Urban Geographical Economics and per Capita GDP Growth in Romania

Abstract

1. Introduction The processes of transition from a central planning economy to a more market oriented economy and EU accession, the two dominant political and socioeconomic processes that characterized the countries of Central and Eastern Europe (CEE) since the collapse of communism, have, over the last two decades, been followed by different growth dynamics which lead to interesting patterns of convergence, divergence and polarization. CEE economies, contrary to Western European countries which have had the historical framework to be aware of the importance of protecting institutions and building a solid institutional framework, have ignored the important role of the institutions in their processes of transition, generating a defective institutional framework, with high transaction costs, uncertain property rights, inflation problems in many cases, not clearly imposed laws, barriers in the way products enter on the market, etc. Moreover, the accession of CEE countries to the European Union in 2004 and 2007 intensified the processes of economic integration, restructuring and national development, thus shrinking the evolutionary time during which the aforementioned processes were to take place. Economic transformations occurring globally and increased risk aversion contributed to a significant reduction of capital flows to Romania, increased pressures upon exchange rate (3). Under the influence of these processes, the last twenty years have seen an important change in the old spatial economic structures and a sharp increase in regional disparities across many Central and Eastern European countries. Romania did not escape to such changes. The deindustrialization process in Romania was very important. The share of industry in Romania's GDP decreased from 46% in 1985 to less than 28% in 1999, however, its contribution to the export sector is still decisive. In 1997 and 1998 respectively, 97% of the value of exported goods in Romania was produced in the industry sector, while in 1999 the figure was 95%. Moreover, strong patterns of polarization and core-periphery structures emerged which were characterized by the concentration of economic activities around Bucharest-Ilfov, Timisoara and Cluj-Napoca, leaving other parts of the country, mainly in the North-East relatively underdeveloped. Therefore, the process of national convergence, stimulated by increasing openness and economic and political integration, has not been accompanied by a similar trend for cross-regional incomes equilibration. Transition was soon followed by increasing economic openness, with substantial shifts in trade partners and specializations and significant inflows of foreign investments, both of which contributed further to altering the economic geography of the countries concerned among them it was also the case of Romania. In order to analyze the growth dynamics of the Romanian economy during this twenty years (4) after the fall of its communism system in December 1989 we have broken down the whole period into 4 sub periods which are going to be analyze at national level and economic region (5) level. * 1995-2008 which constitutes our whole sample period * 1995-2000, this is a period mainly characterized by huge political instability, severe economic crises and also high inflation * 2000-2004 a period characterized by the recovery of the economy and subsequent high growth rates as a result of the reforms of the 90s combined with the positive effects coming from the rest of the countries in Europe. * 2004-2008 is a period characterized at the European level by a big enlargement of the European Union and unprecedented economic growth rates in Romania (average 8-10% annually). The rest of the paper is structured as follows: Section 2 presents a brief overview of the analysis of the growth dynamics in Romania over the period 1995-2008. Section 3 analyzes in detail the regional growth in Romania by typology of region. …