2013. The
share of world agri-food products export in the total world export also decreased, but
to a lesser extent, dropping from 14.05 to 7.42%. The decreased share of the food
export in total global export comes mainly from the fact that the rate of growth of
industrial products export is significantly higher than the rate of growth of food
products export. Only the EU was able to maintain fairly high share of the agricul-
tural export in the total export. However, this fact did not stem from the high
competitive power of the EU’s agricultural sector but rather from the adopted
instruments of the common agricultural policy and common trade policy adapted
to protect the functioning of the common agricultural market of the EU.
High competitive power of particular economy is evidenced by high values of the
Export Specialization Indicator (SI). Growth of this indicator is beneficial. In case of
the foodstuffs produced by the European Union the upward trend of the SI can be
observed; Specialization Indicator grew from 0.84 in 1975 to 1.23 in 2013. This
growth is graphically presented on Fig. 1. However, the competitive power of the
exported foodstuffs was mainly the result of the applied export subsidies abolished
during the WTO forum in 2013. By contrast, the competitive power of Chinese
foodstuffs measured with the SI significantly decreased in the analyzed period
dropping from 2.26% in 1975 to 0.28% in 2013. The growth rate of the Chinese
foodstuffs export is stunted by the limited possibilities of the growth of production
and increasing food consumption in the Chinese society.
35.00% 2.50
EU agr exp/tot exp China agr exp/tot exp World agr exp/tot exp
30.00% SI EU SI China
2.00
25.00%
1.50
20.00%
15.00%
1.00
10.00%
0.50
5.00%
0.00% 0.00
Fig. 1 The EU and China Export Specialization Indicators with its decomposition into compo-
nents. Source: Authors own study based on FAOSTAT database
The fact that in the case of certain products, like labor-intensive vegetables, China
has comparative advantage, as evidenced by the Export Specialization Index, needs
to be emphasized. According to research conducted by Xue and Revell (2009) the
rate of growth of the Chinese export of particular categories of vegetables exceeded
the global rate of growth and the Chinese share in the global market increased.
6 The Analysis of the Agri-Food Products Trade Turnover

Between European Union and China in Comparison
to General Trade Turnover in Years 2002–2017
Total export of the European Union products to China in years 2002–2017 grew
nearly sixfold increasing from 35,101.6 million (henceforth mln.) EUR in 2002 to
198,158.8 mln EUR in 2017 as presented on Fig. 2. In comparison, the growth of
import of the Chinese goods to the European Union was slower increasing from
90,418.9 mln EUR in 2002 to 374,570.6 mln EUR in 2017. In the analyzed period
the adverse balance of trade between European Union and China increased reaching
176,411.8 mln EUR in 2017.
As presented on Fig. 3 the opposite trend can be observed in the European
Union-China trade of food, beverages and tobacco indicated in the international
goods classification as the SITC 0 + 1 products. In this group of products, in years
2002–2017, an unprecedented growth of the European Union export to China can be
500 000,0
400 000,0
Exports Imports Trade balance
300 000,0
200 000,0
100 000,0
0,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-100 000,0
-200 000,0
-300 000,0
Fig. 2 Exports, imports and trade balance of the EU with China in all products (in million EUR).
Source: Authors own elaboration based on Eurostat database
12 000,0
10 000,0
Exports SITC 01 Imports SITC 01 Trade balance SITC 01
8 000,0
6 000,0
4 000,0
2 000,0
0,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-2 000,0
-4 000,0
Fig. 3 Exports, imports and trade balance of the EU with China in food, drinks and tobacco
products (SITC 0 + 1) (in million EUR). Source: Authors own elaboration based on Eurostat
database
160%
140%
120%
100%
80%
Exports of all products Imports of all products
Exports of SITC 0+1 Imports of SITC 0+1

60%
40%
2003/2002
2004/2003
2005/2004
2006/2005
2007/2006
2008/2007
2009/2008
2010/2009
2011/2010
2012/2011
2013/2012
2014/2013
2015/2014
2016/2015
2017/2016
Fig. 4 Comparison of dynamics of the EU-China exports and imports of all products and SITC
0 + 1 products. Source: Authors own elaboration based on Eurostat database
observed with the value of exported products jumping from barely 464.8 mln EUR
in 2002 to 10,083.5 mln EUR in 2017, a growth of nearly 2200%. Similarly, to
import in general the import of products belonging to SITC 0 + 1 group grew less
than fourfold from 1514.3 mln EUR in 2002 to 5140.3 mln EUR in 2017. Such
enormous growth of the export of the SITC 0 + 1 food, beverages and tobacco
allowed European Union to show minor positive balance in trade relations with
China as soon as in 2012 when the positive balance reached 15.5 mln EUR and
continued to rapidly grow reaching 4943.2 mln EUR in 2017.
The comparison of the rate of growth of export and import of all products to the
rate of growth of export and import of the SITC 0 + 1 group of products was
presented on Fig. 4. In general, for all analyzed types of trade turnover a significant
decrease of the rate of growth can be observed during worldwide economic crisis
between 2008 and 2009. General import as well as the import of SITC 0 + 1 group of
products from China decreased in value from 249,102 mln EUR in 2008 to
215,274.1 in 2009 for general import and from 3566.7 mln EUR to 3322.9 mln
EUR for the import of SITC 0 + 1 food and beverages products. When the crisis
ended in 2010 the dynamic growth of turnover occurred and lasted until 2012 when
the second wave of the global economic crisis came. The decrease in import trade
turnover, less significant than in 2009, could be observed again. The general import
of Chinese products to the European Union decreased from 295,055.3 mln EUR in
2011 to 292,121.9 mln EUR in 2012 whereas the import of food and beverages
decreased from 4464.8 to 4346.8 mln EUR. Apart from the periods of the economic
crisis the dynamic growth of the trade turnover in the EU and China, in both import
25,0
Share of imports of all products Share of exports of all products
Share of imports SITC 0+1 Share of exports SITC 0+1

20,0
15,0
10,0
5,0
0,0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Fig. 5 Share of the EU-China imports and exports of all products and SITC 0 + 1 products in
imports and exports with all partners (in %). Source: Authors own elaboration based on Eurostat
database
and export, could be observed. The rate of growth peaked with the growth of export
of SITC 0 + 1 food, beverages and tobacco from the EU to China when it reached
144% growth in 2010 and 149% growth in 2011.
As presented on Fig. 5 the share of the import of Chinese goods in the total EU
import increased from 9.7% in 2012 to 20.2% in 2017 which is a clear evidence of
the growing importance of China as the general provider of goods imported to the
markets of the EU. By contrast, the import share of the SITC 0 + 1 products grew the
most between 2002 and 2006 when it increased from 2.6 to 4.2%. It later maintained
the level which is related to the stable supply of the internal EU market in the agri-
food products from the tropical and subtropical climatic zones and simultaneous
self-sufficiency in terms of manufacturing food products in temperate climactic
zones. As the majority of the agri-food products manufactured in China are temper-
ate climate products there is little possibility for the development of import of such
products even despite the lesser extent to which EU markets are protected. The
situation of the EU export to China is quite different. The dynamic growth of both
the general export as well as the export of the SITC 0 + 1 group of products led to
increasing the importance and share of Chinese market as the recipient of the EU
exported goods in comparison to other destinations. Among all countries the share of
goods exported to China increased from 4 to 10.5%, and the export of the SITC 0 + 1
group of products increased ninefold—from 0.9 to 8.3% which is a marker of the
possibility for the increase of the EU production capabilities and the growing
demand for the agri-food products in China.
Substantial differences can be observed when comparing trends in general

European Union-China trade turnover in years 2002–2017 and the turnover in
trade of the SITC 0 + 1 group of food products in the same period. In general, the
adverse balance of trade on the part of the EU is increasing. However, the trend in
regard to the SITC 0 + 1 group of food products is opposite. Member countries of the
European Union significantly increased the export of the SITC 0 + 1 foodstuffs to
China which resulted in the EU reaching positive trade balance in 2012 and
European foodstuffs obtaining greater share in the Chinese food market.
7 Conclusion
The following conclusions can be drawn on the grounds of the conducted analysis.
Firstly, the Chinese economic development was the result of opening Chinese
economy to international cooperation and trade exchange as well as the promoter
of the extraordinarily dynamic growth of trade turnover between China and rest of
the world, in particular with highly developed economies such as the European
Union. Secondly, the rapid increase in trade turnover concerned mainly Chinese
industrial products the rate of growth of which significantly outpaced the global rate
of growth resulting in continuous increase of Chinese share in global trade. Thirdly,
the rate of growth of Chinese agricultural export was predominantly slower than the
global rate of growth of agricultural export. As a result, the competitive power of
China in international agri-food trade diminished as evidenced by the Export
Specialization Indicator dropping from 2.26% in 1975 to 0.28% in 2013 as calcu-
lated on the basis of FAOSTAT data. By contrast, the comparison of the rate of
growth of total agricultural export of China and the European Union indicates than in
the majority of cases Chinese total agricultural export grew at a faster rate (as in
years 1977, 1979–1985, 1987, 1990, 1993, 1996, 1999, 2001, 2004–2006,
2009–2012). Simultaneously, until 2012, an adverse balance of trade on the part
of the European Union could be observed in agri-food trade between the EU and
China. However, since 2012 the European Union reached favorable balance in agri-
food trade with China.
Fourthly, the European Union’s favorable balance in trade with China is the result
of highly dynamic growth of export of the EU’s goods to China which increased by
nearly 2100% between 2002 and 2017 and simultaneous slow pace of the growth of
agricultural import from China which increased by 340%. In addition, the opportu-
nities for growth of EU’s agri-food export to China are the result of the increased
demand for high-quality foodstuffs, such as the EU’s products, among Chinese
citizens stemming from the increased income of Chinese citizens and the shifting
tastes and preferences of the Chinese consumers. Finally, the main factors in the
development of agri-food trade between the EU and China were the admission of
China into the WTO resulting in stabilization of the terms of the EU-China trade
exchange and trade cooperation between the EU and China in the form of a bilateral
dialogue. By contrast, bilateral trade agreements, difficult to negotiate due to the
conflict of interests between China and member countries of the EU, had less
influence on the development of agri-food trade between the EU and China.
References
Agreement of 19 September 1985 on Trade and Economic Cooperation between the European
Economic Community and the People’s Republic of China, OJ L 250/2.
Białowąs, T., & Kąkol, M. (2009). Stosunki handlowe Unii Europejskiej z Chinami w latach
1995–2007 [Trade relations between the European Union and China in the years 1995–2007].
In B. Mucha-Leszko (Ed.), Pozycja Unii Europejskiej w handlu międzynarodowym [The
position of the European Union in international trade] (pp. 125–157). Lublin: Wydawnictwo
UMCS.
Chen, M., Kwok, C. L., Shan, H., & Yip, P. S. F. (2018). Decomposing and predicting China’s
GDP growth: Past, present, and future. Population and Development Review, 44(1), 143–157.
Christiansen, T., & Maher, R. (2017). The rise of China – Challenges and opportunities for the
European Union. Asia Europe Journal, 15(2), 121–131.
Commission Policy Paper COM 2003/533 of 10 September 2003 for transmission to the Council
and the European Parliament. A maturing partnership: Shared interests and challenges in
EU-China relations (pp. 1–32).
Communication from the Commission COM 1995/279 of 5 July 1995. A long term policy for
China-Europe relations (pp. 1–48).
Communication from the Commission to the Council and the European Parliament COM 1998/181
of 25 March 1998. Building a comprehensive partnership with China (pp. 1–28).
of 15 May 2001. EU strategy towards China: Implementation of the 1998 communication and
future steps for a more effective EU policy (pp. 1–20).
of 24 October 2006. EU-China: Closer partners, growing responsibilities (pp. 1–12).
Council Regulation (EC) 427/2003 of 3 March 2003 on a transitional product-specific safeguard
mechanism for imports originating in the People’s Republic of China and amending Regulation
No 519/94 on common rules for imports from certain third countries, OJ L 065, 8/03/2003 (p. 1).
Council Regulation (EC) 130/2006 of 23 January 2006 imposing a definitive anti-dumping duty and
collecting definitively the provisional duty imposed on imports of tartaric acid originating in the
People’s Republic of China, L 23/1 27/01/2006 (pp. 1–7).
Council Regulation (EU) 158/2013 of 18 February 2013 imposing a definite anti-dumping duty on
imports of certain prepared or preserved citrus fruit (namely mandarins, etc.) originating in the
People’s Republic of China, L 49 22/02/2013 (pp. 1–18).
European Commission. (2016a). EU and China discuss trade, investment, overcapacity and
cooperation on state aid control at the 6th high-level economic and trade dialogue. Brussels
18/11/2016 [online]. Press release. Retrieved March 19, 2018, from http://europa.eu/rapid/
press-release_IP-16-3441_en.htm
European Commission. (2016b). Anti-dumping, anti-subsidy, safeguard statistics covering. The
12 months of 2016. 28/02/2017 [online]. Retrieved March 18, 2018, from http://trade.ec.europa.
eu/doclib/docs/2017/january/tradoc_155243.pdf
Faostat, Statistic Database. (2017). [online]. Retrieved December 20, 2017, from http://www.fao.
org/faostat/en/#data
Garred, J. (2018). The persistence of trade policy in China after WTO accession. Journal of
International Economics, 114, 130–142. https://doi.org/10.1016/j.jinteco.2018.06.001.
Griese, O. (2006). EU-China relations – An assessment by the communications of the European
Union. Asia Europe Journal, 4(4), 545–553.
Jarosz-Angowska, A. (2017). Instrumenty regulacji rynków rolnych w uwarunkowaniach wspólnej

polityki rolnej UE [Instruments of agricultural markets regulation in the conditions of the EU
common agricultural policy]. Studia Ekonomiczne, Wydawnictwo Uniwersytetu Ekonomicznego
w Katowicach, 312, 40–50.
Joint Communication to the European Parliament and the Council JOIN 2016/30 of 22 June 2016.
Elements for a new EU strategy on China (pp. 1–19).
Laursen, K. (2015). Revealed comparative advantage and the alternatives as measures of interna-
tional specialization. Eurasian Business Review, 5, 99–115. https://doi.org/10.1007/s40821-
015-0017-1.
Maher, R. (2016). The elusive EU-China strategic partnership. International Affairs, 92(4),
959–976.
Pasierbiak, P. (2016). China and de jure regional economic integration in East Asia. Studia
Ekonomiczne, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Katowicach, 266, 167–177.
Poczta-Wajda, A., & Pawlak, K. (2017). Globalne skutki ewolucji polityki handlowej na rynkach
rolnych w rozwijających się krajach azjatyckich [The global impact of the evolution of trade
policy on agricultural markets in developing Asian countries]. Roczniki Naukowe
Stowarzyszenia Ekonomistów Rolnictwa i Agrobiznesu, 19(3), 231–237.
Putnam, R. D. (1988). Diplomacy and domestics politics: The logic of two-level games. Interna-
tional Organization, 42(3), 427–460.
Pyffel, R., & De Xing, R. (2014). Vademecum rynku chińskiego – branża spożywcza [Vademecum
of the Chinese market – Food industry]. Biuletyn Informacyjny Agencja Rynku Rolnego, 4,
24–31.
Regulation EU 2015/755 of the European Parliament and of the Council of 29 April 2015 on
common rules for imports from certain third countries, OJ L 123 (pp. 33–49).
Thorstensen, V., & Oliveira, M. I. T. (2014). BRICS in the World Trade Organization: Compar-
ative trade policies – Brazil, Russia, India, China and South Africa (pp. 1–100). Johannesburg:
IPEA, CCGI (FGV) and SAIIA.
Trade Agreement of 11 May 1978 between the European Economic Community and the People’s
Republic of China, OJ L 123/2 (pp. 1–4).
World Tariffs Profiles. (2006). Geneva: WTO, ITC, UNCTAD.
World Tariffs Profiles. (2017). Applied MFN tariffs. Geneva: WTO, ITC, UNCTAD.
World Trade Organization. (2018). Disputes by member [online]. Retrieved March 19, 2018, from
https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm
World Trade Organization Statistic Database. (2017). [online]. Retrieved December 12, 2017, from
http://stat.wto.org/Home/WSDBHome.aspx
Xue, L., & Revell, B. J. (2009). Which way forward for China’s vegetable exports? British Food
Journal, 111(1), 26–43.
Young, A., & Peterson, J. (2014). Parochial global Europe: 21st century trade politics. Oxford:
Oxford University Press.
Economic and Environmental Performance
of Post-Communist Transition Economies
Lina Sineviciene, Oleksandra V. Kubatko, Iryna M. Sotnyk,

and Ausrine Lakstutiene
Abstract This paper presents the results of the empirical study for determining the
factors affecting the environmental and economic per capita performance of national
economies in the case of 15 post-Soviet republics over the period 1995–2013. The
study shows that the growth of GDP per capita stimulates CO2 efficiency of all
countries. Other significant factors of CO2 efficiency are energy efficiency, the
increase of oil prices, the gross fixed capital formation and processes of small and
large privatization. However, a multi-directional effect of some individual factors is
established. Energy efficiency improvements are related to the growth of CO2
efficiency. Oil prices and small-scale privatization also positively affect CO2 effi-
ciency, while large-scale privatization and the increase of gross fixed capital reduce
the carbon efficiency. It was found that the growth of oil prices positively affects
GDP per capita as well as carbon efficiency, while large-scale privatization has a
negative impact on both indicators. The increase of gross fixed capital has a multi-
directional influence on environmental and economic performance leading to per
capita GDP growth and reduction of CO2 efficiency.
Keywords Economic and environmental performance · Post-communist transition

economies · Econometric model · Carbon efficiency · GDP per capita
1 Introduction
The interrelation of economic and environmental aspects of the modern world

development is largely driven by globalization. The deepening of environmental
problems and their exclusion beyond countries’ borders creates the prerequisites for
L. Sineviciene (*) · A. Lakstutiene

School of Economics and Business, Kaunas University of Technology, Kaunas, Lithuania
e-mail: lina.sineviciene@ktu.lt; ausrine.lakstutiene@ktu.lt
O. V. Kubatko · I. M. Sotnyk
Department of Economics and Business Administration, Sumy State University, Sumy, Ukraine
e-mail: ovkubatko@econ.sumdu.edu.ua

bringing together the efforts of the national governments in order to halt global
warming and to avoid its real threats associated with increasing magnitude and
number of natural disasters that cause huge economic losses across the globe.
Economic achievements create the basis for the development and use of environ-
mentally friendly and resource-efficient technologies that promote environmental
quality improvements. However, economic growth causes the growing scale of
environmental pollution, depletion of natural capital and exhaustion of
non-renewable natural resources. The current task for the global economy is to
devise and implement national sustainable development strategies that would ensure
the achievement of high environmental performance within the overall growth of the
nations’ welfare. However, the development of effective strategies and policies
should be based on detailed identification and consideration of the key factors
affecting the environmental and economic performance of national economic
systems.
Global climate change can be prevented by constantly reducing carbon (CO2)
intensity of national economies and increment of their carbon efficiency. For post-
communist transition states, which institutional changes have a high potential for
implementing positive environmental and economic transformations, the adoption of
timely and justified political decisions is an important practical step for improving
carbon efficiency of their GDP. Nonetheless, such recommendations require deter-
mining a range of factors that affect the dynamics of carbon efficiency through the
changes in CO2 emissions’ volumes, economic growth rates, etc.
Economic growth can be achieved by stimulating investment policy, restructuring
economic systems towards reducing their resource intensity, increasing energy
efficiency and renewable energy use, developing the service sector and the green
economy (Melnyk et al. 2013). The consequences of such transformations are
positive changes in the environmental quality and improvement of social indicators.
However, the impact of these processes on economic growth of some national
economies may be ambiguous, in particular, for economies in transition. Given the
existing potential of economic changes in post-communist transition countries and
high costs that must be invested in national economies’ transformation, identification
of the factors that have influence on the economic growth of the states is becoming
extremely relevant.
The distinguishing feature of this study is that authors have investigated the main
factors of carbon efficiency and per capita GDP of 15 former post-communist
republics during 19 years in order to develop policy recommendations for activating
processes of economic growth and decarbonization in the considered states. The
objective of the study is to determine the main factors of environmental and
economic performance of post-communist transition economies in terms of CO2
efficiency and GDP per capita as well as identify significant factors of their changes.
Economic and Environmental Performance of Post-Communist Transition Economies 127
2 Literature Review
There are numerous publications devoted to the investigation of various factors

impact on the dynamics of national economies carbon efficiency in the modern
scientific literature. Most of the papers examine trends in economic processes
development (in particular, economic growth) and CO2 emissions for developed
and developing countries. These are research of economic and CO2 efficiency for
Asia Pacific Economic Cooperation members (Wang et al. 2016); low-carbon
integration and firm performance as well as driving forces of regional carbon
emissions in China (Gao et al. 2016; Mao et al. 2017); factors of influence on low/
no-fossil carbon transformations in different regions of the world (Kurbatova and
Khlyap 2015; Zhao et al. 2017); long-run and casual analysis of energy, growth,
openness, financial development and carbon emissions in Turkey (Ozturk and
Acaravci 2013); relationship between carbon emissions, energy consumption and
income for a panel of new member and candidate countries of the European Union
(EU) (Kasman and Duman 2015); long-run relations between energy consumption,
CO2 emissions, and economic growth in Indonesia (Hwang and Yoo 2014; Shahbaz
et al. 2013); the nexus between carbon emissions, energy consumption and eco-
nomic growth in Middle East countries (Ozcan 2013). Among the key factors
determining national indicators of СО2 emissions and carbon efficiency, scholars
have identified energy efficiency improvements (Wang et al. 2016; Zhao et al. 2017),
GDP growth (Gao et al. 2016; Mao et al. 2017; Wang et al. 2016), investment and
capital stock (Gao et al. 2016; Mao et al. 2017; Wang et al. 2016; Yang and Wang
2013), technological structure of production and its shifts (Jalil and Feridun 2011;
Saidi and Hammami 2015), energy prices and structure of energy mix (Gao et al.
2016; Hammond and Norman 2012; Ren and Hu 2012; Zhao et al. 2017), financial
development (Chiu 2017; Shahbaz et al. 2013) and energy consumption (Arouri
et al. 2012; Kasman and Duman 2015).
Considerable amount of publications has explored the factors of economic growth
in different countries all over the world. Among them, there are investigations of the
relationship between energy consumption and economic growth for G7 countries
(Narayan and Smyth 2008; Tugcu et al. 2012), China (Bloch et al. 2015; Wang et al.
2011), Union for the Mediterranean countries (Esseghir and Khouni 2014), Indonesia
(Soile 2012), Nigeria (Olumuyiwa 2012), a panel of 100 developed and developing
countries (Chontanawat et al. 2008). In addition, there are previous papers for
investigating dynamic links between economic growth and financial development,
investment as well as international trade in China (Shahbaz et al. 2013), G7 countries
(Lee and Chien 2010), India (Bell and Rousseau 2001), Latin America (Cuadros et al.
2004), panels of developed and developing countries (Saidi and Hammami 2015; Xu
2000). There is the nexus between GDP and labor resources as well as urbanization
and industrialization processes for China (Shahbaz et al. 2013; Zhao and Wang
2015), India (Ghosh and Kanjilal 2014), G7 countries (Narayan and Smyth 2008),
the Mediterranean countries (Esseghir and Khouni 2014), a panel of a new EU
member and candidate countries (Kasman and Duman 2015), Nigeria (Olumuyiwa
2012), South Asian countries (Noor and Siddiqi 2010). In addition, the dynamic
causal relationships between energy prices and economic activity in Saudi Arabia
(Alshehry and Belloumi 2015), five largest economies consisting of the Euro area, the
U.S., Japan, China and India (Ratti and Vespignani 2016), 4 OPEC countries (United
Arab Emirates, Kuwait, Saudi Arabia, and Venezuela) (Ftiti et al. 2016), 12 OPEC
members, 9 oil-exporting countries and 15 oil-importing countries (Lescaroux and
Mignon 2008). In addition, there is the causal effects of life expectancy on economic
development for a panel of 47 developed and developing countries (Cervellati and
Sunde 2009; Sunde and Cervellati 2012), sub-Saharan Africa (Turan 2009), 59 coun-
tries including Western Europe, Oceania, the Americas, and Asia (Acemoglu and
Johnson 2006). The nexus between economic growth and processes of privatization
and institutional changes for Iran (Shahraki 2011), a panel of 92 developing countries
(Filipovic 2006), 63 developing countries (Cook and Uchida 2003), 10 developing
countries and 8 transition economies (Barnett 2000), 23 OECD countries
(Katsoulakos and Likoyanni 2002) are also investigated. Finally, the relationship
between renewable energy use and economic development in China (Lin and
Moubarak 2014), 27 European countries (Menegaki 2011), OECD states
(Bayraktutan et al. 2011; Neitzel 2017), 154 countries with different level of
human development (Kazar and Kazar 2014), a panel of 80 developed and develop-
ing economies across the globe (Apergis and Danuletiu 2014).
Following these results, the most important factors influencing economic growth
are energy consumption including clean and renewable energy use (Apergis and
Danuletiu 2014; Bayraktutan et al. 2011; Esseghir and Khouni 2014; Kazar and
Kazar 2014; Lin and Moubarak 2014; Narayan and Smyth 2008), energy prices
(Alshehry and Belloumi 2015; Ftiti et al. 2016; Gronwald et al. 2009; Idrisov et al.
2015), gross fixed capital formation and investment (Esseghir and Khouni 2014;
Narayan and Smyth 2008; Noor and Siddiqi 2010; Saidi and Hammami 2015;
Shahbaz et al. 2013), financial development and institutional changes (Barnett
2000; Cook and Uchida 2003; Filipovic 2006; Saidi and Hammami 2015; Shahbaz
et al. 2013), technological structure of production and its shifts, urbanization and
industrialization processes (Esseghir and Khouni 2014; Kasman and Duman 2015;
Shahbaz et al. 2013), labor resources, life expectancy and employment (Olumuyiwa
2012; Ozturk and Acaravci 2010; Sunde and Cervellati 2012; Turan 2009).
A far less number of publications are devoted to economic and environmental
performance of transition and post-communist economies, in particular, the repub-
lics of the former Union of Soviet Socialist Republics (USSR) (for example,
Brunnschweiler 2009; Carvalho 2016; Cornillie and Fankhauser 2004; Filipovic
2006; Gronwald et al. 2009; Hamm et al. 2012; Idrisov et al. 2015; Kasman and
Duman 2015; Liobikiene et al. 2016; Nepal et al. 2014; Shukurov et al. 2016; Zhang
2013). These studies examine factors that affect economic and environmental
development indicators of post-communist and transition states and consider the
main determinants of GDP growth and CO2 emissions as well as following factors
are also effective: energy efficiency, energy prices, economic restructuring, techno-
logical changes, investment, innovation, privatization, urbanization, and others. The
findings show that many research results contradict one another, causing scientific
and political discussions about the correctness of policy recommendations based on

such results. The outcome is unbalanced management decisions, which do not have a
significant impact on changes in economic and environmental performance of
countries and, in particular, levels of their carbon efficiency and GDP per capita.
3.1 Estimation of Environmental Performance
Given the literature review above, the authors have adopted carbon efficiency as the
main measure reflecting environmental performance and included it as a dependent
variable in a set of indicators for the study. Based on the list of the most common
drivers distinguished by researchers, GDP per capita, industry value added, energy
efficiency, gross fixed capital formation, oil prices, indexes of large scale and small
scale privatization during the period 1995–2013 formed a factor panel for the
investigation.
The beginning of the study period was chosen as 1995 because a tendency to
stabilize economic processes and environmental development after USSR collapse
in 1991 had emerged in the majority of selected countries by that year. 2014 was
marked by the violent change in the territorial integrity of Ukraine that led to the
impossibility of obtaining comparable data for all selected countries, since that year.
Due to data availability, 2013 was adopted as the end of the study period. Totally, the
authors had 285 observations during the 19-year period for the selected 15 post-
communist transition economies (Armenia, Azerbaijan, Belarus, Estonia, Georgia,
Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmen-
istan, Ukraine, and Uzbekistan).
Based on the datasets provided by the World Bank (2017) and European Bank for
Reconstruction and Development (2017), we have constructed and tested economet-
ric model, which includes various factors influencing carbon efficiency [in terms of
GDP (PPP USD) per 1 kg of CO2 emissions] for the panel of the considered
countries. The factors were chosen as follows: GDP per capita (in constant prices,
USD); industry value added (in constant prices, USD); the real price of energy in
terms of oil prices; the gross fixed capital formation (in constant prices); energy
efficiency [in terms of GDP (PPP USD) per 1 kg of oil equivalent]; two institutional
dummies: large and small scale privatization that range against the standards of
industrialized market economies from 1 to 4+ (European Bank for Reconstruction
and Development 2017); the annual dummy (1995–2013).
Given the discussion above, the authors have constructed a regression model to
estimate the impact of various factors on carbon efficiency for a panel of 15 post-
communist economies:
CE t ¼ E ðY t ; IVAt ; OPt ; FC t ; EE t ; LSPRt ; SSPRt ; t t Þ, ð1Þ
Where:
CEt—is carbon (CO2) efficiency (GDP/kg of CO2 emissions);
Yt—is GDP per capita (in constant prices);
IVAt—is the value added of the industrial sector (in constant prices);
OPt—is the real price of energy in terms of oil prices;
FCt—is gross fixed capital formation (in constant prices);
EEt—is energy efficiency (GDP/kg of oil);
LSPRt—is the institutional dummy in terms of large-scale privatization;
SSPRt—is the institutional dummy in terms of small-scale privatization;
tt—is the annual dummy (1995–2013).
For empirical estimations of factors’ relations, the authors transformed all vari-
ables into logarithms and worked with elasticities. As a result, the final log-log
functional form of Eq. (1) was estimated as follows:
cet ¼ β0 þ β1 yt þ β2 it þ β3 opt þ β4 fct þ β5 eet þ β6 LSPRt þ β7 SSPRt þ β8 t t

þ ut , ð2Þ
Where:
cet—is the natural logarithm of carbon efficiency (GDP/kg of CO2 emissions, CEt);
yt—is the natural logarithm of GDP per capita (Yt);
it—is the natural logarithm of the value added of the industrial sector (IVAt);
opt—is the natural logarithm of the real price of energy in terms of oil prices (OPt);
fct—is the natural logarithm of gross fixed capital formation (FCt);
eet—is the natural logarithm of energy efficiency (GDP/kg of oil, EEt);
β0,. . ., β7—are regression coefficients of the model;
uit—is an error term.
Based on Hausman (1978) specification test, the authors have justified the
expediency of using random effects model to study panel data for the considered
countries.
3.2 Estimation of Economic Performance
With regard to the analysis of publications mentioned above, the authors have
adopted GDP per capita as the main resulted indicator of countries’ economic
performance for the second model. Similar to the model (1), the authors have
included industry value added, gross fixed capital formation, oil prices and indexes
of large scale and small scale privatization as well as the annual dummy as factors
into the model of economic performance (1995–2013). In addition, indicators of
urban population, life expectancy, renewable electricity output and energy use
complemented the second model. The selection of factors was provided in accor-
dance with the most common drives of GDP growth investigated by researchers
above.
Because of the reasons mentioned in Literature Review and in order to compare
countries’ environmental and economic performance, the study period was also
defined between 1995 and 2013. Similar to the previous model (1), the authors
have 285 observations during the 19-year period for the selected 15 post-communist
transition economies.
The authors have constructed and tested econometric model, which includes
various factors influencing on GDP per capita [in terms of GDP (PPP USD) per
capita] for the panel of the considered countries. Unlike the previous model, the
additional factors were chosen as follows:
– urban population (% of total);
– life expectancy at birth (years);
– renewable electricity output (% of total electricity output);
– energy use (kg of oil equivalent per capita).
Given the discussion above, the authors have constructed a regression model to
estimate the impact of various factors on GDP per capita for a panel of 15 post-
communist economies:
Y t ¼ E ðU t ; LE t ; RE t ; E t ; IVAt ; FC t ; LSPRt ; SSPRt ; OPt ; t t Þ, ð3Þ
Where:
Ut—is urban population’s share (% of total);
LEt—is life expectancy at birth, total (years);
REt—is share of renewable electricity output (% of total electricity output);
Et—is energy use per capita (kg of oil equivalent).
For empirical estimations of model (3), the authors have transformed all variables
into logarithms and worked with elasticities. As a result, the final log-log functional
form of Eq. (3) was estimated as follows:
yt ¼ β0 þ β1 ut þ β2 let þ β3 ret þ β4 et þ β5 it þ β6 fct þ β7 LSPRt þ β8 SSPRt

þ β9 opt þ β10 t t þ ut , ð4Þ
Where:
ut—is the natural logarithm of the urban population (% of total);
let—is the natural logarithm of the life expectancy at birth, total (years);
Table 1 Random-effects Explanatory variables Dependent variable (cet)

GLS regression analysis of
yt 0.1625 (0.0424)
carbon efficiency (GDP/kg of
CO2 emissions) for the panel it 0.0179 (0.020)
of 15 selected countries opt 0.210 (0.0307)
fct 0.1228 (0.0295)
eet 0.9626 (0.0527)
LSPRt 0.1489 (0.0637)
SSPRt 0.1559 (0.0825)
Intercept 0.1170 (0.425)
Notes: Standard errors in parentheses. p < 0.01; p < 0.05;
p < 0.10
Source: Authors’ own calculations
ret—is the natural logarithm of the renewable electricity output (% of total electricity
output);
et—is the natural logarithm of the energy use (kg of oil equivalent per capita);
β0,. . ., β10—are regression coefficients of the model.
Similar to the model (2), we have used Hausman (1978) specification test to
justify the expediency of using random effects model to study panel data for the
considered countries.
4 Research Results
4.1 Analysis of Environmental Performance
Using the above-mentioned model (2), it was estimated the influence of independent
variables on the GDP per 1 kg of CO2 for the sample of post-communist countries.
The regression results are presented bellow in Table 1. The statistically significant
factors for modeling the carbon efficiency as share of GDP are six out of seven
explanatory variables; the value added of the industrial sector appears to be insig-
nificant. It is necessary to underline the different directions of the influence of
significant factors.
GDP per capita, oil price increase and extensions of small-scale privatization do
cause the positive changes in carbon efficiency indicators, while the increase in gross
fixed capital and large-scale privatization extension do cause a negative influence on
CO2 efficiency. Thus, the increase in GDP per capita by 1% promotes the increase in
GDP per 1 kg of CO2 by 0.16%; the oil price increase by 1% stimulates the growth of
carbon efficiency of GDP by 0.21%; an increment in economy’s energy efficiency
by 1% leads to carbon efficiency of GDP increase by 0.96%. However, growth of
gross fixed capital formation by 1% reduces the carbon efficiency of GDP by 0.12%
as well as big-scale privatization has a negative influence on CO2 efficiency of GDP.
The energy efficiency changes have positive influence on carbon efficiency since
the amounts of fossil fuels consumption per unit of GDP is reducing. The oil price
increase affects in the same way on CO2 efficiency due to more efficient use of
energy resources and declining in CO2 emissions from their combustion. These
results are supported by the papers (Cornillie and Fankhauser 2004; Hammond and
Norman 2012; Kasman and Duman 2015; Liobikiene et al. 2016; Ren and Hu 2012;
Saidi and Hammami 2015).
It was found a bidirectional influence of privatization on CO2 efficiency dynam-
ics. Firstly, the rise in large-scale privatization reduces the carbon efficiency. It might
be explained by the fact that large industrial firms privatized in post-communist
countries are firms with obsolete and resource inefficient technologies. The lack of
restructuration activities in large industrial firms after their privatization promoted to
rising CO2 emissions and declining the carbon efficiency of GDP. Secondly, small-
scale privatization promotes the service sector development, which has reduced the
resource intensity of national economies and increased the GDP carbon efficiency.
These results are supported by the studies (Carvalho 2016; Nepal et al. 2014).
It was expected that industrial production was organized mainly on the basis of
resource-intensive technologies in post-communist transition economies. However,
it was found that this factor is not statistically significant and does not affect the
dynamics of carbon efficiency. This result can be explained by the fact that the
growth of the industrial sector in some post-communist economies was accompanied
by the development of renewable production technologies, and was grounded on
principles of resource and eco-efficiency as well as the use of an efficient material
and technical base. These results are confirmed by the papers (Cornillie and
Fankhauser 2004; Liobikiene et al. 2016; Nepal et al. 2014) and reflect the difference
between transition economies and developed countries’ economies, where the
industrialization processes are related to production automation and robot using,
which positively affect the dynamics of GDP carbon efficiency.
The results of the research have shown that gross fixed capital formation has a
negative effect on CO2 efficiency change. This finding can be explained by the fact
that the gross fixed capital formation increase for the considered countries within
analyzed period was provided mainly due to investment in the development of
resource-intensive industrial sector. It caused the increase in CO2 emissions and
reduction of carbon efficiency. These results are consistent with the studies (Nepal
et al. 2014; Shahbaz et al. 2013). At the same time, most investment in the gross
fixed capital formation in developed countries are focused on implementation of
eco-efficient technologies and services sector development promoting CO2 effi-
ciency growth.
All explanatory factors such as GDP per capita, oil prices, gross fixed capital
formation, energy efficiency and two institutional dummies (large and small-scale
privatization) appear to be inelastic.
Table 2 Random-effects Explanatory variables Dependent variable (yt)

GLS regression analysis of
ut 1.312 (0.346)
GDP per capita for the panel
of 15 selected countries let 5.409 (0.835)
ret 0.00061 (0.0208)
et 0.1580 (0.092)
it 0.0231 (0.0151)
fct 0.5068 (0.0281)
LSPRt 0.0853 (0.0420)
SSPRt 0.0288 (0.0458)
opt 0.377 (0.0462)
Intercept 33.396 (3.5255)
Notes: Standard errors in parentheses. p < 0.01; p < 0.05;
p < 0.10
Source: Authors’ own calculations
4.2 Analysis of Economic Performance
Using the above-mentioned model (4), it was estimated the influence of independent
variables on the GDP per capita for the panel of 15 post-communist economies. The
regression results are presented bellow in Table 2.
The statistically significant factors for modeling GDP per capita are six out of
nine explanatory variables while the value added of the industrial sector, renewable
electricity output and small-scale privatization appear to be insignificant. Five (urban
population, life expectancy, energy use per capita, oil prices and gross fixed capital
formation) out of six significant factors have a positive influence on the dependent
variable whereas the improvements in large-scale privatization cause declining in
GDP per capita.
Thus, the increase in urbanization rates by 1% promotes a gain in GDP per capita
by 1.31%; the life expectancy growth by 1% stimulates the increase in per capita
GDP by 5.41%; an increment in economy’s energy per capita consumption by 1%
leads to GDP per capita increase by 0.16%. Furthermore, the gain in gross fixed
capital formation by 1% stimulates the growth of GDP per capita by 0.51% as well as
growth in oil price by 1% leads to 0.38% increase in GDP per capita.
The research results do not prove that the positive correlation between the growth
of renewable electricity output share and per capita GDP increase exists. The factor
of renewable technologies development has appeared to be statistically insignificant.
It can be explained by different levels of renewable energy development in the
considered countries, and, therefore, diverse trends offset one another for the given
panel of states. In particular, such countries as Russia and Turkmenistan have
significant own stocks of fossil fuels (gas and oil). Thus, their full energy supply
and the high cost of renewable energy generation pose obstacles to expanding green
energy use. On the other hand, the Baltic States (Latvia, Lithuania, Estonia) actively
develop renewable energy capacities due to their own energy deficit (in terms of
fossil fuels) and under the powerful support of the EU. Ukraine and some other
former republics are only at the initial stages of renewable energy facilities devel-
opment. These results coincide with the results received in the papers (Bayraktutan
et al. 2011; Esseghir and Khouni 2014; Menegaki 2011; Neitzel 2017).
The empirical results have confirmed the stimulating effect of the oil price factor
on GDP growth for countries, which have enough own energy resources. Such a
correlation can be explained by the fact that during the study period, world oil prices
were gradually increasing, causing GDP per capita growth in those former republics
that are rich in energy resources and traded in them on the world market. As for other
states from the investigated bloc, which do not have sufficient stocks of own fossil
fuels, for the most part of the study period, the majority of the countries had long-
term contracts with neighboring states, rich in own energy resources and purchased
energy resources from their neighbors at fixed low prices. It gave the countries an
opportunity to produce low-cost products and sell them to the world market at
normal prices, generating additional profits. Those gains provided an increase in
GDP per capita in the states during the study period. These results are confirmed by
the papers (Alshehry and Belloumi 2015; Brunnschweiler 2009; Gronwald et al.
2009; Idrisov et al. 2015).
The revealed negative impact of large-scale privatization on GDP per capita can
be explained by the specifics of large-scale privatization scenarios in the considered
countries. In many of these states, large-scale privatization was associated with
corruption schemes, whereby large state-owned enterprises were deliberately led
to their bankruptcy so that they could be privatized by buying them at low price.
After privatization, enterprises were sold out in parts or continued to exist. However,
these enterprises showed a steadily low efficiency of their management, since few of
the new owners had the opportunity and desire to invest heavily in updating
production technologies of giant enterprises. This result coincides with the papers
(Brunnschweiler 2009; Cook and Uchida 2003; Filipovic 2006; Hamm et al. 2012).
The uncertainty of the impact of industry value added and small-scale privatiza-
tion on GDP per capita growth can be explained by the fact that in the selected
countries there were diverse processes for the development of industrial and service
sectors. The service sector development was stimulated by the implementation of
small-scale privatization. Therefore, it is logical to assume that the existence of
opposite tendencies: prevailing industrial development in some countries and the
rapid expansion of service sector under the support of small-scale privatization in the
others, dampened the influence of these factors on the dynamics of GDP per capita
for the panel of states. Due to the lack of collected data, this conclusion should be
confirmed by further investigation with regard to the situation in each of the selected
countries. In general, the results are supported by the studies (Brunnschweiler 2009;
Filipovic 2006; Hamm et al. 2012; Katsoulakos and Likoyanni 2002) and reflect the
difference between transition economies and developed market economies that have
a clear tendency of reducing the industrial sector share in favor of the service sector
because of transition to a post-industrial economy.
The research results showed that a positive impact of urbanization processes on
GDP per capita growth provides increasing scale of cities where large-scale produc-
tion, labor and investment are concentrated. The combination of these components is
necessary to ensure the economic growth of nations. In turn, due to improved

education and healthcare, increasing life expectancy contributes to prolongation of
population’s working life, the growth of labor use efficiency and improvement of
GDP per capita. These results are confirmed by the papers (Cervellati and Sunde
2009; Kasman and Duman 2015; Sunde and Cervellati 2012; Turan 2009).
Sufficient investment in the national economy is another significant factor
influencing economic growth that is confirmed by the positive effect of gross fixed
capital formation dynamics on GDP per capita increase in the model and by studies
(Esseghir and Khouni 2014; Olumuyiwa 2012; Wang et al. 2011). An increment in
energy use per capita also positively affects economic growth, since use of more
energy resources volumes allows to produce more end-products, which is reflected
in GDP per capita, under other conditions. This result coincides with results obtained
in the papers (Alshehry and Belloumi 2015; Esseghir and Khouni 2014; Olumuyiwa
2012; Saidi and Hammami 2015; Wang et al. 2011). All explanatory factors such as
urban population, life expectancy at birth, energy use, gross fixed capital formation,
oil prices and institutional dummy (large-scale privatization) appear to be inelastic.
Comparing the impact of factors that are common to models (2) and (4)—industry
value added, gross fixed capital formation, oil prices and two institutional dummies
(large and small scale privatization), the authors have made the following conclu-
sions. Given multidirectional trends in the industrial sector development for the panel
of the selected countries, the industry value added appears to be statistically insig-
nificant for environmental as well as for economic performance. Changes in gross
fixed capital formation causes opposite transformations: negative in indicators of
carbon efficiency and positive in GDP per capita. These trends can be explained by
the fact that increasing investment in the national economy clearly leads to economic
growth. However, since investment in the considered countries was mostly directed
to the development of resource-intensive and environmentally unfriendly industries,
the overall environmental performance deteriorated.
The dynamics of oil prices has a positive impact on environmental as well as
economic performance. Furthermore, the growth of CO2 efficiency in some national
economies is due to rationalization of energy resources use because of rising oil
prices. On the other hand, per capita GDP increase is based on economic benefits that
countries with long-term energy contracts received from the difference between
procurement prices of energy resources and prices of finished products sold by
them on the world market.
Large-scale privatization has a negative impact on both carbon efficiency and
GDP per capita. CO2 efficiency declines since the resumption of work of large
industrial enterprises have been provided without their environmentally friendly
restructuring after crises, which caused a rise in CO2 emissions. GDP per capita
decreases due to numerous corruption schemes during large-scale privatization since
large enterprises were brought to the brink of bankruptcy and ineffectively managed.
Small-scale privatization appears to be statistically insignificant for per capita GDP,
whereas it has a positive impact on CO2 efficiency due to successful restructuring of
some national economies in terms of service sector development and reduction of
their resource and eco-intensity.
5 Conclusion
The empirical study confirmed that the growth of GDP per capita stimulates the CO2
efficiency of all countries. Other significant factors for CO2 efficiency are energy
efficiency, the increase of oil prices, gross fixed capital formation and processes of
small and large privatization. However, there was a multi-directional effect of some
individual factors. Energy efficiency improvements are related to the increase of
CO2 efficiency. Oil prices and small-scale privatization also positively affect CO2
efficiency, while large-scale privatization and gross fixed capital growth reduce the
carbon efficiency. The industry value added appears to be insignificant for CO2
efficiency changes.
As of GDP per capita, factors of urbanization processes and the increase of life
expectancy as well as energy use per capita stimulate the growth of national
economies. Oil prices and gross fixed capital formation have the same positive
impact on GDP per capita. On the other hand, large privatization negatively affects
economic performance of post-communist countries, while the value added of the
industrial sector, renewable electricity output and small-scale privatization appear to
be insignificant. Considering both environmental and economic performance of the
selected economies, it was found that growth of oil prices positively affects GDP per
capita as well as carbon efficiency, while large-scale privatization has a negative
impact on both indicators. The increase of gross fixed capital has a multi-directional
influence on environmental and economic performance, leading to per capita GDP
growth and reduction of CO2 efficiency. Small privatization stimulates carbon
efficiency, while this factor is not statistically significant for economic growth.
The following policy implications are recommended for the post-communist
countries for the improvement of their environmental and economic performance.
State policy should be aimed at supporting economic growth with an emphasis on
innovative environmentally efficient technologies implementation in all spheres of
economic activity; the energy efficiency policy supported by additional taxation of
fossil fuels use and, due to this fact, the increment in oil prices would raise the carbon
efficiency and GDP per capita of the countries. In addition, the development of
small-scale privatization processes should be accompanied by a balanced govern-
mental regulation of large-scale privatization processes. For large privatization, the
emphasis should be put on state stimulation of upgrading production technologies of
large enterprises and increase in their productivity based on innovative resource and
eco-efficient changes, renewable energy use, elimination of corruption schemes.
These measures will transform large privatization from the factor of negative
influence on a level of economic growth and CO2 emissions reduction. The gross
fixed capital is an important factor contributing to economic growth, nevertheless,
governments should control both volumes and structure of investment flows in order
to ensure optimal economic and environmental results of investment in the national
economies.
Moreover, special preferences should be given to investors, who spend their
money on renewable energy facilities, green technologies, restructuring of
enterprises, service sector development since green investment reduces energy and
resource intensity of countries’ GDP and increases its carbon efficiency and income
per capita. It is also noteworthy to note that an increase in life expectancy and
urbanization processes positively affect economic performance of the states, never-
theless, they should be supported by state policy aimed at improving the medical
care of population and providing opportunities for formation and maintenance of
sustainable lifestyle. In addition, at the state and regional levels, it is expedient to
determine the boundaries of urban population growth from the standpoint of envi-
ronmental and economic feasibility. Finally, in the context of ensuring economic
growth, an increase in energy use per capita should take place through the involve-
ment of renewable energy sources in production and consumption processes, ratio-
nalization of fossil fuels use with active government support and control. Successful
practical implementation of the proposed recommendations requires further research
on the effectiveness of a range of economic and other instruments for implementing
policies, with regard to specifics of individual states.
Acknowledgement This research was funded by a grant (No. TAP LU-4-2016) from the Research
Council of Lithuania.
References
Acemoglu, D., & Johnson, S. (2006). Disease and development: The effect of life expectancy on
economic growth (Working Paper No. 12269). National Bureau of Economic Research [online].
Retrieved February 16, 2018, from http://www.nber.org/papers/w12269
Alshehry, A. S., & Belloumi, M. (2015). Energy consumption, carbon dioxide emissions and
economic growth: The case of Saudi Arabia. Renewable and Sustainable Energy Reviews, 41,
237–247.
Apergis, N., & Danuletiu, D. C. (2014). Renewable energy and economic growth: Evidence from
the sign of panel long-run causality. International Journal of Energy Economics and Policy, 4
(4), 578–587.
Arouri, M. H., Ben Youssef, A., M’Henni, H., & Rault, C. (2012). Energy consumption, economic
growth and CO2 emissions in Middle East and North African countries. Energy Policy, 45,
342–349.
Barnett, S. (2000). Evidence on the fiscal and macroeconomic impact of privatization (IMF
Working Paper WP/00/130) [online]. Retrieved February 16, 2018, from https://www.imf.org/
external/pubs/ft/wp/2000/wp00130.pdf
Bayraktutan, Y., Yılgör, M., & Uçak, S. (2011). Renewable electricity generation and economic
growth: Panel data analysis for OECD members. International Research Journal of Finance
and Economics, 66, 59–67.
Bell, C., & Rousseau, P. L. (2001). Post-independence India: A case of finance-led industrializa-
tion? Journal of Development Economics, 65(1), 153–175.
Bloch, H., Rafiq, S., & Salim, R. (2015). Economic growth with coal, oil and renewable energy
consumption in China: Prospects for fuel substitution. Economic Modelling, 44, 104–115.
Brunnschweiler, C. N. (2009). Oil and growth in transition countries. Zürich: CER-ETH Center of
Economic Research at ETH Zurich and OxCarre, University of Oxford.
Carvalho, A. (2016). Energy efficiency in transition economies: A stochastic frontier approach
(CEERP Working Paper No. 4).
Cervellati, M., & Sunde, U. (2009). Life expectancy and economic growth: The role of the
demographic transition (IZA Discussion Paper No. 4160). The Institute for the Study of Labor.
Chiu, Y. (2017). Carbon dioxide, income and energy: Evidence from a non-linear model. Energy
Economics, 61, 279–288.
Chontanawat, J., Hunt, L. C., & Pierse, R. (2008). Does energy consumption cause economic
growth? Evidence from a systematic study of over 100 countries. Journal of Policy Modeling,
30(2), 209–220.
Cook, P., & Uchida, Y. (2003). Privatization and economic growth in developing countries. The
Journal of Development Studies, 39(6), 121–154.
Cornillie, J., & Fankhauser, S. (2004). The energy intensity of transition countries. Energy
Economics, 26(3), 283–295.
Cuadros, A., Orts, V., & Alguacil, M. (2004). Openness and growth: Re-examining foreign direct
investment, trade and output linkages in Latin America. Journal of Development Studies, 40(4),
167–192.
Esseghir, A., & Khouni, L. H. (2014). Economic growth, energy consumption and sustainable
development: The case of the Union for the Mediterranean countries. Energy, 71, 218–225.
European Bank for Reconstruction and Development. (2017). Transition indicators [online].
Retrieved November 18, 2017, from http://www.ebrd.com/what-we-do/economic-research-
and-data/data.html
Filipovic, A. (2006). Impact of privatization on economic growth. Undergraduate Economic
Review, 2(1), 7 [online]. Retrieved February 16, 2018, from http://digitalcommons.iwu.edu/
uer/vol2/iss1/7
Ftiti, Z., Guesmi, K., Teulon, F., & Chouachi, S. (2016). Relationship between crude oil prices and
economic growth in selected OPEC countries. The Journal of Applied Business Research, 32(1),
11–22.
Gao, C., Liu, Y., Wei, T., Zhang, J., & Zhu, L. (2016). Driving forces in energy-related carbon
dioxide emissions in east and south coastal China: Commonality and variations. Journal of
Cleaner Production, 135, 240–250.
Ghosh, S., & Kanjilal, K. (2014). Long-term equilibrium relationship between urbanization, energy
consumption and economic activity: Empirical evidence from India. Energy, 66, 324–331.
Gronwald, M., Mayr, J., & Orazbayev, S. (2009). Estimating the effects of oil price shocks on the
Kazakh economy (Ifo Working Paper No. 81). Ifo Institute for Economic Research at the
University of Munich.
Hamm, P., King, L. P., & Stuckler, D. (2012). Mass privatization, state capacity, and economic
growth in post-communist countries. American Sociological Review, 77(2), 295–324.
Hammond, G. P., & Norman, J. B. (2012). Decomposition analysis of energy-related carbon
emissions from UK manufacturing. Energy, 41, 220–227.
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271.
Hwang, Y. H., & Yoo, S. H. (2014). Energy consumption, CO2 emissions, and economic growth:
Evidence from Indonesia. Quality & Quantity, 48(1), 63–73.
Idrisov, G., Kazakova, M., & Polbin, A. (2015). A theoretical interpretation of the oil prices impact
on economic growth in contemporary Russia. Russian Journal of Economics, 1(3), 257–272.
Jalil, A., & Feridun, M. (2011). The impact of growth, energy and financial development on the
environment in China: A cointegration analysis. Energy Economics, 33(2), 284–291.
Kasman, A., & Duman, Y. S. (2015). CO2 emissions, economic growth, energy consumption, trade
and urbanization in new EU member and candidate countries: A panel data analysis. Economic
Modelling, 44, 97–103.
Katsoulakos, Y., & Likoyanni, E. (2002). Fiscal and other macroeconomic effects of privatization.
Nota di Lavoro, Fondazione Eni Enrico Mattei, No. 113.2002 [online]. Retrieved February
16, 2018, from https://www.econstor.eu/bitstream/10419/119721/1/NDL2002-113.pdf
Kazar, G., & Kazar, A. (2014). The renewable energy production-economic development nexus.
International Journal of Energy Economics and Policy, 4(2), 312–319.
Kurbatova, T., & Khlyap, H. (2015). GHG emissions and economic measures for low carbon
growth in Ukraine. Carbon Management, 6(1–2), 7–17.
Lee, C., & Chien, M. (2010). Dynamic modelling of energy consumption, capital stock, and real
income in G-7 countries. Energy Economics, 32(3), 564–581.
Lescaroux, F., & Mignon, V. (2008). On the influence of oil prices on economic activity and other
macroeconomic and financial variables (CEPII, Working Paper No. 2008–05).
Lin, B., & Moubarak, M. (2014). Renewable energy consumption – Economic growth nexus for
China. Renewable and Sustainable Energy Reviews, 40, 111–117.
Liobikiene, G., Butkus, M., & Bernatiniene, J. (2016). Drivers of greenhouse gas emissions in the
Baltic states: Decomposition analysis related to the implementation of Europe 2020 strategy.
Renewable and Sustainable Energy Reviews, 54, 309–317.
Mao, Z., Zhang, S., & Li, X. (2017). Low carbon supply chain firm integration and firm perfor-
mance in China. Journal of Cleaner Production, 153, 354–361.
Melnyk, L. G., Shkarupa, E. V., & Kharchenko, M. O. (2013). Innovative strategies to increase
economic efficiency of greening the economy. Middle-East Journal of Scientific Research, 16,
30–37.
Menegaki, A. N. (2011). Growth and renewable energy in Europe: A random effect model with
evidence for neutrality hypothesis. Energy Economics, 33(2), 257–263.
Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 countries, new
evidence from panel cointegration with structural breaks. Energy Economics, 30(5), 2331–2341.
Neitzel, D. (2017). Examining renewable energy and economic growth: Evidence from 22 OECD
countries. Honors Program Theses, 46 [online]. Retrieved February 16, 2018, from http://
scholarship.rollins.edu/honors/46
Nepal, R., Jamasb, T., & Tisdell, C. A. (2014). Market-related reforms and increased energy
efficiency in transition countries: Empirical evidence. Applied Economics, 46(33), 4125–4136.
Noor, S., & Siddiqi, M. W. (2010). Energy consumption and economic growth in South Asian
countries: A co-integrated panel analysis. International Journal of Energy and Power Engi-
neering, 4(7), 1731–1736.
Olumuyiwa, O. S. (2012). Longrun relationship between energy consumption and economic
growth: Evidence from Nigeria. IOSR Journal of Humanities and Social Science, 3(3), 40–51.
Ozcan, B. (2013). The nexus between carbon emissions, energy consumption and economic growth
in Middle East countries: A panel data analysis. Energy Policy, 62, 1138–1147.
Ozturk, I., & Acaravci, A. (2010). CO2 emissions, energy consumption and economic growth in
Turkey. Renewable and Sustainable Energy Reviews, 14, 3220–3225.
Ozturk, I., & Acaravci, A. (2013). The long-run and causal analysis of energy, growth, openness
and financial development on carbon emissions in Turkey. Energy Economics, 36, 262–267.
Ratti, R. A., & Vespignani, J. L. (2016). Oil prices and global factor macroeconomic variables.
Energy Economics, 59, 198–212.
Ren, S., & Hu, Z. (2012). Effects of decoupling of carbon dioxide emission by Chinese nonferrous
metals industry. Energy Policy, 43, 407–414.
Saidi, K., & Hammami, S. (2015). The impact of energy consumption and CO2 emissions on
economic growth: Fresh evidence from dynamic simultaneous-equations models. Sustainable
Cities and Society, 14, 178–186.
Shahbaz, M., Hye, Q. M. A., Tiwari, A. K., & Leitão, N. C. (2013). Economic growth, energy
consumption, financial development, international trade and CO2 emissions in Indonesia.
Renewable and Sustainable Energy Reviews, 40, 109–121.
Shahbaz, M., Khan, S., & Tahir, M. I. (2013). The dynamic links between energy consumption,
economic growth, financial development and trade in China: Fresh evidence from multivariate
framework analysis. Energy Economics, 40, 8–21.
Shahraki, J. (2011). The investigation of relationship between privatization and economic growth in
Iran. International Journal of Business, Humanities and Technology, 1(2), 167–174.
Shukurov, S., Maitah, M., & Smutka, L. (2016). The impact of privatization on economic growth:
The case of Uzbekistan. International Journal of Economics and Financial Issues, 6(3),
948–957.
Soile, I. O. (2012). Energy-economy nexus in Indonesia: A bivariate cointegration analysis. Asian
Journal of Empirical Research, 2(6), 205–218.
Sunde, U., & Cervellati, M. (2012). Diseases and development: Does life expectancy increase
income growth? [online]. Retrieved February 16, 2018, from https://voxeu.org/article/disease-
and-development-does-living-longer-raise-economic-growth
The World Bank. (2017). World development indicators database [online]. Retrieved November
5, 2017, from http://databank.worldbank.org/data/reports.aspx?source¼world-development-
indicators
Tugcu, C. T., Ozturk, I., & Aslan, A. (2012). Renewable and non-renewable energy consumption
and economic growth relationship revisited: Evidence from G7 countries. Energy Economics,
34(6), 1942–1950.
Turan, B. (2009). Life expectancy and economic development: Evidence from micro data. Univer-
sity of Houston [online]. Retrieved October 15, 2017, from http://www.uh.edu/~bkturan/
lifeexpec.pdf
Wang, Z., He, W., & Chen, K. (2016). The integrated efficiency of economic development and CO2
emissions among Asia Pacific Economic Cooperation members. Journal of Cleaner Production,
131, 765–772.
Wang, S. S., Zhou, D. Q., Zhou, P., & Wang, Q. W. (2011). CO2 emissions, energy consumption
and economic growth in China: A panel data analysis. Energy Policy, 39(9), 4870–4875.
Xu, Z. (2000). Financial development, investment, and economic growth. Economic Inquiry, 38(2),
331–344.
Yang, L., & Wang, K. L. (2013). Regional differences of environmental efficiency of China’s
energy utilization and environmental regulation cost based on provincial panel data and DEA
method. Mathematical and Computer Modelling, 58(5–6), 1074–1083.
Zhang, F. (2013). The energy transition of the transition economies: An empirical analysis. Energy
Economics, 40, 679–686.
Zhao, L., Mao, G., Wang, Y., Du, H., Zuo, J., Liu, Y., & Huisingh, D. (2017). How to achieve low/
no-fossil carbon transformations: With special focus upon mechanisms, technologies and
policies. Journal of Cleaner Production, 163, 15–23.
Zhao, Y., & Wang, S. (2015). The relationship between urbanization, economic growth and energy
consumption in China: An econometric perspective analysis. Sustainability, 2015(7),
5609–5627.

Eurasian Economic Perspectives: Mehmet Huseyin Bilgin Hakan Danis Ender Demir Ugur Can Editors

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Eurasian Economic Perspectives: Mehmet Huseyin Bilgin Hakan Danis Ender Demir Ugur Can Editors

Uploaded by

Copyright:

Available Formats

Eurasian Studies in Business and Economics 11/1

Series Editors: Mehmet Huseyin Bilgin · Hakan Danis

Ender Demir Ugur Can

ISSN 2364-5067 ISSN 2364-5075 (electronic)

© Springer Nature Switzerland AG 2019

This is Volume 1—Eurasian Economic Perspectives of the 11th issue of the

Istanbul, Turkey Ender Demir

With my very best wishes,

Klaus F. Zimmermann, PhD

EBES Advisory Board

Part I Growth, Development and Finance

Part III Public Economics

Part IV Regional Studies

Olimpia I. Ban Department of Economics and Business, University of Oradea,

Liliana Mihaela Moga Department of Economics, Dunarea de Jos University of

Madalina Ecaterina Popescu and Ramona-Mihaela Paun

Keywords Vocational training · Earnings · Impact evaluation · Ordered logit

© Springer Nature Switzerland AG 2019 3

relies on a quasi-experiment which assumes building a counterfactual scenario based

3 Data Description and Methodology

Table 1 The main covariates considered in the analysis

Table 2 The probit model Covariates Coefﬁcients

Table 3 The output of net Covariates Coefﬁcients

Lina Sineviciene, Aura Draksaite, Violeta Naraskeviciute,

Keywords Economic development · Sustainability · Environmental pollution ·

Energy intensive economies face growing environmental pollution problems if the

L. Sineviciene (*) · A. Draksaite · V. Naraskeviciute

© Springer Nature Switzerland AG 2019 13

economic development and environmental pollution in the case of Lithuania. The

According to the European Commission (2010), in the Europe 2020 Strategy, it is

Pollution per capita, kg RGDP per person, th EUR

Table 1 Descriptive statistics of Lithuania all sample data

Table 2 Descriptive statistics of Lithuanian counties data

Table 3 Results of Spearman’s correlations (all sample data)

Table 4 Results of Spearman’s correlations (Lithuanian counties data)

Keywords Financial instruments · Risk management · Measures of risk

© Springer Nature Switzerland AG 2019 25

2 Price of the Geometric Call Options

Wc—the pay-off function of the geometric call option,

C—the price of the geometric call option,

r—the domestic interest rate,

3 Delta Coefﬁcient of the Geometric Call Options

4 Gamma Coefﬁcient of the Geometric Call Options

5 Vega Coefﬁcient of the Geometric Call Options

6 Theta Coefﬁcient of the Geometric Call Options

7 Rho Coefﬁcient of the Geometric Call Options

Normalini M. D. Kassim, Jasmine Ai Leen Yeap, Saravanan Nathan,

Keywords Smart community · Smart city · Smart citizen · Smart government

The use of Information and Communication Technology (ICT) in cities in various

N. M. D. Kassim (*) · J. A. L. Yeap · T. Ramayah

© Springer Nature Switzerland AG 2019 39

Lazaroiu and Roscia (2012) deﬁned a smart community as a community of

2 Deﬁnition of Smart City vs. Smart Community

The ‘Smart Community’ will provide comprehensive solutions encompassing

3 Smart City Threats and Issues

4 Characteristic of Smart Community

4.1 Smart Citizen

Stratigea (2012)’s work focusing on relating smart cities concept to community

4.3 Smart Governance

structuring an effective bottom-up mechanism where it is the key steps in

5 Implementation of Smart Cities in Asia

Smart city development is favourable by governments and developers as to its

In Japan, Smart Community often deﬁne as taking full advantage of IT technology to