Towards a new growth model in CESEE : convergence and competitiveness through smart, green and inclusive investment

This paper focuses on the growth and convergence of Central, Eastern and South-Eastern European EU countries (CESEE). We argue that the factors behind the pre-crisis growth model of the region - skilled yet affordable labour force, foreign direct investment, imports of productivity-enhancing technology - are petering out, and are yet to be substituted. We propose a new growth model centred around a shift towards more home-grown innovation, digitalisation, climate change mitigation and a strong focus on skills, labour and social inclusion to leave the middle income trap behind for good and to boost economies' growth prospects in a post-COVID world. Based on analysis of firm-level data, we highlight the prerequisites of making this transition happen.