Assessing Eastern Europe's Capital Needs

The capital needs that will enable Eastern Europe to catch up to EC standards of living are assessed within the framework of a constant elasticity of substitution production function. This function, parameterized on the EC, is assumed to apply, with certain inefficiency factors, to Eastern Europe in 1992. Quantitative results, given the heroic assumptions required, are bounded by large ranges. The approach provides a framework for assessing the factors that will determine future capital needs in Eastern Europe and underscores the crucial role of efficiency gains in this process.