The document discusses structural convergence in Central and Eastern Europe. It examines topics like output and employment structures, productivity dynamics, and changing patterns of international specialization. While income growth implies convergence of supply and demand structures, the scope for specialization based on factors like country size means full structural convergence is not expected. Structural features in the catching-up process include shifts in sectoral employment shares and a U-shaped pattern of employment growth over time. Wage and productivity dynamics also influence changing trade specializations within Europe.

1. Competitiveness/Structural Convergence in Central and Eastern Europe Michael A. Landesmann OENB/SUERF Meeting 22 June 2007 ‚ Central and Eastern Europe: Is Convergence on Track?‘

5. The aggregate picture

6. GDP per head, real growth annual averages 1993-2000 and 2000-2006, in percent EU-25 countries, incl. Bulgaria and Romania Source: AMECO Database 1993-2000 2000-2006

7. Growth of gross domestic product: Wider Europe % annual change, 2006 and 2006-2020 forecasts

8. GDP per head at PPS, EU-25 countries, incl. Bulgaria and Romania Source: AMECO Database

9. The employment-output relationship

10. Employment and GDP growth 1995 = 100 EU-15 NMS-10

11. Source: wiiw Database Employment growth rates 2000-2006 in %

12. Unemployment rates 2000-2007 LFS, %, annual average Source: wiiw Database

13. Employment growth rates Source: wiiw Database

14. Structural break in employment-to-GDP relationship Separate Fixed Effects panel regressions of log(employment) on log(GDP) Note: CEE4 is CZ, SK, SI, HU; Other NMS are PL, EE, LV, LT, BG, RO

15. GDP growth and Current Account balance Source: wiiw Database

16. GDP growth and Current Account balance Panel estimation of CA change (in % of GDP) on real GDP growth (annual data)

17. Structural change, convergence and the U-shaped pattern of employment growth

18. Stylized U-shaped pattern of employment growth in NMs Employment levels Time Strong presence of sectors with declining output shares and strong productivity catching-up Increasing weight of sectors with strong output growth and lower productivity catching-up Aggregate GDP growth / catching-up and convergence in output structures (with more advanced economies)

19. Divergence of employment shares from EU-15 structure, 2005 NMS-4 NMS-7 PL

20. Employment growth in sectors, 1999-2005 NMS-4 NMS-7 PL

21. Divergence of employment shares from EU-15 structure, 2005 NMS-4 NMS-7

22. Employment growth in sectors, 1999-2005 NMS-4 NMS-7

23. Value added, difference to EU-15, 1999

24. Value added, difference to EU-15, 2005

25. Agriculture NMS-7 (CZ, HU, SK, SI, EE, LV, LT) Poland Industry NMS-7 (CZ, HU, SK, SI, EE, LV, LT) Poland Output and Employment, 1995-2005 Output Employment

26. Basic Services (Trade, Restaurants, Hotels, etc.) NMS-7 (CZ, HU, SK, SI, EE, LV, LT) Poland Financial and Business Services NMS-7 (CZ, HU, SK, SI, EE, LV, LT) Poland Output and Employment, 1995-2005 Output Employment

27. Growth by sectors, 1995-2005 in % p.a. NMS-7 Poland

28. Wage-productivity dynamics and the changing pattern of international specialisation

29. Poland: Dynamics of wages, productivity and unit labour costs, 2000-2006 Relative to Austria (2002=100) Total manufacturing Textiles Leather Machinery Electrical equipment Transport

30. Czech Republic: Dynamics of wages, productivity and unit labour costs, 2000-2006 Relative to Austria (2002=100) Total manufacturing Textiles Leather Machinery Electrical equipment Transport

31. Hungary: Dynamics of wages, productivity and unit labour costs, 2000-2006 Relative to Austria (2002=100) Total manufacturing Textiles Leather Machinery Electrical equipment Transport

32. Bulgaria: Dynamics of wages, productivity and unit labour costs, 2000-2005 Relative to Austria (2002=100) Total manufacturing Textiles Leather Machinery Electrical equipment Transport

33. Romania: Dynamics of wages, productivity and unit labour costs, 2000-2006 Relative to Austria (2002=100) Total manufacturing Textiles Leather Machinery Electrical equipment Transport

34. Market shares in EU-25 imports Czech Republic Hungary

35. Market shares in EU-25 imports Poland Slovak Republic

36. Market shares in EU-25 imports Bulgaria Romania

39. Export unit value ratios by industrial groupings (groupings 1 – low tech, 3 – medium/high tech) 1 – low tech 3 – medium/high tech period 1: 1995-1997 period 2: 2002-2004

40. Price and quality competition in EU-15 markets 1995/98 - 2002/04 by country groups Low tech industries Medium-high tech industries

41. Import penetration ratios in EU-North in medium high-tech industries

42. Import penetration ratios in USA in medium high-tech industries

43. Import penetration ratios in Japan in medium high tech industries

44. The impact of structural convergence – example from the labour market: Skill up-grading, the pressure on the low-skilled and supply side adjustment

45. Employment by educational categories 1992-2005 Hungary: (Index: 19 92 = 100) Poland: (Index: 19 92 = 100) Czech Republic: (Index: 199 3 = 100) 2005 Primary education Secondary education Tertiary education T otal e mployment

47. Grouping of industries into low-, medium- and high-skill industries; EU-27 High-skill industries 19 Tanning and dressing of leather 18 Wearing apparel 17 Textiles 20 Wood and of products of wood and cork 37 Recycling 36 Furniture; manufacturing n.e.c. Medium-skill industries 28 M etal products 26 Other non - metallic mineral products 15 Food products and beverages 25 Rubber and plastic products 21 P ulp, paper and paper products 27 B asic metals 16 Toba cco products 34 M otor vehicles, trailers and semi trailers 29 M achinery and equipment n.e.c 31 E lectrical machinery and apparatus n.e.c. 22 Publishing, printing and reproduction of recorded media 35 O ther transport equipment 33 M edical, precision and optical instruments, watches and clocks 24 C hemicals and chemical products 32 R adio, television an d communication equipment and apparatus 23 C oke, refined petroleum products and nuclear fuel 30 O ffice machinery and computers Low-skill industries

48. Skill shifts – between and within components in low-, medium- and high-skill sectors,1999-2005 Source: wiiw CZ HU SI SK L=low-skill sectors, M=medium-skill sectors, H=high-skill sectors High education

49. Skill shifts – between and within components in low-, medium- and high-skill sectors,1999-2005 Source: wiiw EU-North EU-South NMS-4 L=low-skill sectors, M=medium-skill sectors, H=high-skill sectors High education

50. Skill shifts – between and within components in low-, medium- and high-skill sectors,1999-2005 Source: wiiw EU-North EU-South NMS-4 L=low-skill sectors, M=medium-skill sectors, H=high-skill sectors Low education

51. Outsourcing : Shares in total EU-27 imports, focus on MH (largely CEEs) and China; 1995 and 2005 (in % of total) Source: wiiw CN MH CN MH CN MH CN MH Processed Parts Final Total HL HH USA HL HH USA HL HH USA HL HH USA

53. Labour supply response

54. Growth of labour force, 15-64, 1999 - 2003, in % Low educated EU-15 EU-S NMS-4 NMS-7 NMS-8 EU-15 EU-S NMS-4 NMS-7 NMS-8 Highly educated Medium educated EU-15 EU-S NMS-4 NMS-7 NMS-8

55. Share of population in education groups in % of total population in education groups Low High

56. The regional dimension

57. Size of regional income disparities in the EU-27 regions Coefficient of Variation, regional GDP per capita at PPS. NUTS-3 regions , 1995 & 2002

58. Regional Clusters Agriculture regions Industry regions Basic service regions Business service regions Capital cities

59. Regional GDP per head, 2002 in percent of country averages, cluster weighted averages

60. Regional GDP growth, 1995-2002 average yearly growth rates, relative to country average, cluster weighted averages

61. Population (15-64 years): Region types and educational attainment levels, 2003

62. Employment rates – of persons with completed tertiary education ( employment as a proportion of the highly educated working-age population 25-64 years ) , 2003 69.0 to 75.0 75.0 to 80.0 80.0 to 82.0 82.0 to 84.0 84.0 to 86.0 86.0 to 94.0

63. Employment rates – of persons with low level education ( employment as a proportion of the low educated working-age population 25-64 years ) , 2003 23.0 to 38.0 38.0 to 45.0 45.0 to 51.0 51.0 to 56.0 56.0 to 59.0 59.0 to 63.0 63.0 to 82.0

64. Regional net migration flows 5 year periods,in % of the labour force (cumulative)