wiiw Products & Services : Seminars / Lectures

other seminars / lectures / conferences

	Jörg Lackenbauer, Otto-Friedrich University, Bamberg
	Catching-up, Regional Disparities and EU Cohesion Policy: the Case of Hungary wiiw, 8 March 2004, 3:30 p.m.

Due to the legacy of the socialist era, there is a general economic backwardness in Central and Eastern European countries (CEECs) such as Hungary with respect to the current EU Member States (EU-15). On the other hand, the transition from centrally planned economies to market economies and the ongoing integration with the EU have led to a preoccupying rise of regional inequalities within the CEECs. With the example of Hungary, which, in this respect, is close to being a 'typical' transition/accession country, we try to identify the factors behind dynamic growth and catching-up to the EU-15 in some regions and falling-behind and very low per-capita levels of income in others, focusing on the ubiquitous implications of the transition process. Using empirical data for the 'transition decade' of the 1990s for Hungary, we identify the 'winner regions' and the 'loser regions' of the transition process. By its very definition, EU cohesion policy has to address both problems (national catching-up vs. the containment of regional disparities) very attentively after EU Eastern enlargement. This is a complex issue, as regional policies often seem to face an equity-efficiency trade-off, as we briefly analyse in the paper.

Based on this analysis, we discuss how, after EU accession of Hungary, EU cohesion policy can contribute to attaining higher national growth (and therefore convergence towards the EU-15) and, at the same time and central to the analysis in this paper, contribute to the decrease in regional disparities (something that traditional infrastructure policies have hardly been capable of). We use a theoretical approach that combines an endogenous growth framework with new economic geography. The model we use shows that - in contrast to transport infrastructure policies - a policy that reduces the cost of innovation or increases the diffusion of innovation is able to reduce regional income inequality, agglomeration and increase the national growth rate. The regional policies involved could be primarily subsidies for research and technological development, investment in human capital or ICT infrastructure. In the final two sections of the paper, we question whether these regional policy prescriptions would fall on fertile soil in light of Hungary's economic reality, and which could be promising EU cohesion policy schemes to incorporate an innovation-oriented regional policy approach.


		top last update: February 2004