Effects of technological changes and trade liberalisation on industrial development in the Western Balkan Countries

Abstract

The transition process in the Western Balkan Countries (W.B.C.) is followed by efforts focused on modernisation and industrial manufacture growth. However, industries in these countries are still under the pressure of the need for restructuring and the rules of an open market. Opening towards the world and transferring new technologies are related processes. Although they are of the same importance, adoption of new technologies is a process which is more demanding than trade liberalisation process. Technological and trade openness pander to other factors of development and contribute to higher efficiency of investments. Industrial manufacture growth spurs economic growth. Furthermore, share of industrial production in G.D.P. as dependent variable represents the scope and quality of industrial development. The hypothesis is that the share of industrial production in G.D.P. is affected by: Technological readiness, Manufacture value added and Merchandise trade as well as Gross investments and Innovations. Results of panel analysis indicate that Technological readiness, Manufacture value added and Gross investments have positive and significant impact on industrial development. Negative coefficient of merchandise trade liberalisation in the panel model implies slowdown of industrial development, and one of the reasons is continuously high merchandise trade deficit in W.B.C.