Abstract
Research background: A strong industrial base is essential for achieving long-term sustainable economic growth and export competitiveness. In that sense, manufacturing remains a significant contributor to exports in the CEE countries. How-ever, its role and its influence vary between CEE economies and change over time.
 Purpose of the article: The main objective of this paper is to compare the determinants of the international competitiveness, measured by the net exports of the manufacturing sectors in the Czech and Polish economies, by using the database of 13 manufacturing sub-sectors in 1995-2011. The authors research the question of how much foreign and domestic demand, the level of labour costs, the level of sector innovation intensity, the level of sector openness to foreign markets as well as sectoral labour productivity influence the changes in trade balance.
 Methods: Our approach is based on employing an error correction model and SUR model to disaggregated sectoral manufacturing data.
 Findings & Value added: The results of the analysis conducted show substantial differences in the roles particular variables play in explaining the net exports in individual sectors. For the majority of Polish and Czech manufacturing sub-sectors, generation of positive trade balance is determined by relative demand growth. An increasing labour productivity influences heavily a positive trade balance of Polish goods in majority of sub-sectors, however, a key factor in Czech sub-sectors is decreasing unit labour costs. The results of the analysis indicate mostly a greater impact of the researched factors on net exports in long rather than short term and the better capacity of the Czech economy to correct deviations from the equilibrium.
Highlights
Growth models in CEE countries has based on a massive inflow of direct foreign investments, especially in manufacturing, from the onset of the transformation
In our additional analysis based on sub-sectors data we found that a positive trade balance in some Polish and Czech manufacturing sectors was achived even when a relative demand decreased
Our analysis shows that price/cost competitiveness was much more important for a trade balance growth in the Czech manufacturing sectors comapared to the Polish economy
Summary
Growth models in CEE countries has based on a massive inflow of direct foreign investments, especially in manufacturing, from the onset of the transformation. This resulted in a substantial share of manufacturing goods in total exports and a high ranking of some CEE countries among the most industrialized economies in the world. The one which can be found is based on highly aggregated data and focuses on one chosen determinant, or concentrates on factors determining exchange with one chosen market For this reason, the Authors want to fill the gap in the empirical literature on the determinants of CEE net exports. The empirical part of the article concentrates on 13 manufacturing sub-sectors and covers the period 1995– 2011
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