Structural Change in the European Union and Its Periphery: Current Challenges for the Western Balkans

Abstract

This paper analyses structural change in the European Union (EU) over the past two decades, with the aim of providing some guidelines for the Western Balkan (WB) countries. After recalling the main theories of structural change, the paper illustrates the general trend of decline in the relative shares of manufacturing output and employment in the old and the new EU member states, pointing to distinctive features of the East European countries. It proceeds to show how structural change in the WB countries has had additional characteristics, specific to the region. The WB countries have experienced a process of extreme de-industrialization that has reduced the contribution of manufacturing too quickly, to levels which are not consistent with their relatively low level of economic development. What is necessary is a strategy of re-industrialization of the WB economies that would strengthen their export capacity and facilitate more robust economic growth.