Revisiting economic growth and real convergence in the post-communist countries

This paper revisits the growth dynamics and real convergence for the 30 post-communist countries from the early transition in 1995 until 2023. All the countries have narrowed the income gap to Western Europe, but to very different degrees. Econometric analysis of beta convergence uncovers an average annual speed of convergence within all the post-communist countries of around 1%, which is below benchmark results for other emerging-market economies. There is however indication of group convergence for the Central and Eastern European countries, which exhibit an annual speed of beta convergence of around 5%. Endogenous cluster analysis confirms that these countries comprise a cluster that exhibits fast and consistent convergence, while most countries in the Balkans and from the former Soviet Union show slower and less consistent convergence dynamics. Analysis of conditional beta convergence shows that governance quality is a key conditioning variable that accounts for cross-country heterogeneity, which influences the estimated speed of convergence, while other variables, including reform intensity and political liberalisation, are unimportant as conditioning variables.