Regional Economic Transformation – Could We Learn From Central And Eastern European Countries?

Modern economies and their smaller units – regions, regardless of their development level, witness significant inequalities. European regions differ significantly in their economic structure, history, available workforce skills, technological profiles, institutional and managerial capacities, and many other aspects. Most Central and Eastern European Countries (CEECs) are not an exception. Specifically, differences exist between national economies and between NUTS 3 regions within national economies, with some regions lagging behind. The inequality problem is addressed by the EU’s Cohesion Policy in the CEECs, keeping in mind that CEECs are less developed than the average of the EU28 (27). Through its Cohesion Policy, the EU is seeking to reduce economic disparities between regions. An important issue is to create region-specific policies to foster regional growth. Therefore, Cohesion Policy instruments should be used in Central and Eastern European countries to tackle regional divergences and assist them in balancing their regional development as they formulate sectoral policies. Many analysts argue that the higher the movement towards a post-industrial (information, service) society, the more outdated the growth, production, and productivity inherited from industrial capitalism will be. Technological innovation has always been a crucial driver of progress, but over the last 50 years, its pace and significance have been growing. Technologically leading regions have long embraced innovation and are forging ahead, whereas lagging regions require a complete transformation of their economic (industrial) structure. Therefore, this paper aims to analyze Cohesion Policy in the CEECs by analyzing the relationship between GDP per capita and spending of EU funds. Moreover, the aim is to investigate the importance of vertical and horizontal industry policy in CEECs. To do that, the paper analyzes the total output growth and inter (intra) industry exchanges of Central and Eastern European countries (CEECs). More specifically, an analysis of the changes in intra-industry trade (two-way trade) is performed, which shows how far bilateral imports and exports match within sectors. The paper reviews current theoretical knowledge and empirical research on the importance of the regional dimension of industrial policy, respecting the paradigm of innovative sustainability. The main methods used in the paper comprise a comparative analysis based on earlier theoretical and empirical studies in the field of regional economic development, as well as an analysis of industrial performance.