Innovation, Inclusion, and Integration: From Transition to Convergence in Eastern Europe and the Former Soviet Union

Contents......Page 6
Foreword......Page 12
Acknowledgments......Page 16
Abbreviations and Glossary......Page 18
Overview......Page 20
Innovation......Page 21
Inclusion......Page 29
Integration......Page 35
Figure 10 Migration in Southern Europe Evolved in a “Hump”Pattern......Page 41
1 The Elements of Economic Growth......Page 48
PART I: INNOVATION......Page 54
2 Labor Productivity......Page 56
Figure 2.1 Sectoral Shares of Total Value Added......Page 57
Figure 2.7 Sources of Productivity Growth, Selected Countries......Page 64
Figure 2.9 Incumbent Productivity Growth and the Contribution of Net Entry......Page 66
Services......Page 70
3 The Business Environment......Page 72
Competition and Market Structure......Page 73
Finance and the Structure of Lending......Page 78
Figure 3.7 The Structure of Finance for De Novo Firms, 1999 and 2005......Page 84
What Determined Restructuring?......Page 86
PART II: INCLUSION......Page 90
4 The Evolution of Employment......Page 92
Entry, Exit, and Employment......Page 93
Table 4.1 Job Reallocation, Job Creation, Job Destruction, and Job Growth, by Country Group......Page 96
Shortages of Skills......Page 104
5 Poverty......Page 106
Figure 5.2 Composition of Poor Population, Selected Transition Countries: 2005/2006......Page 107
Wages, Employment, and Distribution......Page 108
Figure 5.5 Real Wage and Net Employment Growth in Transition Countries, 1997–2005......Page 112
Figure 5.7 Coverage of Social Protection by Country Groups, around 2003......Page 114
Well-Being in Transition......Page 115
PART III: INTEGRATION......Page 118
6 International Trade......Page 120
Figure 6.2 Services Trade Openness as Percentage of GDP, in Purchasing Power Parities......Page 121
Figure 6.5 Factor Intensity of Merchandise Exports......Page 124
Buyer-Driven and Producer-Driven Networks......Page 125
Transition Countries: “Normally” Integrated?......Page 128
Patent Citations, International Co-Invention and Multinational Sponsorship of Local Invention......Page 129
7 International Migration......Page 132
Determinants of Migration......Page 134
Figure 7.2 Postwar Emigration from Southern Europe, 1960–1988......Page 135
PART IV: THE THIRD TRANSITION......Page 138
8 Demographic Change......Page 140
Participation......Page 142
Figure 8.4 Change in Labor Force Participation Rates Required to Maintain the Share of the Labor Force in Total Population in 2025 at 2000 Levels......Page 144
A Policy Package......Page 145
The Role of Migration......Page 146
Appendix: Decomposing Productivity Growth......Page 150
References......Page 152
Index......Page 154
Box 1.1 Country Groups......Page 50
Figure 1 Firm Entry and Exit Contribute More to Productivity Growth in Transition Economies than in Industrial and Developing Economies......Page 22
Figure 2 The Structure of Finance for Fixed Investment Is Maturing but Has Not Converged to That in Developed Economies......Page 26
Figure 4 The Difference in Structures of Finance between Private Firms in Transition Economies and Market Economies Is Due to Autonomous Factors......Page 27
Figure 6 Structure of Finance for De Novo Firms, 1999 and 2005......Page 28
Figure 7 De Novo Firms Have Been a Strong Force for Job Creation......Page 30
Figure 8 The Majority of the Poor Are Working Adults and Children......Page 33
Figure 9 Foreign Direct Investment Helps EU New Member States Take Part in Producer-Driven Global Networks......Page 36
Figure 11 Populations in Many Transition Countries Are Shrinking......Page 42
Figure 12 Some Net Senders of Migrants Will Become Net Receivers......Page 44
Figure 1.1 Average Annual Growth Rate in GDP per Capita and Its Components, 1998–2006......Page 49
Figure 1.2 Employment Rates: Early Transition, 1998 and 2006......Page 51
Figure 2.2 Benchmarking Sectoral Employment in Eastern Europe and the CIS—Evolution over the Transition and Compared with Market Economy Benchmarks......Page 58
Figure 2.3 Sources of Productivity Growth in Developed, Transition, and Developing Economies......Page 60
Figure 2.4 Contributions of Firm Entry and Exit to Productivity Growth......Page 61
Figure 2.5 New Firm Labor Productivity......Page 62
Figure 2.6 Survival Rates......Page 63
Figure 2.8 Incumbent Productivity Growth and the Contribution of Net Entry......Page 65
Figure 2.10 Sectoral Wage Employment for the Poor and Nonpoor, Selected Countries......Page 67
Figure 2.11 Sectoral Value Added per Worker......Page 68
Figure 2.12 Factor Intensity and the Growth of Household Farms......Page 69
Table 3.7 Sources of Financing, 2004–05......Page 79
Figure 3.3 Evolution of Financing for Fixed Investment......Page 80
Figure 3.5 Decomposition of Difference in the Structure of Financing for Fixed Investment between Transition Economies and Developed Market Economies......Page 82
Figure 3.6 The Structure of Finance for Privatized and De Novo Firms, 2005......Page 83
Figure 4.1 Large Job Flows in Transition Economies......Page 94
Figure 4.2 Job Creation and Job Destruction in Manufacturing and Services......Page 95
Figure 4.3 Job Creation and Job Destruction, by Country Group......Page 97
Figure 4.4 Job Creation and Job Destruction in the Transition Economies, by Ownership......Page 98
Figure 4.5 Size Distribution of Firms in 2004–05......Page 101
Figure 4.6 Evolution of Size Distribution of Firms in EU8 Countries......Page 102
Figure 4.7 Evolution of Firm Size Distribution in Poorer Transition Economies......Page 103
Figure 5.3 Wage Increases and Productivity Gains during the Economic Recovery......Page 110
Figure 5.4 Real Wage Gains in Southeastern Europe and the CIS......Page 111
Figure 5.6 Changes in Employment Rate, 1998–2005/06, Selected Transition Countries......Page 113
Figure 6.3 Global Distribution of Merchandise Exports from the Transition Countries......Page 122
Figure 6.4 Intraregional Distribution of Merchandise Exports......Page 123
Figure 6.6 FDI Stock per Capita and Share of Skilled-Labor and Capital-Intensive Exports in 2006......Page 127
Figure 7.1 Remittances as a Share of GDP in Transition Countries......Page 133
Figure 8.2 Working Age Population to Total Population, 1950–2025......Page 141
Figure 8.3 Labor Force Participation in the EU15 and Transition Country Groups for People Ages 55–64, by Gender, 2006......Page 143
Figure 8.5 Migration and Demography—Policy Implications......Page 147
Table 3.1 Market Structure—Number of Competitors......Page 74
Table 3.2 Price Elasticity of Demand......Page 75
Table 3.4 Pressure from Foreign Competitors......Page 76
Table 3.6 Pressure from Customers......Page 77
Table 3.8 Evolution of Financing, 1999–2005......Page 81
Table 3.9 Deep Restructuring, 1999–2005......Page 85
Table 4.2 Job Reallocation, Job Creation, Job Destruction, and Job Growth in the Transition Economies, by Ownership......Page 99
Table 5.1 Poverty Profile by Sector and Type of Employment of the Household Head, Selected Transition Countries, 2005/06......Page 109