Working Paper: CEPR ID: DP1116
Authors: Dalia Marin
Abstract: This paper looks at Austria's pattern of development and its lessons for Eastern Europe. Austria's development path is characterized by three features. In the post-war era Austria was among the countries with the fastest convergence rate. At the same time Austria's movement up the technological ladder was slow compared with other European countries and came about with a small relative share of R&D in GDP. The paper uses insights from recent dynamic theories of trade to explain these three stylized facts. It is argued that resource endowments, international knowledge spillovers, learning, and government policy have contributed to Austria's post-war growth and the evolution of its pattern of trade over time. The paper looks at two lessons for Eastern Europe. First, Austria as a possible economic case for a gradual approach to economic reform. Second, in the light of the Austrian experience, industrial and trade policy for economies in transition is discussed.
Keywords: trade; growth; international spillovers; R&D; technology policy; Eastern Europe
JEL Codes: F1; F4; 03; 04; P5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| resource endowments (Q32) | sectoral composition of the economy (E20) |
| government policy promoting R&D (O38) | acceleration in Austria's GDP growth (O52) |
| government policy promoting R&D (O38) | constrained growth of high-tech sectors (O49) |
| knowledge spillovers from trading partners (O36) | faster convergence rate relative to other European countries (O52) |
| Austria's integration with larger economies like Germany (F15) | knowledge spillovers (O36) |