Transition, Regional Features, Growth and Labour Market Dynamics

The aim of this paper is to throw some light on the institutional change, regional features, and growth and labour market performances in the eight transition countries that became EU members in May 2004 (8-CEECs). After a survey of the theoretical and empirical literature on the great transformation, the empirical results on some regional features (convergence, concentration and specialisation) of the 8-CEECs are discussed. The consideration of a rather fine territorial disaggregation – at NUTS-3 Eurostat level – distinguishes this paper from previous studies. This allows for the investigation of some important tendencies such as the concentration of production around the capital cities. The main empirical finding of the paper is that, while transition countries – in particular the eight CEECs – are converging, with a reduction of disparities in per capita incomes across countries, within each single country divergence is prevailing, with leading regions (mainly the capital city areas) growing much faster than the rest of the country. The final econometric investigations – on the determinants of regional income convergence, GDP growth and employment dynamics – on one hand confirm this result and on the other hand highlight the role of institutional change. The latter, which is always positive for real output growth, in the long run also becomes functional to employment growth, once the short-term effects of rationalisations and restructuring are vanished. The main policy implications, concerning both European and national economic policies, are presented in the conclusive section.