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Central and Eastern Europe: Catching up or lagging behind?

The Methodological Maze of the EU’s Method of Measuring Development

Society and Economy
Author: Zoltán Polyánszky

The rosy reports of the EU on Central and Eastern European regional development and EU-wide regional convergence are based on the GDP per capita positions of NUTS-2 regions, expressed in percentage of the EU average. This approach is reflected also in the regulation of eligibility for Objective 1 structural transfers. The article analyses whether this relative measurement of catching up or lagging behind is realistic, or other methods yield different results. We reveal that by substituting absolute numbers (that is, GDP per capita in PPS) for percentages, the position of the Central and Eastern European regions related to the EU average turns just the opposite. Calculated in PPS, the difference between the per capita GDP of almost 90% of the new members’ NUTS-2 regions and the EU average increased between 1995 and 2006. This puts both EU cohesion policy and the prospects of the Central and Eastern European region into a different light.

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Being heavily energy dependent, it is not much of a surprise that Europe pays special attention to reducing the use of fossil fuels. Each one of the ten new member states is characterized by relatively low per capita energy consumption and relatively low energy efficiency, and the share of renewables in their energy mix tends to be low, too. The paper examines the problem when policy measures create a decrease in environmental capital instead of an increase. In this case it hardly seems justified to talk about environmental protection. The authors describe a case of a Hungarian rapeseed oil mill which would not be of too much interest on its own but given that almost all similar plants went bankrupt, there are some important lessons to learn from its survival. The enterprise the authors examined aimed at establishing a micro-regional network. They completed a brown-field development to establish a small plant on the premises of a former large agricultural cooperative. By partnering with the former employees and suppliers of the onetime cooperative, they enjoyed some benefits which all the other green-field businesses focusing on fuel production could not. The project improved food security, energy security and population retention as well.

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This paper reviews the expected effects of the current financial crisis and subsequent recession on the rural landscape, in particular the agri-food sector in Europe and Central Asia (ECA) on the basis of the structure of the rural economy and of different organisations and institutions. Empirical evidence suggests that the crisis has hit the ECA region the hardest. Agriculture contributes about 9% to gross domestic product (GDP) for the ECA region as a whole with 16% of the population being employed in the agricultural sector. As far as the impact of the financial crisis on the agri-food sector is concerned, there are a few interconnected issues: (1) reduction in income elastic food demand and commodity price decline, (2) loss of employment and earnings of rural people working in urban centres, implying also costly labour reallocation, (3) rising rural poverty originating mainly from lack of opportunities in the non-farm sector and a sizable decline of international remittances, (4) tightening of agricultural credit markets, and the (5) collapse of sectoral government support programs and social safety-net measures in many countries. The paper reveals how the crisis hit farming and broader agri-business differently in general and in the ECA sub-regions.

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The Hsinchu Science Park in Taiwan has been synonymous with dynamic and flourishing high-tech industries and companies since the 1980s. Using patent citation data, this empirical study shows that Taiwan's Hsinchu Science Park is a healthy and knowledge-based cluster surrounded by the semiconductor sector, in which external knowledge is continuously playing an important role, while internalized capability is building up quickly; new and extended industrial clusters are being established by the growth of new ventures; and the linkages of capital, manpower, and technology flows are conducted respectively by the large business groups, the NTHU and NCTU, and the ITRI in the region. Subsequent sectors, repeating the successful model created by and catalyzed from the semiconductor sector are flourishing; the thin-film transistor-liquid crystal display (TFT-LCD) and integrated circuit (IC) design sectors have been growing rapidly since the beginning of the 2000s, and the solar photovoltaic and LED (Light-Emitting Diode) sectors emerged quickly in mid-2005. The continuous evolving and growing industries along with the significant increase of value added in the Hsinchu Science Park have demonstrated it is acting as a healthy and vivid innovation region. The policy implications derived from this study can thus shed light, for the Southeast Asian, Latin American or other latecomers, on the strategies for formulating regional research and innovation policies in the process of developing a knowledge-based economy.

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This paper deals with the effects of political decentralisation on economic growth in Spain, an issue that has generated heated debates in recent decades. Our analysis of the last three and a half decades, a period characterised by the weak narrowing of the income per capita gap within regions, does not offer conclusive results on convergence and points to the importance of alternative factors. Several proxies were used to capture the decentralisation process. We also studied some potential interactions between decentralisation and other variables. All in all, our empirical evidence shows robustly that transferring more responsibilities to subnational governments does not significantly affect growth in any sense.

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Economic growth requires well functioning transport systems. The paper deals with the problems associated with ever-increasing car use and traffic jams in Budapest. Car scarcity was the major problem that impeded car use two decades ago which has transformed into road scarcity since then. Road capacity is limited in the Hungarian capital, only the public transport can help to satisfy medium run travel demand of residents. As motorisation and car use grow congestion related time loss, petrol and pollution costs put a heavy burden on Budapest. International experience shows that restrictions on cars can mitigate congestion. In many large cities introduction of road pricing in central areas has become one of the most successful traffic management solutions. Experience in London and Stockholm confirms that citizens support car use restrictions even if they are placed on car use.

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It is known that the simple Markov chain model overestimates the long run horizon mobility of the income distribution process. Dissolving the homogeneity assumption of the Markov model may lead to better forecasts. One generalisation of the Markov model, the Mover-Stayer model assumes heterogenous population: some units are moving according to a common Markov chain, but there are some (unknown) units that are not moving at all. They are called stayers.Based on the Frydman (1984) methodology if we compute both the Markov and Mover-Stayer models for Hungarian micro-regions income data, we find that the Mover-Stayer model fits better the regional relative income data than the simple Markov model. Using likelihood ratio test statistics we show that the difference is highly significant. The method is also applied for spatially conditioned data. The results show that the high persistence of relative income positions is a remarkable feature of the Hungarian economy in 1990–2003 both on a country-wide scale and local level. We also demonstrate that forecasts made on a less reliant model might lead to very ambiguous results.

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The purpose of this paper is to analyse the economic resilience of Spanish provinces and help to explain why some of them are much more resilient than others. To do so, the paper focuses on the recent, 2007–2009 economic crisis and computes a composite indicator (Resilience) made up of two sub-indicators: one for the recession period (Drop) and the other for the recovery period (Rebound). Then, it suggests some factors affecting resilience and, due to the presence of spatial dependence, applies a spatial econometric approach to assess them. The main conclusions are that the level of Resilience depends negatively on the shares of the construction and manufacturing sectors in GDP, and positively on the share of services and the openness degree. As for the Drop, it is important to stress that human capital emerges as a variable that has contributed to minimise the negative effect of the crisis.

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The aim of this paper is to identify the differences in the determinants of successful transition (understood as the creation of a new development path) between the eastern and the western EU Member States between 1994 and 2014 and elaborate assumptions for a strategy of constructing regional advantage for them at the NUTS2 level. We find that the regional transition requires individual approaches to using comparative advantage at the beginning of the process and then competing with specific advantages that can be consciously constructed throughout the process. Therefore, we hypothesise that a successful transition requires constructing regional advantages based on the knowledge-related factors, leading to specialisation in the knowledge-intensive industries. Furthermore, we state that the way of constructing such advantages differs across the regions. All of our hypotheses were confirmed. Both groups of regions had different comparative advantages at the beginning of the period and constructed competitive advantage based on related knowledge-intensive industries, leading to their specialisation. Interestingly, although the process of building regional advantage was similar, the factors used to create it were different, had a different impact on GDP growth and led to a different specialisation.

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This paper offers some insights into scientific collaboration (SC) at the regional level by drawing upon two lines of inquiry. The first involves examining the spatial patterns of university SC across the EU-15 (all countries belonging to the European Union between 1995 and 2004). The second consists of extending the current empirical analysis on regional SC collaboration by including the economic distance between regions in the model along with other variables suggested by the extant literature. The methodology relies on co-publications as a proxy for academic collaboration, and in order to test the relevance of economic distance for the intensity of collaboration between regions, we put forward a gravity equation. The descriptive results show that there are significant differences in the production of academic scientific papers between less-favoured regions and core regions. However, the intensity of collaboration is similar in both types of regions. Our econometric findings suggest that differences in scientific resources (as measured by R&D expenditure) between regions are relevant in explaining academic scientific collaborations, while distance in the level of development (as measured by per capita GDP) does not appear to play any significant role. Nevertheless, other variables in the analysis, including geographical distance, specialization and cultural factors, do yield significant estimated coefficients, and this is consistent with the previous literature on regional SC.

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