Technological Progress and Factor Utilization in Eastern European Economic Growth

Abstract

Frontier production functions are estimated for the industrial sector of four East European countries: Czechoslovakia, the German Democratic Republic, Hungary, and Poland. The estimates reveal that the slowdown in industrial growth in these countries is due to a decline in the efficiency or intensity of factor utilization rather than to declining rates of growth of technological progress. In all countries, changes in the efficiency of resource utilization are found to be more responsive to changes in macroeconomic policies than to economic reforms. Finally, the amount of labor that could be displaced during cyclical downturns is estimated and found to imply potentially high levels of disguised unemployment. Copyright 1989 by The London School of Economics and Political Science.

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