Structural and productivity changes of Central and Eastern Europe

The purpose of this paper is to analyse the structural and productivity changes of Central and Eastern European (CEE) countries. The research period covers the years following accession into the European Union, from 2004 until 2018. This study aims to answer the following question: What effects have resulted from the integration with the European Union in terms of the sphere of productivity? The analysis covers two main categories of labour productivity growth: pure labour productivity growth and structural labour productivity growth. Moreover, factors that may affect both pure and structural productivity changes are examined. The main research techniques are shift-share analysis and panel data methods. The analysis shows that all the CEE countries in the studied period improved in terms of both pure and structural productivity. The impact of pure labour productivity, however, was much smaller than that of structural labour productivity; this means that the main change in productivity level was more attributable to changes in employment between sectors than to the modernisation of technological processes. Productivity increased in all sectors, but the most significant growth occurred in service sectors, specifically in financial and insurance activities and real estate activities. Simultaneously, employment decreased in less productive sectors, such as agriculture, forestry, and fishing. Furthermore, the results of the panel data analysis confirm a significant impact of the evaluated factors on pure and structural productivity growth. Thus, aggregate productivity change in the CEE area can have a positive impact on both forms of productivity growth. Both structural and pure productivity growth are stimulated by research and development expenditures, information and communication technology (ICT) goods imports, and trade openness. Moreover, this research confirms the positive impacts of business enterprise research and development expenditure growth and an increase in the number of researchers to the workforce ratio on sector productivity, although there are substantial differences between sectors. This research can be used by government agencies in establishing industrial development policies.