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Changing development prospects for the Central and Eastern European EU member states


  • Farkas, Beáta


One of the fundamental goals of European integration is to provide less-developed member states opportunities for convergence and strengthen economic and social cohesion. Before the crisis the convergence process was impressive in the new member states. This success raises the question of how the institutions of the new EU member states match the institution types previously worked out for the old member states, and whether they resemble any of the broadly accepted four models of capitalism (Anglo-Saxon, Nordic, Continental European and Mediterranean) or represent a new type of model. Empirical analysis suggests that an independent Central and Eastern European model is eligible for existence. The characteristics of the model may be derived from three main factors: the lack of capital, weak civil society and the impact of the European Union and other international organisations influencing the new member states. FDI inflow could help to reduce the lack of capital. The success of convergence can be explained through the reconfiguration of the value chain after the collapse of communism by companies located in Continental and Northern Europe. These companies located their assembly activities in Central and Eastern Europe, and these countries could integrate not only within the EU but also within the world economy through increased investment and productivity. Although this convergence model has its limits, it provided sufficient space for the Central and Eastern European countries to develop, due to their low initial GDP levels. During the crisis the convergence has slowed down. The forthcoming period makes some changes in the convergence model necessary. The reduction in the private sector savings-investment gap is unavoidable. Savings must be used more efficiently than in the past. These suggestions are known in literature. However, two other important factors should also be taken into consideration. Failing to bridge the current productivity gap between foreign and domestic companies makes catching-up impossible. Population ageing and increased net migration from the Central and Eastern European countries has reached the level which demolishes their economic potential and destabilizes their societies in the medium and long run. These issues mean severe challenges on both national and European level.

Suggested Citation

  • Farkas, Beáta, 2013. "Changing development prospects for the Central and Eastern European EU member states," MPRA Paper 48172, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:48172

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    References listed on IDEAS

    1. Jean Pisani-Ferry & Pavle Petrovic & Michael A Landesmann & Vladimir Gligorov & Daniel Daianu & Torbjörn Becker & Zsolt Darvas & André Sapir & Beatrice Weder di Mauro, . "Whither growth in central and eastern Europe? Policy lessons for an integrated Europe," Blueprints, Bruegel, number 453.
    2. Hanousek, Jan & Kocenda, Evzen & Maurel, Mathilde, 2011. "Direct and indirect effects of FDI in emerging European markets: A survey and meta-analysis," Economic Systems, Elsevier, vol. 35(3), pages 301-322, September.
    3. Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," CEPR Discussion Papers 6546, C.E.P.R. Discussion Papers.
    4. André Sapir, 2006. "Globalization and the Reform of European Social Models," Journal of Common Market Studies, Wiley Blackwell, vol. 44(2), pages 369-390, June.
    5. Beáta Farkas, 2012. "The Impact of the Global Economic Crisis in the Old and New Cohesion Member States of the European Union," Public Finance Quarterly, State Audit Office of Hungary, vol. 57(1), pages 53-70.
    6. Beata Farkas, 2011. "The Central and Eastern European model of capitalism," Post-Communist Economies, Taylor & Francis Journals, vol. 23(1), pages 15-34.
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    Cited by:

    1. Ivan Todorov, 2016. "Currency Integration of the New EU Member Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 82-117.

    More about this item


    Central and Eastern European; convergence; global crisis; varieties of capitalism;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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