EU Integration and the Prospects for Catch-Up Development in CEECs - The Determinants of the Productivity Gap
           
Czech Republic
Estonia
Hungary
Poland
Slovak Republic
Slovenia
   
• The Project:  
  The project is co-financed by the EU Commission through its 5th Framework Programme and the participating institutions. The project ran from September 2001 to August 2004. The project is coordinated by Johannes Stephan, Halle Institute for Economic Research (IWH).  
  The project analysed the determinants of productivity gaps between a selection of most advanced Central East European Economies. Accession countries in Central East Europe today exhibit significantly lower levels of economic development in comparison to the average of contemporary EU member states. Even the most advanced transition economies barely reach the level of per capita income of Greece, only Slovenia already compares with Portugal.  
  The Agenda of EU Enlargement is biased towards institutional integration and legal convergence (e.g. negotiation in chapters of the acquis communautaire). Little effort in research has so far been invested to understand the specific conditions prevailing in individual countries of Central East Europe (CEECs) and their influence on the effects of integration (i.e. conditions of economic catch-up development). It is not at all clear that integration per se will result in a swift process of income convergence. The East German example, featuring divergence of income levels since 1997, may serve as a case in point and this in particular despite significant financial transfers from West Germany and the EU.  
  Most regions of the newly accessing states will therefore qualify as recipients of EU Structural and Cohesion Funds. Already pre-enlargement, some pre-accession assistance is being granted. However, knowledge on the particular conditions, main deficiencies in CEECs, as well as the effects of intensifying integration with the EU to be expected in the near future is still scarce and lacks comparability. Such knowledge however is indispensable for targeting economic policy to their most efficient use.
    		 
• Objectives:  
  The overarching objective of the project is the generation of a unique knowledge base on the various determinants of lower levels of economic development in accession candidates. Determinants assessed comprise of three groups: patterns of domestic and international specialisation at the macro-level, technological sophistication of production at a meso-level, and firm-specific determinants at the micro-level of individual enterprises.  
  This newly generated body of comparative knowledge will be compiled with a view on an effective management of the accession process: accession policy, negotiations, pre-accession assistance and strategies as well as EU financial and technical assistance to the then new member countries have to be assessed in terms of their potentials to assist the catching up of levels of productivity and hence income. The project aims to inform policy makers on the respective effectiveness of targeted economic policy intervention and assistance to and within new EU member states.
    		 
• Description of the project:  
  The research project assessed the weight and role played by a variety of determinants of the productivity gap between selected new member countries and the EU. Countries of analysis are in geographical order Estonia, Poland, the Czech and Slovak Republics, Hungary and Slovenia.  
 

The project was based on the following assumptions:

  • Technological catch-up in general and sizeable potentials for a closure of the gap in levels of productivity between the average of the EU and individual CEECs (the 'productivity gap') in particular are the paramount conditions for further integration and intensified competition to lead up to a dynamic process of catch-up development in the accession partners in CEE.
  • The integration process until today, significantly determined the conditions of, or future prospects for catch-up development in those countries: emerging structures give rise to hysteresis-effects via a tendency of self-reinforcement of conditions and determinants effected by investment into physical and human capital.
    Structures in branch specialisation and foreign trade, as well as FDI and R&D regimes, as they emerged during the integration process, not only help to explain contemporary productivity levels. More importantly, patterns existing today are a reflection of past investment projects and established technological capabilities: it is therefore safe to assume that future investment and other business decisions will in some proximity adhere to existing structures. This assumption is obviously targeted at economies where the period of most intense structural change as adjustment to integration is over. This can be assumed for our selections of countries.
  • Technology change in CEE might not be a sufficiently self-governing process. In particular, the transfer of technology from West to East may be restricted by investors' strategies, absorptive capacities and indigenous R&D is restricted by intensifying competition, the size of home markets, and the structural composition of industries.
 		  
• Databases produced in the project:  
  The method of construction and integration of new sets of data and indicators of comparative nature at the wider European level comprises of field studies, including questionnaires, a matched pair panel and structured interviews, quantitative empirical analysis and literature assessment. Interpretation and analysis of data is assisted by the usual empirical and econometric methods, including partial equilibrium models, data envelopment analysis, regression models and average and variance analysis.
The data generated in the project is now open source, and researchers interested in our data are able to download the databases and are free to use it for their own purposes.
Note:
(i) please be so kind as to inform the coordinator about any analysis and publications, so that the consortium can keep track of the use of the data; and
(ii) please make sure to include a note of the EU project contract for the data (Research presented here is based upon the “CEEC subsidiary database”, the generation of which was financially supported by the EU in the RTD project "EU Integration and the Prospects for Catch-Up Development in CEECs - The Determinants of the Productivity Gap" (contract no HPSE-CT-2001-00065) in any publications that use the data.
    		 
     
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