Explaining regional disparities in Central and Eastern Europe: The role of geography and of structural change

The paper analyses the determinants and the evolution of income disparities across regions within Central and Eastern European Countries (CEECs) over 1991–2011. We add to the literature in different ways. First, we adapt the categories that Rodriguez-Pose used for studying convergence among old EU members to CEECs regions. This allows us to assess the relevance of geo-sectoral groups (urban areas, old industrialized areas and peripheral areas) for newcomer regions. Second, we introduce a new category, that of ‘successful Foreign Direct Investment (FDI)-based restructuring’ in order to capture regions that, often through considerable FDI, manage to reconvert their old industrial base. We then analyze whether this group helps understand catching-up/falling behind processes in CEECs. We test the relevance of these groups by means of both non-parametric and spatial regression analyses. We find that they help explain the increase in within-countries’ regional disparities especially after the turn of the century.