Assessing the potential for knowledge-based development in the transition countries of Central and Eastern Europe, the Caucasus and Central Asia

Reinhilde Veugelers

Society and Economy, 2011, vol. 33, issue 3, 475-504

Abstract: Transition economies that formerly were within the Soviet Union’s political and economic sphere exhibited high economic growth before the crisis. In part, increasing total-factor productivity (TFP), a’ residual’ growth factor commonly interpreted as reflecting technological progress, was behind higher growth rates. This paper zooms in on TFP’s contribution to growth in the transition countries of Central and Eastern Europe, the Caucasus and Central Asia, in order to identify which countries have established a knowledge-based growth path or have the potential to develop one in the near future. We start by looking at how the transition countries covered by the paper measure up according to traditional innovation input and output indicators. But the major part of our analysis focuses on identifying countries’ potential for future knowledge-based growth. Few transition economies have highly-developed innovation profiles. Analysis of the prerequisites for knowledge-based growth indicates that transition countries are at a systemic disadvantage relative to the US, the EU-15 and Japan, and have limited potential for knowledge-based growth

Keywords: transition economies; path dependence; knowledge-based growth; innovation (search for similar items in EconPapers)
JEL-codes: O10 O30 O50 (search for similar items in EconPapers)
Date: 2011
Note: I amgrateful to conference participants at the CICM Conference “20 Years of Transition in Central and Eastern Europe: Money, Banking and Financial Markets” and seminar participants at Bruegel and the European Bank for Reconstruction and Development for comments and suggestions. Excellent research assistance by Lucia Granelli and Maite de Sola is gratefully acknowledged as well as editorial advice from Stephen Gardner. Bruegel gratefully acknowledges the support of the German Marshall Fund of the United States for the research underpinning this paper. The author also acknowledges financial support from EU-FP7-SSH7-CT-2008-217436.
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