Before and After Joining the European Union: The Impact of Investments in Telecoms on the Visegrád Group of Countries and Baltic States

Abstract

The limited resources of transition economies accentuate the need for formulating effective and efficient policies for investments in information and communication technologies. However, the empirical evidence required for sound decision making is scarce, thus prompting a call for studies in the area of macroeconomic impact of investments in information and communication technologies. Using two-time series data sets, one for the period from 1993 to 2003 and another for the period from 2004 to 2010, the impact of investments in telecoms on total factor productivity in the context of transition economies was investigated. Specifically, the focus was on a group of seven transition economies that is comprised of the Visegrád Group of countries (e.g., Czech Republic, Hungary, Poland, and Slovakia) and the Baltic States (Estonia, Latvia, and Lithuania). Results suggest that all the members of the Visegrád Group of countries and the Baltic States group exhibited overall growth in productivity. Further, a comparison of the two periods shows that the most significant difference between those periods is that the dominant source of growth in productivity in the later transition period (2004–2010) was the efficient utilization of the existing technology, while in the former transition period the growth was driven by technological changes.