Please Close the Gap! New Development Models of CEE Economies?

  • Abstract:

    While East Central European economies have grown successfully since the mid-1990s, the economic catch-up processes has slowed down noticeably within the last few years. This can, at least in part, be explained by the recent problems in the development of higher economic capabilities, which are important to exempt these economies from their dependence on low wages. However, these problems are hitherto only partially understood and relevant insights are dispersed within various research strands. This makes our understanding of capability development rather fuzzy and fragmented. This paper therefore aims to focus on the topic of ‘capability development’, by approaching it more holistically and investigating its current state in East Central Europe. It focuses on three central aspects of capability development, namely the import of capabilities by foreign actors, the endogenous development of capabilities within the region, and efforts to govern their improvement. The paper shows that capability development in ECE faces many challenges. Firstly, the import of capabilities is slowing down noticeably, as foreign actors are embracing the status quo. Secondly, endogenous capability development is still insufficient due to feedback loops between highly diverging individual capabilities and little interaction. Thirdly, efforts to govern the capability development have had limited success so far. Against this background, the presentation discusses current economic policy efforts in the countries of Central and Eastern Europe to accelerate the economic catching-up process.

 

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