Catching up, forging ahead or falling behind? Central & Eastern European development in 1990-2005
AbstractThis paper aims to assess the economic development and development policies in the Central and Eastern European (CEE) countries in 1990-2005, from the collapse of the USSR to the enlargement of the European Union. A great number of authors have generally seen the transition as a very positive process. They have concluded that the reform policies focusing on macroeconomic and price stability have been the key to success for CEE economies. A reliable economic environment is, of course, instrumental for longer-term economic success, as exemplified by the prolonged crisis in most of the former Soviet Union. Our analysis of the economic development and competitive advantages in the region, however, leads to the conclusion that the specific approach to transition that the Central and Eastern European countries followed came at a rather high cost. Comparative neglect and weakness of a set of policies crucial for longer-term development, such as science, technology and innovation policies, has led to deterioration in the last decade rather than the strengthening of the competitive advantages of Central and Eastern European economies. Furthermore, we argue that, in most cases, CEE countries have unfortunately overlooked or misjudged a number of development challenges, and have thus implemented policies that have generated growth at the cost of rapidly increasing risks. This is how the financial fragility of several Central and Eastern European countries has recently increased drastically, and the region seems to have virtually arrived at the brink of economic collapse. Since the CEE countries joined the European Union, the CEE governments have gradually moved towards acquiring a more active role in economic development. These policies need, however, to be strengthened considerably and reinforced by macroeconomic policies that curb current excessive dependence on foreign-financed growth.
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Bibliographic InfoPaper provided by Institute of Baltic Studies in its series Working Papers with number 01-2008.
Length: 21 pages
Date of creation: 06 Jan 2008
Date of revision:
Central and Eastern Europe; industrial dynamics; innovation policy; financial fragility;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-EEC-2008-04-21 (European Economics)
- NEP-TRA-2008-04-21 (Transition Economics)
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- Rainer Kattel & Annalisa Primi, 2010. "The periphery paradox in innovation policy: Latin America and Eastern Europe Compared," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 29, TUT Ragnar Nurkse School of Innovation and Governance.
- Rainer Kattel & Erkki Karo, 2010. "Is 'Open Innovation' Re-Inventing Innovation Policy for Catching-up Economies?," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 30, TUT Ragnar Nurkse School of Innovation and Governance.
- Erkki Karo & Rainer Kattel, 2009. "The Copying Paradox: Why Converging Policies but Diverging Capacities for Development in Eastern European Innovation Systems?," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 24, TUT Ragnar Nurkse School of Innovation and Governance.
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