Accession Trajectories and Convergence: Endogenous Growth Perspective

Michal Kejak, Stephan Seiter and David Vavra

In this paper we analyze qualitatively and quantitatively the potential effect of the EU accession on the development of several Central and Eastern European (CEE)countries (specifically, the Czech Republic, Hungary, and Poland). To achieve the task we design a small open economy version of the two-sector endogenous growth model of the Uzawa-Lucas style with knowledge diffusion. The model is first calibrated and validated to stylized facts of the economic development during the accession process in the EU periphery countries. We then calibrate the model according to the data on the CEE countries above and simulate their behavior using alternative scenarios in several dimensions. The interplay of various initial conditions and the parameters of the accession generate different accession patterns and also rather different speeds of convergence to the EU average. The model outcomes do not only provide us with these quantitative estimates but also improve our understanding of the economic mechanisms, which underpin those transitions.

Keywords: Two-Sector Growth Models, Economic Growth and Aggregate Productivity, Macroe-conomic Analysis of Economic Development, Human Resources, Human Capital Formation

JEL classification: O41, O40, O11, O15, J24