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.