Capacity of Industrial Structure: The Case of Eastern and Central Europe

Abstract

Changes after 1989 enabled Central and Eastern European (CEE) countries to start processes of political and economic transformation. The Washington Consensus was adopted by post-communist economies in early 1990s. However, reforms were introduced by CEE countries with different speed. The chapter outlines the philosophy and foundation of transition, in which structural changes play an essential role. In the second part, the analysis focuses on structural changes in industrial sectors. The chapter also examines the capacity of industrial structure, as industry is one of the key sectors for CEE countries. Many studies emphasized a significant effect of industry changes on long-term economic growth. The chapter focuses on the relation between structural changes in industry and economic growth/competitiveness. Due to the complexity of the topic, the research requires usage of diverse methodological approaches. Main method is a comparative analysis using data collected from Eurostat Database, OECD Database, and Global Competitiveness Report. The analysis shows that Visegrad countries are doing quite well in the region; however, they are still behind other European Union countries. They need to explore ways to transition to a knowledge-based economy. To achieve it they should focus on high-tech production and improve the business sector’s capacity for innovation, labor market efficiency, and strengthen business sophistication. This research can be used by the government agencies for industrial development policies.