The Gravity Effect and Its Impact on Labor Productivity in Balkan Economies
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Publish date: 2015-04-30
Gospodarka Narodowa 2015;276(2):15–53
The authors explore what they define as gravity effect and its impact on regional disparities in labor productivity in 11 Balkan countries from 2000 to 2013. The gravity effect, which is a reference to Newton’s gravity law, is based on the assumption that regions have some economic influence on one another. The strength of these relationships is proportional to the size of the regional economies and inversely proportional to the distance between them. The model of economic growth applied by Mroczek, Nowosad and Tokarski draws from the neoclassical models of Solow; Mankiw, Romer and Weil; and Nonneman and Vanhoud. The research looks at how Balkan countries are distinct from other European economies in terms of the capital-labor ratio and regional disparities in labor productivity. The authors discuss the specific features of the Balkan political system and examine why the region has followed a different path of political and economic development than the rest of postwar Europe. The Balkan region is distinct for its authoritarian regimes, military conflicts and public acceptance of corruption, the authors say. They compare the political and economic systems of individual Balkan countries and their development paths from the end of World War II to the end of 2013. In their research, the authors use a method based on numerical simulations of a long-term equilibrium in labor productivity in Balkan economies. The model developed by the authors has an “asymptomatically stable steady state point regarded as a point of long-term equilibrium.” The research includes an analysis of statistical data on physical capital resources. The research shows that Greece, Slovenia, Croatia and Albania have high capital-labor ratios, while Romania, Serbia, Bulgaria, and Macedonia have low ratios. The impact of the capital-labor ratio on labor productivity in the region is almost three times stronger than the influence of the gravity effect, the authors say. They add that Albania and Croatia have the highest levels of labor productivity, while Romania and Turkey are at the opposite end of the spectrum. Macedonia and Bosnia-and-Hercegovina are the worst off in terms of the labor market situation and unemployment. Joblessness is the lowest in Romania, Turkey and Slovenia, according to the authors. Their research shows that Slovenia is the most affluent country in the Balkan region and the only one with a GDP per capita above the EU average. Several Balkan countries are associated with the European Union and seeking to join the bloc. According to Mroczek, Nowosad and Tokarski, EU accession would benefit these Balkan economies because it would reinforce the gravity effect and lead to a stronger convergence process, thus contributing to greater political and economic stability in the region.