Fostering growth in CEE countries: a country-tailored approach to growth policy

This paper analyses the long term growth experiences of the eastern European accession countries and the effect of various tailored growth policies. We find that there are two overarching growth-enhancing policies that can substantially increase long-term growth: competition and the quality of education. We find empirical evidence that if accession countries from the transition region want to achieve – and sustain – higher growth rates they will need to ensure competition by continuing to remove entry and trade barriers and by strengthening competition agencies. We also find evidence on the positive long-run impact of quality of education on growth, and hence the high return on public investment in education, particularly at the primary and secondary level. The private sector’s role in overcoming skill mismatches will benefit from deepening financial intermediation and reducing constraints in access to finance.