Regional growth in central and eastern Europe: Convergence, divergence and non-linear dynamics

Abstract

Regional disparities in the countries of Central and Eastern Europe have risen substantially in the process of transition and internationalisation of their economies. Still, prima facie evidence of beta-convergence is often found in the CEE data. In this chapter we develop a hybrid model of regional growth that incorporates key aspects of three central theories of regional growth, namely neoclassical convergence, cumulative causation and the regional Kuznets curve. We find partial evidence in support of all three approaches, but ultimately our results suggest that the regional growth process in CEE has not been obeying the rule of convergence, either monotonically (neoclassical) or through a bell-curve (regional Kuznets curve). The specific economic, institutional and cultural factors that account for this, ought to be the subject of continuing research in the filed.