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Prosperity in Central
and Eastern Europe -
Austria
2016
A Legatum Institute Prosperity Report
The Legatum Institute
The Legatum Institute is an international think
tank and educational charity focused on
understanding and measuring prosperity.
Over the past ten years, the Prosperity Index
team has acquired a vast amount of experience
in the design of indices - the collection,
standardisation, and presentation of data – and
their application in both the policy and business
fields.
The Legatum Prosperity Index™, the Institute’s
signature publication, measures prosperity as
more than just the accumulation of material
wealth, but also the joy of everyday life and the
prospect of an even better life in the future.
The Prosperity Index team has extensive
experience in using indices to inform practical
recommendations in helping people lead more
prosperous lives.
The third edition of the
Africa Prosperity Report
The tenth edition of the
Legatum Prosperity
Index™
The first edition of the
UK Prosperity Index
The first edition of the
Central and Eastern
Europe Prosperity
Report
The Legatum Prosperity Index™
The Legatum Prosperity Index™ is a global measure of prosperity
– wealth and wellbeing – across 149 countries globally, of which
16 are in Central and Eastern Europe.
The Index measures prosperity through the annual assessment
of each country’s performance across 104 variables that form
the nine ‘pillars’ (or sub-indices) of prosperity: Economic Quality,
Business Environment, Governance, Education, Health, Safety &
Security, Personal Freedom, Social Capital, and Natural
Environment
• The Index combines both objective and subjective data,
measuring not only how prosperous a country is, but how
prosperous its citizens feel.
• 2016 is the Index’s tenth edition. With a decade of data, the
Index is a unique global benchmarking tool, providing
governments with an insight into where they have delivered
for their citizens, where they have not, and why.
• Tracking performance over time, particularly in the context of
peer nations, the Index is also a powerful tool for citizens to
hold their governments to account.
Central and Eastern Europe Prosperity Rankings
CEE PI
Rank
Country PI Rank
Economic
Quality
Business
Environment
Governance Education Health
Safety &
Security
Personal
Freedom
Social
Capital
Environment
1 Austria 15 11 20 15 11 25 9 23 15 12
2 Slovenia 20 30 60 38 23 35 14 20 22 1
3 Estonia 26 27 26 20 29 55 43 32 71 7
4 Czech Republic 27 26 30 34 24 27 27 28 78 32
5 Poland 34 37 45 36 33 47 21 39 85 46
6 Slovakia 36 46 49 48 30 46 23 43 86 34
7 Latvia 37 34 34 39 32 82 42 57 94 16
8 Lithuania 42 45 55 37 43 80 45 41 125 33
9 Croatia 43 61 89 44 37 56 31 38 113 30
10 Hungary 47 52 56 46 38 50 38 46 114 93
11 Romania 50 65 41 64 47 85 46 48 97 61
12 Macedonia 53 93 44 62 40 66 37 69 119 85
13 Bulgaria 57 73 71 78 39 91 48 66 111 41
14 Montenegro 58 96 52 59 52 69 35 54 117 125
15 Serbia 66 101 102 70 46 86 40 59 127 105
16 Albania 74 107 67 71 76 49 68 60 106 121
Global Rankings (1st to 149th)
30
40
50
60
70
80
90
0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000
ProsperityIndexScore,2016
GDP per capita (PPP $), 2016
How much prosperity is delivered with wealth?
Austria strongest deliverer of prosperity in CEE
The only developed country in Central
and East Europe, Austria also leads in
both prosperity and wealth.
Ranked at 15th globally in prosperity,
Austria also has the 15th biggest positive
prosperity surplus out of the 149
countries we cover.
Over-delivery: shows us that prosperity
is more than just income or wealth, and
that some countries, like Austria, are
able to deliver more prosperity given
their wealth levels.
Big prosperity surpluses are the true
success stories.
Austria + 11%
CEE
Switzerland +13%Germany +13%
45
50
55
60
65
70
75
80
85
Economic
Quality
Business
Environment
Governance
Education
Health
Safety
& Security
Personal
Freedom
Social
Capital
Environment
Austria Visegrad Germany
Austria’s prosperity is broad based…
People in Austria enjoy a safe and free
society, high standards of education and
health services, stable economic structures
with low level of unemployment and near
absence of poverty.
Despite recent local corruption scandals,
Austria in general enjoys a highly transparent
and stable political system, its clean and
effective governance is the envy of most of
its neighbours to the east.
…but Austria underperforms other wealthy countries in prosperity
To begin with, among countries at similar level of wealth, Austria has the smallest prosperity
surplus in 2016.
…and has lagged behind its neighbours in growing prosperity
99
100
101
102
103
104
105
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ProsperityScore,2007=100
West Europe CEE Austria Germany
Moreover, while prosperity has been growing in CEE and Germany, it stagnated in Austria,
creating a sense of stasis.
Social Capital decline is behind underperformance
Austria’s overall Social Capital score – which
measures the strength of cohesion and
networks in society – dropped by 8% over
the past decade.
It is rare for social capital to experience such
large movements – Austria’s drop was the
10th largest across the 149 countries covered
by the Prosperity Index.
Excluding Austria’s Social Capital sub-index
would raise its 2016 global ranking from 15th
to just shy of the top 10, at 12th place.
90
92
94
96
98
100
102
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SocialCapitalscore,2007=100
Austria's Social Capital dropped by 8% since 2007
What is Social Capital?
One of the Prosperity Index’s nine sub-indices – and a central one.
The Prosperity Index defines Social Capital into Four categories:
Trust: A central component of social capital is “trust”, which we can think
of as encompassing social trust and institutional trust. The first refers to
how widely and easily citizens trust each other. The second refers to the
degree to which citizens trust public institutions.
Family and Community: The CEE experience shows us that higher levels
of trust between immediate family and friends can compensate for low
levels of wider trust. We can refer to this component as “family and
community”, which measures the strength of informal networks connecting
families and friends together.
Civic Engagement: Social networks can also work through more formal
networks, such as volunteering and other charitable activities. We can
think of this component as “civic engagement”, which measures the
strength of formal bonds between citizens.
Civic Participation: Finally, we can think of the links between citizens and
public officials as the “civic participation” component. This measures how
involved and connected citizens are with their governing group.
51%
78%
53%
74%
34%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
%ofpeoplethinkingAustriaagoodplacefor...
Austrians are growing increasinly tolerant
Ethnic minorities Immigrants LGBT groups
Economic not social change driving Social Capital decline
Contrary to recent headlines about the rise of populism and
heated debate on immigration, tolerance in Austrian society has
been rising, becoming the most socially liberal country in CEE.
A sluggish economy both necessitates and limits inter-
household financial support and charitable donations. It is these
two components that account for the overall decline in Social
Capital.
Survey responses from Gallup World Poll: nationally representative sample of ~1,000 respondents conducted annually.
45%
8%
69%
48%
-5
-4
-3
-2
-1
0
1
2
3
4
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Annual%growth
%peoplewithaffirmativeanswer
Sluggish economic growth is straining social capital
Annual GDP per capita growth (%, right hand axis)
Sending financial help to other household
Donating to charitable cause
Social Capital: Austria compared with Norway
Both having high level of Social
Capital, Norway (6th) and
Austria (15th) have very similar
patterns in most indicators
under the sub-index.
It is only in Donating and
Sending financial help to other
households, that the two
countries are significantly
divergent. In both
measurements, Norway is 17
percentage points ahead of
Austria.
-5%
0%
5%
10%
15%
20%
Helping
stranger
Trust in
police
Treated with
respect
Making
friends
Voicing
opinions
Sending financial help
to other household
Volunteering
Can rely on
family or friends
Donating
Diffenrence in Social Capital Patterns between Norway and Austria
Social Capital can be improved independently of economy
Social capital is affected by economic
forces, but isn’t a function of those forces
alone.
It softens the blow of economic disruption,
and can be improved independently of
economic forces.
Report highlights ways in which social
capital can be strengthened:
• Building institutional trust;
• Anti-corruption measures;
• Engagement of civil society, etc.
What Austria is going through is a decline
in “Family & Community” and “Civic
Engagement” social capital – policies need
to address these variables.
Austria’s economic decline was large given its social capital starting point (as it
falls slightly below the trend line), but the general tendency implies that it
would have been larger still if its initial social capital were weaker.
-12%
-10%
-8%
-6%
-4%
-2%
0%
30 35 40 45 50 55 60 65 70
EconomicQualityScore,peaktotrough
Social Capital Score, peak
The higher a country’s initial level of social capital, the smaller the economic shock
Austria
72
73
74
75
76
77
78
79
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
PredictedProsperityIndexScore
Reversing Austria's Social Capital decline would raise its overall prosperity
substantially
Improving Social Capital has big prosperity pay-off
Besides being a component of
prosperity itself, Social Capital has
crucial links to other sub-indices
(trust in the business world and in
governance, for example) that
amplify its effect on overall
prosperity.
Counterfactual: reversing Austria’s
Social Capital decline over the
past decade would see its global
prosperity ranking in 2016 go
from 15th to 5th.
5th place globally
Predicted path of Prosperity Index score above is the application of a regression coefficient to the reversed trend of Austria’s observed
Social Capital score decline between 2007 and 2016. The coefficient was estimated from an OLS regression of the PI on Social Capital
sub-index with year fixed effects, on the panel of CEE countries between 2007 and 2016: 0.68, significant at 1%. R2 0.81.
Social Capital: Learning to trust and help each other
Among all CEE countries, Lithuania has made the largest
gains in Social Capital over the past ten years.
More than anything, it is the surge in general trust – public
trust in local police rose by 27 percentage points – that
boosted its performance.
This is helped by the Lithuanian government’s resolute anti-
corruption programme, synthesising cross-sector
cooperation, better defined legal framework and
institutional design, as well as the implementation of
transparency-enhancing technology such as e-government
services.
But Lithuania’s social capital was also boosted by “Family &
Community” type of Social Capital including inter-
household financial help, making friends-5% 0% 5% 10% 15% 20% 25% 30%
Can rely on
family or friends
Helping
stranger
Volunteering
Voicing
opinions
Donating
Treated with
respect
Making
friends
Sending financial help
to other household
Trust in
police
Change in percentage points, 2007-2016
Lithuanian Social Capital on the Rise
What is to be done in Austria?
Donations and inter-household financial help are proxies for broader
“Family & Community” and “Civic Engagement” social capital that
were shown to have weak resilience.
• Strengthen what’s there: perhaps lower levels in these variables
reflect a move towards more “institutionalised” support – not
bad in itself, but trades-off social capital.
• Build what isn’t: volunteering is another form of this social capital
and is lower in Austria (28%) than many other European
countries. Help with time rather than money.
AustriaFinland
France
Ireland
Netherlands
Norway
Slovenia
Switzerland
United Kingdom
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0 20,000 40,000 60,000 80,000 100,000 120,000
Haveyouvolunteeredyourtimetoanorganizationinpastyear?
YES
GDP per capita (PPP $), 2016
Austria can improve other areas of social capital that are less
directly affected by the economy
Key Findings from the CEE Prosperity Report
•Central and Eastern Europe’s convergence on Western Europe has been much faster in terms of prosperity than income alone. Most
CEE countries deliver a prosperity surplus
KEY FINDING 1
•Central and Eastern Europe has one of the world’s largest deficits in social capital and this is holding back further prosperity growth.
KEY FINDING 2
•Social Capital, Governance, and Business Environment have a disproportionately large effect on CEE’s prosperity delivery.
KEY FINDING 3
•In an environment of slower global growth and one that is increasingly hostile to EU integration, CEE’s success depends on
improving its own ability to deliver prosperity.
KEY FINDING 4
•Countries with high initial levels of social capital experienced less severe economic downturns between 2007 and 2016.
KEY FINDING 5
•Young Central and Eastern Europeans are more pro-business, better educated, have higher social capital and are more demanding
of their governments - therein lies the opportunity to unlock prosperity, but also the challenge.
KEY FINDING 6
Benefiting from accession to EU
90
95
100
105
110
115
120
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SocialCapitalscore,2007=100
Social Capital
Albania Macedonia Montenegro Serbia
90
95
100
105
110
115
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Governancescore,2007=100
Governance
Albania Macedonia Montenegro Serbia
90
100
110
120
130
140
150
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
BusinessEnvironmentscore,2007=100
Business Environment
Albania Macedonia Montenegro Serbia
EU accession has been a huge boost for prosperity
in applicant countries. In order to comply with the
acquis communautaire, a range of policy and
institutional reforms need to be implemented,
which in turn improve performance in Governance,
Business Environment, and Social Capital.
How to Measure Prosperity?
Selecting
variables
• Through literature review and regression analysis we select 104 variables that have statistically
significant and economically meaningful relationship with at least wealth or wellbeing.
Standardi
sation
• We adopt distance-to-frontier approach to normalise variables of different units of measurement,
by comparing a country’s performance with the best and worst scenarios of the entire sample.
Weighting
Variables
• Each variable is assigned a weight, based on their varying significance to prosperity.
Pillar
scores
• In each of the nine pillars, variables’ distance-to-frontier scores are multiplied by their weights and
then summed to generate countries’ pillar scores.
Prosperity
Index
score
• The Prosperity Index score is determined by assigning equal weights to all nine pillars for each
country. The mean of the nine pillars’ scores yields a country’s overall Prosperity score.
Methodology: Social Capital

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Wohlstandsreport Zentral- und Osteuropa

  • 1. Prosperity in Central and Eastern Europe - Austria 2016 A Legatum Institute Prosperity Report
  • 2. The Legatum Institute The Legatum Institute is an international think tank and educational charity focused on understanding and measuring prosperity. Over the past ten years, the Prosperity Index team has acquired a vast amount of experience in the design of indices - the collection, standardisation, and presentation of data – and their application in both the policy and business fields. The Legatum Prosperity Index™, the Institute’s signature publication, measures prosperity as more than just the accumulation of material wealth, but also the joy of everyday life and the prospect of an even better life in the future. The Prosperity Index team has extensive experience in using indices to inform practical recommendations in helping people lead more prosperous lives. The third edition of the Africa Prosperity Report The tenth edition of the Legatum Prosperity Index™ The first edition of the UK Prosperity Index The first edition of the Central and Eastern Europe Prosperity Report
  • 3. The Legatum Prosperity Index™ The Legatum Prosperity Index™ is a global measure of prosperity – wealth and wellbeing – across 149 countries globally, of which 16 are in Central and Eastern Europe. The Index measures prosperity through the annual assessment of each country’s performance across 104 variables that form the nine ‘pillars’ (or sub-indices) of prosperity: Economic Quality, Business Environment, Governance, Education, Health, Safety & Security, Personal Freedom, Social Capital, and Natural Environment • The Index combines both objective and subjective data, measuring not only how prosperous a country is, but how prosperous its citizens feel. • 2016 is the Index’s tenth edition. With a decade of data, the Index is a unique global benchmarking tool, providing governments with an insight into where they have delivered for their citizens, where they have not, and why. • Tracking performance over time, particularly in the context of peer nations, the Index is also a powerful tool for citizens to hold their governments to account.
  • 4. Central and Eastern Europe Prosperity Rankings CEE PI Rank Country PI Rank Economic Quality Business Environment Governance Education Health Safety & Security Personal Freedom Social Capital Environment 1 Austria 15 11 20 15 11 25 9 23 15 12 2 Slovenia 20 30 60 38 23 35 14 20 22 1 3 Estonia 26 27 26 20 29 55 43 32 71 7 4 Czech Republic 27 26 30 34 24 27 27 28 78 32 5 Poland 34 37 45 36 33 47 21 39 85 46 6 Slovakia 36 46 49 48 30 46 23 43 86 34 7 Latvia 37 34 34 39 32 82 42 57 94 16 8 Lithuania 42 45 55 37 43 80 45 41 125 33 9 Croatia 43 61 89 44 37 56 31 38 113 30 10 Hungary 47 52 56 46 38 50 38 46 114 93 11 Romania 50 65 41 64 47 85 46 48 97 61 12 Macedonia 53 93 44 62 40 66 37 69 119 85 13 Bulgaria 57 73 71 78 39 91 48 66 111 41 14 Montenegro 58 96 52 59 52 69 35 54 117 125 15 Serbia 66 101 102 70 46 86 40 59 127 105 16 Albania 74 107 67 71 76 49 68 60 106 121 Global Rankings (1st to 149th)
  • 5. 30 40 50 60 70 80 90 0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 ProsperityIndexScore,2016 GDP per capita (PPP $), 2016 How much prosperity is delivered with wealth? Austria strongest deliverer of prosperity in CEE The only developed country in Central and East Europe, Austria also leads in both prosperity and wealth. Ranked at 15th globally in prosperity, Austria also has the 15th biggest positive prosperity surplus out of the 149 countries we cover. Over-delivery: shows us that prosperity is more than just income or wealth, and that some countries, like Austria, are able to deliver more prosperity given their wealth levels. Big prosperity surpluses are the true success stories. Austria + 11% CEE Switzerland +13%Germany +13%
  • 6. 45 50 55 60 65 70 75 80 85 Economic Quality Business Environment Governance Education Health Safety & Security Personal Freedom Social Capital Environment Austria Visegrad Germany Austria’s prosperity is broad based… People in Austria enjoy a safe and free society, high standards of education and health services, stable economic structures with low level of unemployment and near absence of poverty. Despite recent local corruption scandals, Austria in general enjoys a highly transparent and stable political system, its clean and effective governance is the envy of most of its neighbours to the east.
  • 7. …but Austria underperforms other wealthy countries in prosperity To begin with, among countries at similar level of wealth, Austria has the smallest prosperity surplus in 2016.
  • 8. …and has lagged behind its neighbours in growing prosperity 99 100 101 102 103 104 105 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ProsperityScore,2007=100 West Europe CEE Austria Germany Moreover, while prosperity has been growing in CEE and Germany, it stagnated in Austria, creating a sense of stasis.
  • 9. Social Capital decline is behind underperformance Austria’s overall Social Capital score – which measures the strength of cohesion and networks in society – dropped by 8% over the past decade. It is rare for social capital to experience such large movements – Austria’s drop was the 10th largest across the 149 countries covered by the Prosperity Index. Excluding Austria’s Social Capital sub-index would raise its 2016 global ranking from 15th to just shy of the top 10, at 12th place. 90 92 94 96 98 100 102 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SocialCapitalscore,2007=100 Austria's Social Capital dropped by 8% since 2007
  • 10. What is Social Capital? One of the Prosperity Index’s nine sub-indices – and a central one. The Prosperity Index defines Social Capital into Four categories: Trust: A central component of social capital is “trust”, which we can think of as encompassing social trust and institutional trust. The first refers to how widely and easily citizens trust each other. The second refers to the degree to which citizens trust public institutions. Family and Community: The CEE experience shows us that higher levels of trust between immediate family and friends can compensate for low levels of wider trust. We can refer to this component as “family and community”, which measures the strength of informal networks connecting families and friends together. Civic Engagement: Social networks can also work through more formal networks, such as volunteering and other charitable activities. We can think of this component as “civic engagement”, which measures the strength of formal bonds between citizens. Civic Participation: Finally, we can think of the links between citizens and public officials as the “civic participation” component. This measures how involved and connected citizens are with their governing group.
  • 11. 51% 78% 53% 74% 34% 68% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 %ofpeoplethinkingAustriaagoodplacefor... Austrians are growing increasinly tolerant Ethnic minorities Immigrants LGBT groups Economic not social change driving Social Capital decline Contrary to recent headlines about the rise of populism and heated debate on immigration, tolerance in Austrian society has been rising, becoming the most socially liberal country in CEE. A sluggish economy both necessitates and limits inter- household financial support and charitable donations. It is these two components that account for the overall decline in Social Capital. Survey responses from Gallup World Poll: nationally representative sample of ~1,000 respondents conducted annually. 45% 8% 69% 48% -5 -4 -3 -2 -1 0 1 2 3 4 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Annual%growth %peoplewithaffirmativeanswer Sluggish economic growth is straining social capital Annual GDP per capita growth (%, right hand axis) Sending financial help to other household Donating to charitable cause
  • 12. Social Capital: Austria compared with Norway Both having high level of Social Capital, Norway (6th) and Austria (15th) have very similar patterns in most indicators under the sub-index. It is only in Donating and Sending financial help to other households, that the two countries are significantly divergent. In both measurements, Norway is 17 percentage points ahead of Austria. -5% 0% 5% 10% 15% 20% Helping stranger Trust in police Treated with respect Making friends Voicing opinions Sending financial help to other household Volunteering Can rely on family or friends Donating Diffenrence in Social Capital Patterns between Norway and Austria
  • 13. Social Capital can be improved independently of economy Social capital is affected by economic forces, but isn’t a function of those forces alone. It softens the blow of economic disruption, and can be improved independently of economic forces. Report highlights ways in which social capital can be strengthened: • Building institutional trust; • Anti-corruption measures; • Engagement of civil society, etc. What Austria is going through is a decline in “Family & Community” and “Civic Engagement” social capital – policies need to address these variables. Austria’s economic decline was large given its social capital starting point (as it falls slightly below the trend line), but the general tendency implies that it would have been larger still if its initial social capital were weaker. -12% -10% -8% -6% -4% -2% 0% 30 35 40 45 50 55 60 65 70 EconomicQualityScore,peaktotrough Social Capital Score, peak The higher a country’s initial level of social capital, the smaller the economic shock Austria
  • 14. 72 73 74 75 76 77 78 79 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PredictedProsperityIndexScore Reversing Austria's Social Capital decline would raise its overall prosperity substantially Improving Social Capital has big prosperity pay-off Besides being a component of prosperity itself, Social Capital has crucial links to other sub-indices (trust in the business world and in governance, for example) that amplify its effect on overall prosperity. Counterfactual: reversing Austria’s Social Capital decline over the past decade would see its global prosperity ranking in 2016 go from 15th to 5th. 5th place globally Predicted path of Prosperity Index score above is the application of a regression coefficient to the reversed trend of Austria’s observed Social Capital score decline between 2007 and 2016. The coefficient was estimated from an OLS regression of the PI on Social Capital sub-index with year fixed effects, on the panel of CEE countries between 2007 and 2016: 0.68, significant at 1%. R2 0.81.
  • 15. Social Capital: Learning to trust and help each other Among all CEE countries, Lithuania has made the largest gains in Social Capital over the past ten years. More than anything, it is the surge in general trust – public trust in local police rose by 27 percentage points – that boosted its performance. This is helped by the Lithuanian government’s resolute anti- corruption programme, synthesising cross-sector cooperation, better defined legal framework and institutional design, as well as the implementation of transparency-enhancing technology such as e-government services. But Lithuania’s social capital was also boosted by “Family & Community” type of Social Capital including inter- household financial help, making friends-5% 0% 5% 10% 15% 20% 25% 30% Can rely on family or friends Helping stranger Volunteering Voicing opinions Donating Treated with respect Making friends Sending financial help to other household Trust in police Change in percentage points, 2007-2016 Lithuanian Social Capital on the Rise
  • 16. What is to be done in Austria? Donations and inter-household financial help are proxies for broader “Family & Community” and “Civic Engagement” social capital that were shown to have weak resilience. • Strengthen what’s there: perhaps lower levels in these variables reflect a move towards more “institutionalised” support – not bad in itself, but trades-off social capital. • Build what isn’t: volunteering is another form of this social capital and is lower in Austria (28%) than many other European countries. Help with time rather than money. AustriaFinland France Ireland Netherlands Norway Slovenia Switzerland United Kingdom 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0 20,000 40,000 60,000 80,000 100,000 120,000 Haveyouvolunteeredyourtimetoanorganizationinpastyear? YES GDP per capita (PPP $), 2016 Austria can improve other areas of social capital that are less directly affected by the economy
  • 17. Key Findings from the CEE Prosperity Report •Central and Eastern Europe’s convergence on Western Europe has been much faster in terms of prosperity than income alone. Most CEE countries deliver a prosperity surplus KEY FINDING 1 •Central and Eastern Europe has one of the world’s largest deficits in social capital and this is holding back further prosperity growth. KEY FINDING 2 •Social Capital, Governance, and Business Environment have a disproportionately large effect on CEE’s prosperity delivery. KEY FINDING 3 •In an environment of slower global growth and one that is increasingly hostile to EU integration, CEE’s success depends on improving its own ability to deliver prosperity. KEY FINDING 4 •Countries with high initial levels of social capital experienced less severe economic downturns between 2007 and 2016. KEY FINDING 5 •Young Central and Eastern Europeans are more pro-business, better educated, have higher social capital and are more demanding of their governments - therein lies the opportunity to unlock prosperity, but also the challenge. KEY FINDING 6
  • 18. Benefiting from accession to EU 90 95 100 105 110 115 120 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SocialCapitalscore,2007=100 Social Capital Albania Macedonia Montenegro Serbia 90 95 100 105 110 115 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Governancescore,2007=100 Governance Albania Macedonia Montenegro Serbia 90 100 110 120 130 140 150 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 BusinessEnvironmentscore,2007=100 Business Environment Albania Macedonia Montenegro Serbia EU accession has been a huge boost for prosperity in applicant countries. In order to comply with the acquis communautaire, a range of policy and institutional reforms need to be implemented, which in turn improve performance in Governance, Business Environment, and Social Capital.
  • 19. How to Measure Prosperity? Selecting variables • Through literature review and regression analysis we select 104 variables that have statistically significant and economically meaningful relationship with at least wealth or wellbeing. Standardi sation • We adopt distance-to-frontier approach to normalise variables of different units of measurement, by comparing a country’s performance with the best and worst scenarios of the entire sample. Weighting Variables • Each variable is assigned a weight, based on their varying significance to prosperity. Pillar scores • In each of the nine pillars, variables’ distance-to-frontier scores are multiplied by their weights and then summed to generate countries’ pillar scores. Prosperity Index score • The Prosperity Index score is determined by assigning equal weights to all nine pillars for each country. The mean of the nine pillars’ scores yields a country’s overall Prosperity score.