Drivers of Convergence in Eleven Eastern European Countries

This paper investigates the drivers of growth and prosperity in a group of eleven European countries -- Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia, and Slovakia (the EU11). Since the EU11 b...

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Bibliographic Details
Main Authors:	Cuaresma, Jesus Crespo, Oberhofer, Harald, Smits, Karlis, Vincelette, Gallina A
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ACCOUNTABILITY AFFILIATES AVERAGE PRODUCTIVITY BANKING SYSTEM BANKS BENCHMARK BOND MARKETS BRAIN DRAIN BUSINESS CLIMATE BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS BUSINESS REGULATION CAPITAL ACCUMULATION CAPITAL FLOW CAPITAL FLOWS CAPITAL INVESTMENT CAPITAL INVESTMENTS CIVIL SERVICE COMMON MARKET COMPETITIVENESS CONSOLIDATION CONSUMER DURABLES CONSUMPTION LEVELS CORPORATE GOVERNANCE CROSS-BORDER TRANSACTIONS DEBT DEBT CRISIS DEMOGRAPHIC DEMOGRAPHICS DEVELOPING COUNTRIES DEVELOPING MARKET DEVELOPMENT FINANCE DEVELOPMENT POLICY DIVIDENDS DRIVERS ECONOMETRICS ECONOMIC ANALYSIS ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC INTEGRATION ECONOMIC OUTLOOK ECONOMIC RESEARCH ECONOMIC SURVEYS ECONOMICS EMERGING ECONOMIES EMERGING MARKETS EMPLOYMENT EMPLOYMENT GROWTH ENTREPRENEURSHIP ENVIRONMENTAL ENVIRONMENTAL POLICIES EQUITY MARKETS EXPORT GROWTH EXPORTS EXTRAORDINARY INCOME FACTORS OF PRODUCTION FERTILITY RATE FERTILITY RATES FINANCIAL CRISIS FINANCIAL FLOWS FINANCIAL INTEGRATION FINANCIAL MANAGEMENT FINANCIAL SECTOR FINANCIAL SERVICES FISCAL CONSOLIDATION FISCAL DEFICIT FOREIGN ASSETS FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN MARKETS FOREIGN OWNERSHIP FUTURE STUDIES GDP GDP PER CAPITA GLOBAL MARKETS GOVERNANCE INDICATORS GOVERNMENT BOND GOVERNMENT EXPENDITURES GROWTH PROJECTIONS GROWTH RATE HOUSING HUMAN CAPITAL INCOME INCOME LEVELS INCOMES INEFFICIENCY INNOVATION INTEREST RATE INTERMEDIATE GOODS INTERNATIONAL INVESTORS INTERNATIONAL MARKET INTERNATIONAL MARKETS INVESTMENT CLIMATE JOB CREATION LABOR COSTS LABOR FORCE LABOR FORCE GROWTH LABOR FORCE PARTICIPATION LABOR MARKET LABOR MARKET POLICIES LABOR MOBILITY LABOR ORGANIZATION LABOR PRODUCTIVITY LABOUR LABOUR FORCE LAWS LEGAL SYSTEM LIFE EXPECTANCY LIQUIDITY LIVING STANDARDS LOCAL GOVERNMENTS MARKET ECONOMIES MERGERS MIGRATION OPEN ECONOMIES OUTPUT OUTSOURCING PENSION PENSION REFORM PENSION SYSTEMS PENSIONS PER CAPITA INCOME POLICY MAKERS PORTFOLIO PRIVATIZATION PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS PUBLIC DEBT PUBLIC FINANCE PUBLIC FINANCES PUBLIC SERVICES PURCHASING POWER RAPID GROWTH REAL GDP RED TAPE REGIONAL INTEGRATION REPLACEMENT RATE RETIREMENT RETIREMENT AGE SAVINGS SAVINGS RATES SHAREHOLDERS SINGLE MARKET SKILLED WORKERS SKILLS SHORTAGES SOCIAL BENEFITS SOCIAL INCLUSION SOCIAL PROTECTION SOVEREIGN DEBT SUBSIDIARIES SYSTEMS ANALYSIS TAX TAX ADMINISTRATION TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE FLOWS TRANSPARENCY TRANSPORT VALUE ADDED WAGES WORLD MARKETS
Online Access:	http://documents.worldbank.org/curated/en/2012/08/16658348/drivers-convergence-eleven-eastern-european-countries http://hdl.handle.net/10986/12034

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Summary:	This paper investigates the drivers of growth and prosperity in a group of eleven European countries -- Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia, and Slovakia (the EU11). Since the EU11 began the transformation process, this group of emerging countries has made impressive strides as developing market economies and is anchoring development in European Union institutions. There are reasons to believe that the convergence of EU11 income per capita to Western European levels will continue, but will proceed more slowly. The paper concludes that trade and financial integration have sped along at a spectacular pace in the EU11 in the recent past, although trade in modern services and the integration of government bond and equity markets are somewhat behind. As in the rest of Europe, demographic developments will pose huge challenges for the sustainability of public finance in the EU11 economies. In the next several decades, the EU11 labor force is expected to contract more than labor forces in the rest of the European Union, making it even more urgent that countries in the region reform pension systems, change migration policy, and find incentives to attract talent to the region. Closing the gap with the rest of the European Union in educational attainment levels and improving education quality might significantly soften the constraints imposed by the demographic threats and produce sizable returns in terms of additional income convergence.

Drivers of Convergence in Eleven Eastern European Countries

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