Cohesion in the new EU member states: catching-up, structural change and the role of trade and FDI

30  October 2014    4:00 pm

Presentation and Discussion


wiiw, Vienna 6, Rahlgasse 3, lecture hall


On the occasion of the 25th Anniversary of the Fall of the Iron Curtain, wiiw presents the main findings from the international research project Growth-Innovation-Competitiveness: Fostering Cohesion in Central and Eastern Europe (GRINCOH).

The presentations will focus on economic development patterns and structural change in the New Member States (NMS) as well as on the role of external trade, FDI and technology upgrading.


Peter Havlik: Economic Development Patterns and Structural Change

Over the two decades following the fall of the Iron Curtain, the Central and East European New EU Member States (NMS) experienced an impressive economic growth which was to a large degree related to improvements in productivity, innovation and competitiveness. A considerable real economic convergence process took place, which is supposed to continue as a fundamental long-term economic trend also in the future. Even during the recent crisis years, the NMS maintained a positive growth differential vis-à-vis Western Europe.

Unfortunately, the convergence process in the NMS was associated with a major downward shift in GDP growth rates across the EU and it is likely to continue at a lesser speed than before the crisis, with considerable differences among individual countries.

Attila Soos: The Role of External Trade and FDI in Economic Growth

Foreign trade and foreign direct investments (FDI) have played a crucial role in the economic development of the NMS. Today, we find the NMS among the most open and export based economies in the world, with rising export shares and increasing export unit values. The countries managed to integrate in international production networks, to move the technology ladder upwards and to increase the value added of their exports.

These considerable achievements were, however, accompanied by a number of risks: the pronounced price competitiveness of NMS' exports raises doubts of the quality and skill-intensity of the production processes and the relatively low diversification of NMS' exports may challenge the sustainability of their development path. Last but not least, regional and investment policies need to pay attention to the potentially negative impact of FDI on social and regional disparities.

Slavo Radosevic: Growth, technology upgrading and innovation policy in new member states: in search of new growth model

Convergence of new member states towards EU average has slowed down after 2008. The end of productivity catch-up related to early transition and stalled reforms have opened the issue: what is the new CEE growth model? In this presentation, Radosevic will discuss the issue of CEE growth from the perspective of technology upgrading i.e. whether CEE are building the basis for long-term growth based on technology capability.

Science systems in these countries have recovered but not technological activities. Growth is based on production capability which is not sufficient basis for continuous convergence process. Central Europe is in relatively much better situation than the rest of region due to their integration in German-Austrian industrial system. EU structural funds policies are crucial to support technology upgrading but critical analysis of these policies shows that they are not geared towards specific challenges of these economies.

The Presenters

Peter Havlik is Staff Economist and former Deputy Director at The Vienna Institute for International Economic Studies (wiiw) and guest research scholar at the International Institute for Applied Systems Analysis (IIASA). His main research areas cover economic transition in Central and Eastern Europe, foreign trade, competitiveness, EU integration, EU-Russian relations, the analysis and forecasts of macroeconomic developments. He is also country expert for Russia and the Newly Independent States (NIS) at wiiw. He participated in and coordinated various large research projects, for instance ‘Industrial Restructuring in the NIS: experiences of and lessons from the new EU Member States (INDEUNIS), funded by the EU 6th Framework Programme (2005-2007) and ‘European energy security‘, a project on energy security for the OENB Jubilee fund (2008-2010). He has also contributed to and coordinated various chapters to the EU Competitiveness Reports (2003, 2009, 2012) and conducted a study on the Economic Development of the Black Sea Region for the Austrian Ministry of Economy in 2009.

Károly Attila Soós is Senior Research Fellow of the Institute of Economics of the Hungarian Academy of Sciences (HAS). Having been member of Parliament (Alliance of Free Democrats - SZDSZ) for seven years (and also Secretary of State in 1994-1996), and having worked for three years in the EBRD, he came back to the HAS in 2001. He graduated at the Karl Marx University of Economics in 1967, when he also started to work in the HAS. In the 1970s - 1980s, he participated in different preparatory works of Hungarian economic reforms; in the 1990s he was a leading economic expert of the Alliance of Free Democrats. His research focuses on economic reforms, macroeconomic processes and foreign economic relations of former socialist countries. During the last few years, he has also worked as expert in foreign assistance projects of the European Union in different former socialist countries.

Slavo Radosevic is Director of the School of Slavonic & East European Studies (SSEES) at the University College London and Professor of Industry and Innovation Studies. His research focuses on the economics of technological change and innovation studies, with a special emphasis on countries of central and eastern Europe. He explores issues of growth and structural change through innovation systems, entrepreneurship, international business and innovation policy perspectives from a neo-Schumpeterian perspective.

The GRINCOH project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no 290657.