EU Accession of Central and Eastern Europe: Bridging the Income Gap

The countries of Central and Eastern Europe (CEE) have much to gain from implementing policies that increase investment, support the development of human capital, and promote the legal, regulatory, and policy framework needed for market mechanisms to function. The faster they implement such changes, the faster they will bridge the income gap between them and the countries of the European Union - and the more likely their chances of successful integration. Joining the European Union (EU) is perhaps the key political and economic objective of Central and Eastern European (CEE) countries as they approach the 21st century. But how successful the CEE countries are in achieving this goal depends not only on how well and quickly they adapt their legal and regulatory systems to EU requirements but on how well and quickly they bridge the wide income gaps between CEE and EU countries. Using a model and cross-section data to develop estimates, Barbone and Zalduendo investigate how appropriate structural policies adopted before and after accession to the EU can help CEE countries bridge this income gap. They have much to gain from implementing policies that increase investment, support the development of human capital, and promote the legal, regulatory, and policy framework needed for market mechanisms to function. The faster they implement such changes, the faster they will bridge the income gap between them and the EU countries - and the more likely their accession to the EU will be successful. This paper - a product of Country Department II, Europe and Central Asia - is part of a larger effort in the department to examine issues related to accession to EU by Central and Eastern European countries. Luca Barbone may be contacted at lbarbone@worldbank.org.