Towards policy lessons for regional development:

the empirical perspective

Implementing Regional Development Policies:What are the key factors for success?

CEE transformation:GDP dynamics, previous year=100

Periodisation, factors of growth

• 1989-1992/1994: deep decline due to fundamental economic and institutional restructuring;

• From 1992/1994: more or less stable/shaky growth, benefits of lifting barriers of real socialism;

• Institutional and structural reforms and their impact on economic growth;

• 2004/2007: accelerated growth, benefits from EU accession;

• 2008/2009: beginning of smaller or deeper recession (Poland: an exception);

• 2010: back to growth; for how long and how stable? New structural challenges.

Net FDI inflows (in per cent of total world FDI) into CEECs andbordering countries, 1970-2012

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

19

70

19

71

19

72

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Ne

t F

DI

infl

ow

s (

in %

of

tota

l w

orld

FD

Is)

Bordering Countries CEECs

CEECsNeighbours*

*Albania, Belarus, Bosnia, Montenegro, Moldova, the Russian Federation, Serbia, Macedonia, Turkey, Ukraine.

Source: R.Capello, A.Caragliu: After Crisis Scenarios for CEECs: Alternative Evolutions of Structural Adjustments, GRINCOH 2014

Lessons from transformation

• Restructuring is always costly. The earlier, the less painful.

• However, the price should be paid for something, not in vain.

• Restructuring does not? only relate to material structures: consciousness, values and attitudes, as well as institutions, are even more important.

• Institutional reforms: crucial for success.

An example from Western Europe

• Ederveen, de Groot and Nahuis 2006: examination of performance of 14 countries of the “Old EU” (Luxembourg excluded).

• Results: the countries that had open economies and good institutions benefited the most.

• For the countries that were closed and had inefficient institutions (plus high corruption) external subsidies have led to mismanagement, poor strategies, inefficient allocations, and at the end of the day – to slower growth and economic difficulties.

• This was a kind of a (negative) prophecy for Southern Europe!

GDP/inhabitant, PPP

PKB per capita EUR1995

5 800 do 11 300 (16)3 500 do 5 800 (24)2 500 do 3 500 (33)2 100 do 2 500 (27)1 700 do 2 100 (23)1 200 do 1 700 (41)1 000 do 1 200 (36)

800 do 1 000 (11)

2005

PKB per capita EUR2011

18 100 do 30 800 (9)12 800 do 18 100 (21)9 000 do 12 800 (36)7 000 do 9 000 (44)6 100 do 7 000 (25)5 200 do 6 100 (18)3 800 do 5 200 (30)2 400 do 3 800 (28)

2011

GDP dynamics, 1995-2011

Metropolitan dynamics.

Successful re-industralisation in diversified districts.

Peripheral stagnation.

Border regions – the worst

1995-2011

240 do 298 (14)199 do 240 (21)176 do 199 (33)156 do 176 (33)138 do 156 (30)121 do 138 (26)100 do 121 (30)68 do 100 (24)

GDP dynamics, 2005-2011

1995-2011

125 do 190 (14)115 do 125 (8)105 do 115 (17)95 do 105 (31)85 do 95 (47)75 do 85 (51)40 do 75 (43)

GDP dynamics, 2005-2011, country=100

Metropolisation – a new dimension of regional development

• The metropolitan – non-metropolitan divide. Has replaced the traditional urban-rural one that has been the spatial pattern of the industrial paradigm.

• Only in large urban centres new sectors of knowledge services could have developed to replace declining industries.

• Metropolitan centres became the main drivers of transformation and nodes connecting the CEE countries with the global economy.

The crisis 2008-2010

GDP dynamics, 2008-2011

2008-2011

113 do 139 (19)104 do 113 (46)99 do 104 (30)96 do 99 (22)93 do 96 (29)90 do 93 (33)85 do 90 (19)74 do 85 (13)

GDP dynamics 2008-2011country=100

2008-2011

110 do 145 (14)105 do 110 (15)101 do 105 (37)99 do 101 (28)95 do 99 (71)90 do 95 (32)75 do 90 (14)

The regional dimensions of the crisis: unemployment, 2008-2009

Unempl. rate change, country=100Unempl. rate change, perc. points

By Maciej Smętkowski

The regional patterns of the crisis

• Regions with diversified economic structures more resistant.

• Export-oriented regions more vulnerable (temporarily?).

• Metropolitan regions doing well (services!).

• General regional diversification reinforced.

• And will have been further reinforced during recovery.

Cohesion policy 2007-2013 in figures

How these funds are being used?

• Two options: – for social reasons (improvement of the quality of life: through

increased incomes and/or durable facilities (roads, municipal infrastructure, community centers etc.). Demand effects occurs, which is obvious.

– for economic development through increased efficiency of production factors (transport and communication infrastructure, new technologies, increased skills etc.). Mostly desired supply effect emerges.

• Obviously – no simple assignments to this or that category – depends on local conditions and policies applied.

And the policy effects …

• In all new Member States – great civilisationalnot a good word progress, mostly in infrastructure (roads, rail, nature protection).

• However – less impact on economic potential.• Even less on innovativeness.• In Poland – EU funds increase divergence

(stronger regions receive more in volume and make a more development-oriented use).

But poor innovation performance in new Member States…

Innovation performance per dimension

Scenarios for the European Union 2030

!

!

!

!

!

!!

!!

!

!

!

!

!

! !

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Skopje

Zagreb

Ankara

Madrid

Tirana

Sofiya

London Berlin

Dublin

Athinai

Tallinn

Nicosia

Beograd

Vilnius

Ar Ribat

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Ljubljana

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Bratislava

Luxembourg

Bruxelles/Brussel

Valletta

Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

0 500250km

Reference scenario: stuck in transition

Average regional GDP growth rate< 0.000.01 - 0.560.57 - 1.061.07 - 1.431.44 - 1.711.72 - 1.981.99 - 2.282.29 - 2.89> 2.90

© Politecnico di Milano, Project GRINCOH, 2014

Baseline

!

!

!

!

!

!!

!!

!

!

!

!

!

! !

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Skopje

Zagreb

Ankara

Madrid

Tirana

Sofiya

London Berlin

Dublin

Athinai

Tallinn

Nicosia

Beograd

Vilnius

Ar Ribat

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Ljubljana

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Bratislava

Luxembourg

Bruxelles/Brussel

Valletta

Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

0 500250km

Place-based competitiveness scenario

GDP growth rate, difference w.r.t. reference scenario< 0.000.01 - 0.210.22 - 0.320.33 - 0.410.42 - 0.490.50 - 0.570.58 - 0.660.67 - 0.91> 0.92

© Politecnico di Milano, Project GRINCOH, 2014

Secondary cities

!

!

!

!

!

!!

!!

!

!

!

!

!

! !

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Skopje

Zagreb

Ankara

Madrid

Tirana

Sofiya

London Berlin

Dublin

Athinai

Tallinn

Nicosia

Beograd

Vilnius

Ar Ribat

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Ljubljana

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Bratislava

Luxembourg

Bruxelles/Brussel

Valletta

Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

0 500250km

Political and spatial cohesion scenario

GDP growth rate, difference w.r.t. reference scenario< -0.27-0.26 - -0.19-0.18 - -0.14-0.13 - -0.07-0.06 - 0.000.01 - 0.210.22 - 0.500.51 - 1.14> 1.15

© Politecnico di Milano, Project GRINCOH, 2014

Equalisation

Source: R.Capello, A.Caragliu: After Crisis Scenarios for CEECs: Alternative Evolutions of Structural Adjustments, GRINCOH 2014

General conclusions

• The CEE countries have reached overall success in post-socialist transformation.

• CIS countries are in a more difficult position.

• The CEE countries have also manifested – in general - resistance to the recent crisis, mostly due to sometimes harsh austerity measures. An example to the South?

• Country-convergence and regional divergence are very likely to proceed in the future. Also for CIS?

• However – the change of the drivers of development is crucial: will they be able to switch form low-cost to innovative economies? A general challenge for all post-socialist countries

• If not – their future is bleak!

Thank you for your kind attention!

Grzegorz GorzelakCentre for European Regional andLocal Studies (EUROREG)gorzelak@post.pl www.euroreg.uw.edu.pl

www.cord2014.md