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Faculty of Economics University of Mostar ,*. { i. I "-",* ,:J fl I NTE RNATIONAL CON FE RENCE Proceedings 1,1,-1,2 November 2011 Mostar; Bosnia and Herzegovina Tige Proceedings of the hternational Conference,Bconomic Theory and Practice: Meeting the New Challenges" Publisher Faculty of Economics University of Mostar Matice hrvatske bb, 8S 000 Mostar, Bosnia and Herzegovina http://ef.sve-mo.bal For the Publisher Prof. Dr' Brano Marki6, Acting Dean Layout Mirela Mabi6 Cover Design FramZiral d.o.o. PttzaAluminij bb, Mostar, BiH Printed by FramZiral d.o.o. P:utzaAluminij bb, Mostm, BiH Number of copies 300 printed Copyright @ 2011 by Faculty of Economics University of Mostar All rights reserved. No part of this publication rnay be reproduced stored in a retrieval system, or tansmitte4 in any form or by any means, without the prior written consent of the publisher' ISSN 2233- 0267 Scientific Committee President of the Scientific Committee Brano Markid - Faculty of Economics, University of Mostar, BiH Vice-Presidents of the Scientific Committee Zeljko Suman - Faculty of Economics, University of Mostar, BiH Antonis Simintiras - School of Business and Economics, Swansea University, UK Members Mate Babi6 - Faculty of Economics, Zagreb, Croatia Marika Baseska-Gjorgjieska - Faculty of Economics, Prilep, FRY Macedonia Marin Buble - Faculty of Economics, Split, Croatia Giuseppe Burgio - University of Rome "La Sapierza", EuroSapienza,ltaly Muris Cidi6 - Faculty of Economics, Sarajevo, BiH DraLena Ga5par - Faculty of Economics, University of Mostar, BiH Branko Grdi6 - Faculty of Economics, Split, Croatia ls..lina Guerini - Carlo Cattaneo University of Castellanza (LIUC); SDA Bocconi, Milan, Italy Danimir Gulin - Faculty of Economics, Zagreb, Croatia Novak Kondi6 - Faculty of Economics, Banja Luka, BiH Slavo Kuki6 - Faculty of Economics, University of Mostar, BiH Tondi Lazibat - Faculty of Economics, Zagreb, Croatia Antlelko Lojpur - Faculty of Economics, Podgorica, Montenegro Vlado Majstorovi6 - University of Mostar, BiH Ludmila Novacka - University of Economics, Bratislava, Slovakia Boris Snoj - Faculty of Economics and Business, University of Maribor, Slovenia Rajko TomaS - Faculty of Economics, Baqja Luka, BiH Gabriele Tondl - Vienna University of Economics and Business, Austria i,eljko Turkalj - Faculty of Economics, Osijek, Croatia Organizing Committee President of the Organizing Committee Sanja Bijak5id, Faculty of Economics, University of Mostar, BiH Vice-President of the Organizing Committee Zdenko Klepi6, Faculty of Economics, University of Mostar, BiH Members Arnela Bevanda, RuZica Buri6, Anela iolak, Marija iutura, Dijana eavar, Josipa Grbavac, Sandra Jeldi6, Lidija Lesko BoSnjak, Maja Letica, Damir Lucovi6, Mirela Mabi6, Katerina Mali6 Bandur, Zeljko Mari6, ZoraMarljanovit, - Sanella Palac, Nikola Papac, Branimir Skoko, Sandra Sode Kraljevi6, Zeljko Santi6, Marsela Skutoi, raarant<a Si-rnouii, Jelena Zovko,tio, iwko, , Inja Boban (student), Marko Marki6 (student), Zeljko Matkovi6 (student), Ivana Planinid (student) Friday, ll N{ovember 20ll Session I Gbbd Eooouy erd Blsiress furopeen Inhgmtfur: Ecoromic lmplkrfiors ead Chlbeges 13:00 - 17:00 Room 9 Moderator Leljko Suman, Predrag Trpeski, Goran Popovi6 Slavenko Grgurevi6, EUROPE Al[D BALKAN- REGIONAL ECONOMIC INTEGRATION PROBLEMS AI\D PERSPECTTVES Mislav JoSi6, Hrvoje JoSi6, TRADE LIBERALIZATION: THE CASE OF OECD COI.]IITRIES Sead Kreso, Velma (Tahmaz) Pijalovi6, IMPACT OF GLOBALIZATION ON HEALTH SECTOR Anclelko S. Lojpur, Sanja Perkovi6, Ana A. Lojpur, THE COMPETITION PROBLEMS IN COLTNTRIES OF TRANSITION - ADOPTION OF ,,NE'W' DEYELOPMENT ECONOMIC PARADIGM AS AN IMPERATIVE Zeljko Mari6, GROSS DOMESTIC PRODUCT ASA,,WRONG MEASURE" OF NATIONAL WELFARE (CASE OF BOSI\IIA AND HERZEGOVTNA) Goran Popovi6, Jelena Popovi6, MOVEMENT OF OUTPUT AI\D IJITEMPLOYMENT IN THE EUROPEAI{ UhtION: IS THERE OKT]N'SLAW? Mladen Rebi6, Nemanja Sarenc, IMPACT OF ACTUAL ECONOMIC RECESSION ON THE ECONOMY OF BOSIYIA AIID HERZEGOYINA Tihomir Spremo, EFFICIENT RESTRUCTURING: THE WAY TO WAYE PACIFICATION INTENSTVE DOWI\SIZING ECONOMY IN RECESSION Zeljko Suman, EUROPEAI\I AGRICULTURE TOWARDS 2020: MEETING THE NEW GLOBAL CHALLENGES Predrag Trpeski, Pece Nedanovski, CONTEMPORARY ASPECTS OF THE AGGREGATE DEMAND MANAGING AND T'hIEMPLOYMENT - THE CASE OF THE REPI.]BLIC OF MACEDOIYIA CONTENTS TR.EFACE t9 Iif}\OTE LECTURE 27 II} Lsl le L GIOBAL ECON{OMY AT.{D BTJSIN{ESS rl' Er Jo5i6, Hrvoje Jo5i6 LrJ€ LIBERALIZATION: THE CASE OF OECD COLTNTRIES ........................39 ird Kreso, Velma (Tahmaz) Pijalovi6 .\C.{CT OF GLOBALIZATION ON HEALTH SECTOR..... .............47 L;r Mari6 I--'SS DOMESTIC PRODUCT AS A,,WRONG MEASURE OF NATIONAL WELFARE (CASE OF r-s\anAND I{ERZEGOVINA) ...............59 t{bden Rebi6, Nemanja Sarenc .U].{CT OF ACTUAL ECONOMIC RECESSION ON T}IE ECONOMY OF BOSNIA AND filomir Spremo ::FICIENT RESTRUCTURING: TFIE WAY TO WAVE PACIFICATION INTENSIVE DOWNSZING :aONOMY INRECESSION.............. ...."" 85 ch irtlto Su-an t*se :'-ROPEAN AGRICULTURE TOWARDS 2020: MEETING THE NEW GLOBAL CHALLENGES.............97 h. 2- ETIROPEAI\I INTEGRATION: ECONOIUIC IMPLICATIONS ANI) S. CHALLENGES - venko Grgurevi6 nROPE AND BALKAN-REGIONAL ECONOMIC INTEGRATION - Problems and Perspectives............. 105 r,rdclko S. Lojpur, Sanja Perkovid, Anja.d Lojpur :.{ COMPETITION PROBLEMS IN COUNTRIES OF TRANSITION ADOPTION OF ,,NEW" :.\ELOPMENT ECONOMIC PARADIGM AS AN IMPERATIVE ................... I 13 Goran Popovi6, Jelena Popovid TIOVEMENT OF OUTPUT AND LTNEMPLOYMENT INTI{E EUROPEAN TINION: IS THERE OKUN,S Ittdrag Trpeski, Pece Nedanovski --:]'}{TEMPORARY ASPECTS OF THE AGGREGATE DEMAND MANAGING AND UNEMPLOYMENT _ .--{ CASE OF TT{E REPUBLIC OF MACEDONIA........... .............. I39 -1. ENTREPRENEURSHIP,INNOVATION AI\ID COMPf,TMTVENESS Veso Arsenovi6 --I]\CEPTUAL FRAMEWORK FOR TTIE CORPORATE STRATEGY FORMULATION.......................... I55 - Global Economy and Business - TRADE LIBERALTZATION: THE CASE OF OECD COUNTRIES Mislav Jo5i6, univ. spec. oec. Faculty of Economics and Business Zagreb, University of Zagteb J. F. Kennedy Sqr. 6,10000 Zagreh, Croatia [email protected] Hrvoje JoSi6, univ. spec. oec. Faculty of Economics and Business Zagreb, University of Zagreb J. F. Kennedy Sqr. 6, 10000 Zagreb, Croatia [email protected] .iE.nrt alization is reshaping the world economy in a way that no country is left aside from the -51 ;alled globalization. All countries, no matter the size, engage into trade using specific trade rctr-s Ttis paper examines trade differences between OECD countries and the rest of the worid rg lailatization indicators related to international trade. The results indicate several findings as *rr Frstly, small countries are more open to trade than the large ones. Secondly, all countries xsErrc rheir total trade in average accorciing to higher GDP growth. Lastly, geographical index that measures globalization trends tends to be lower and lower. As opposite to trade liberalization once again serves a key role in maximization of nation's welfare -lrooosmtEuE--rztim flcrrt: trade, lib eralization, globalization, competitivenes s, OECD rr - a-,1- Fl4, F53 r. FTRODUCTION f,rd;',otal trade is the subject of research of numerous theoretical economists that highlight the rt:, .:r rade liberalization between various countries. This paper analyzes OECD's member 'rrrrF'r=s rrade through severat structural indicators such as: trade openness, trade market share and tF,q,'ri!h;al concentration index. The analysis is restricted to 30 OECD member countries and time to 2008 according to statistical data available on yearly basis. rErnc =!rn 1990 h nrs part ofthe research deals with the issue oftrade openness using the ratio oftotal trade and EP frger group of countries isn't homogeneous due to differences in size (economic strength) inj bI GDP and the ratio of total trade in world's trade. Liberalization trend does not follow the G 3r=ern in all countries. Trade in smaller countries has higher growth rates that the one in iarger n cs- rn average. An average annual increase in trade equals 6Jyot. *- ,strrd part of the paper focuses on trade diversification based on geographical principle. Certain ffir'-Ei have changes in geographical concentration index as a result of forming regional economic -r'rrt)ns and trade blocks, while the others increase the number of their exporting markets due to --:Err i calculation 39 - Global Economy and Business - globalization process. These changes are meilsured using Herfindahl-Hirschman index of geographi, concentration which has tendency to decline in the long run. The last part of the paper discusses and systemizes all theoretical and empirical keypoints found in t paper. Working hypotheses (3) are set as follows: Hr: Small countries are more open to trade than the large ones. Hr: Trade openness increases - liberalization trends are present. Hri Geographical concentration index declines - diversification of trade is present. All hypotheses mentioned will be tested using standard2 globalization indicators. 2. LIBERALIZATION TRENDS IN GOODS AND SERVICES The frst best solution in international trade is free international trade, without a doubt. No barriers trade should be imposed in order to achieve maximum national welfare. This type of trade leads Pareto optimal solution in economics because every trade restriction and protectionism lowers r nation's welfare. In practice, all nations gradually reduce average tariff rates in trade with the rest the world and nontariff barriers CNTB) replace with