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Bridging the technology-gap in economic transition, the J-curve of growth and unemployment

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  • Hetze, Pascal

Abstract

The macroeconomic experience has been somewhat ambiguous during the historic experiment of economic transition in the former centrally-planed countries in Central and East Europe (CEE). The economic restructuring produced a notable catching-up in terms of productivity but also a J-curve shape of output growth accompanied by an increase in unemployment on a large scale. This paper models the transformation progress which leads to these contradictory outcomes. Before transition initiated catching-up, the economies suffered from two limits to growth: a gap of usable capital and a gap of technologies. Accordingly, a rapid technology transfer from the advanced Western economies led to a significant technological and structural change combined with high rates of labor reallocation. If we include frictions in the consequent matching between job seekers and jobs, the model reproduces the pattern of productivity, growth and unemployment that we find in the CEE countries.

Suggested Citation

  • Hetze, Pascal, 2006. "Bridging the technology-gap in economic transition, the J-curve of growth and unemployment," Thuenen-Series of Applied Economic Theory 66, University of Rostock, Institute of Economics.
  • Handle: RePEc:zbw:roswps:66
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    References listed on IDEAS

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    1. Felix Fitzroy & Michael Funke, 1998. "Skills, Wages and Employment in East and West Germany," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 459-467.
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    3. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
    4. Gérard Roland & Thierry Verdier, 1999. "Transition and the output fall," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March.
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    6. Arjun S. Bedi & Andrzej Cielik, 2002. "Wages and wage growth in Poland: The role of foreign direct investment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 1-27, March.
    7. Blanchard, Olivier, 1996. "Theoretical Aspects of Transition," American Economic Review, American Economic Association, vol. 86(2), pages 117-122, May.
    8. Keller, Wolfgang, 2002. "Trade and the Transmission of Technology," Journal of Economic Growth, Springer, vol. 7(1), pages 5-24, March.
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    More about this item

    Keywords

    catching-up; growth; unemployment; technological change; transition economies;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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