Last year’s Transition Report, entitled "Stuck in Transition?", examined the causes of the slow-down in income convergence between transition countries and more advanced market economies. It focused on country-level characteristics that continue to hamper economic development in large parts of the transition region – weak economic and political institutions, slow structural reforms, limited productivity growth and the daunting challenge of improving human capital and working towards equal opportunity. The report was a general reality check and, to some extent, a wake-up call.
"Innovation in Transition" – the title of this year’s Transition Report – tackles a similar set of issues from a completely different perspective. The report focuses, in considerable detail, on the individual firm in transition. Adopting this micro perspective is crucial to achieving a deeper understanding of why countries can become “stuck” in transition. More importantly, it also reveals the effect that individual firms can have on economy-wide productivity and the specific steps that can be taken to help boost productivity and reinvigorate economic growth. The challenge for policy-makers is discovering how to facilitate and encourage change at the firm level without intervening in decisions that are best left to firm owners and management.
Alexander Plekhanov is a Lead Economist at the EBRD’s Office of the Chief Economist. He has worked on global macroeconomic issues as well as a country economist on a number of countries, including Belarus, Kazakhstan, Mongolia and Russia.
Cagatay Bircan is a Research Economist at the EBRD’s Office of the Chief Economist. He holds a PhD in Economics from University of Michigan and his main research interests are foreign direct investment, international trade and financial development.
Ferdinand Fichtner is Head of the Forecasting and Economic Policy Department at DIW Berlin. At DIW Berlin, he is managing the regular economic projection exercise and is importantly contributing to the institute's macroeconomic policy advice activities.