New EU Members Have No Chance To Catch Up The Most Developed Countries

 In 2005, we published a paper quantitatively describing the transition of the former socialist countries to a new state similar to capitalism. In 2009, we extended our model and predicted the evolution of real GDP per capita in 27 countries, including two virtual countries: the U.S.S.R and Czechoslovakia. Briefly, despite different social, cultural, ethnical, racial, demographical, religious, and technological histories our model demonstrates general success in the overall prediction between the start point (1989 to 1991) and the year of 2006(7). In all cases, the most accurate prediction is associated with the initial segment of the transition, when socialism was dynamically replaced by capitalism. The initial stage is characterized by the largest changes in the GDP per capita, and thus, provides a wide dynamic range as a crucial condition for accurate modeling. 

At later stages, some exogenous forces, such as economic recession, might disturb the agreement between measured and predicted GDP, and introduce some bias in the estimation of the defining parameters. This later stage, however, is of lower relevance to the transition itself and rather demonstrates the behavior of a regular capitalist economy.

Here, we revisit our old predictions and compare them with actual observations with the real GDP per capita estimates borrowed from the Maddison Project Database. In 2009, we concluded that the transition process has effectively finished in Central and East European countries. Thus, the long-term growth rate of GDP per capita in these countries is limited by the attained level of the GDP per capita, as in developed countries (see this post). Any deviations from the long-term rate can be explained only by inefficient economic performance. In fact, many developed countries are characterized by lower values of an economic trend than that in the U.S. at the same level of GDP per capita. We assume that the future economic growth in the FSC will follow either the potential or current value of the annual GDPpc increment. When no inefficiency is allowed, the best-case scenario of economic growth is realized.

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Disclosure: None. 

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