Regional Convergence in Central and Eastern Europe: Evidence from a Decade of Transition

Abstract

The paper analyses regional growth and convergence in a sample of 31 Central and Eastern European regions over the period 1990-2002. We find that the regional disparity has decreased in the first half of the 1990s. Thereafter it has remained stable. Almost all of the reduced disparity seems to be attributable to income convergence between countries. At the country level, on the other hand, we find no evidence for sigma-convergence. Our econometric analysis finds evidence for conditional beta convergence. The estimates indicate that structural variables like the labour participation rate and the economy's sectoral structure matter for regional growth. Additionally, they point to the role of national specific differences in the growth performance. The sources of regional disparities do not seem to differ much between the accession countries and the current EU members. From this, we conclude that the present priorities and instruments of EU regional policy equally apply to an enlarged European Union.

Keywords: economic growth, regional convergence, transition economies

JEL Classification: R11, F41