Abstract
In this paper we analyze the growth and real convergence process of the Central and Eastern European countries which joined the European Union in May 2004, namely Poland, the Czech Republic, Slovakia, Hungary, Lithuania, Latvia, Estonia and Slovenia (henceforth CEEC-8), vis-a-vis the European Union (EU) as a whole, individual EU members, and OECD countries (non-EU members). The analyses cover the period from 1995 to present. Results of testing beta-convergence indicate that in the period 2008-2014 the countries of the CEEC-8 group converged to Mediterranean countries but did not converge to rich countries of the European Union or non-EU OECD countries. We estimate parameters of the dynamic panel model to identify the causes of the convergence slowdown of CEECs. According to the results of the estimation, the low level of innovation in the countries under consideration was the main cause of both the slower TFP growth and the convergence slowdown.
Highlights
The main aim of this paper is to identify the causes of the significant growth and convergence slowdown in the 2008-2014 period in Central Eastern Europe Countries (CEEC-8) - Poland, the Czech Republic, Slovakia, Hungary, Lithuania, Latvia, Estonia, Slovenia - in relation to both the European Union (EU) and the OECD countries, for which noticeable if not significant divergent tendencies can be observed
1995, and especially due to their entry into the EU in 2004. Due to these two extremely important factors the CEECs have moved up or converged from an average of approximately 40% of EU gross domestic product (GDP) per capita at purchasing power parity (PPP) in 1990 to 55% in 2007 (Czasonis, Quinn, [8])
Though all countries of the CEEC-8 group are classified as high-income countries (WESP [40]), convergence of the Central and Eastern European countries with the developed World slowed down after the global financial crisis took hold, suggesting a typical situation in which the above group of countries has entered the “middle-income economy trap”
Summary
The main aim of this paper is to identify the causes of the significant growth and convergence slowdown in the 2008-2014 period in Central Eastern Europe Countries (CEEC-8) - Poland, the Czech Republic, Slovakia, Hungary, Lithuania, Latvia, Estonia, Slovenia - in relation to both the EU and the OECD countries (non-EU members), for which noticeable if not significant divergent tendencies can be observed. The first is devoted to the analysis of the growth and convergence process in the CEEC-8 group as observed since the beginning of the systemic transformation process in 1995 until 2014. It consists of both statistical analyses of the convergence process and the testing of hypotheses concerning beta-convergence, especially after the year 2007/2008 when the initial significant growth and convergence process broke down. The second part of the paper is devoted to identifying and evaluating the causes of the CEECs’ convergence slowdown after 2007/2008 For this purpose, we estimate the parameters of an econometric model. We estimate the parameters of the dynamic panel model using the Blundell–Bond [5] systemic estimator in order to avoid the problem of endogeneity of some regressors
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