A curious trend in the Balkans

2000-2004: Under the rule of the Social Democrat Party (PSD) and Prime Minister Adrian Nastase, Romania enjoys four consecutive years of rapid economic growth. Romania’s GDP increases by an average of nearly 6% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Romania joins NATO and is accepted for EU accession in 2007.

December 2004: voters reject Nastase and PSD, voting in the opposition in a weak coalition government.

2001-2005: Under the rule of the National Movement Simeon II (NDST) and Prime Minister Simeon Saxecoburgotski, Bulgaria enjoys four consecutive years of rapid economic growth. Bulgaria’s GDP increases by an average of around 5% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Bulgaria joins NATO and is accepted for EU accession in 2007.

June 2005: Voters reject Saxecoburgotski and NDST, voting in the opposition, which now appears likely to form a weak coalition government.

2001-2005: Under the rule of the Socialist Party and Prime Minister Fatos Nano, Albania enjoys four consecutive years of rapid economic growth. Albania’s GDP increases by an average of about 6% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Albania is accepted into the Partnership for Peace and moves from being an impoverished semi-pariah to a serious candidate for EU accession sometime in the next decade.

July 2005: Voters reject Nano and the Socialists, returning to former President Sali Berisha, out of office since 1997. Berisha will form a coalition government with several minor parties.

What’s going on here?
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Europe’s ‘Tiger’

Last Friday Eurostat released the 2004 data on comparative per capita PPP’s (purchasing power parities) across the EU. Perhaps the most surprising fact which emerges is that Ireland is now in second place (after Luzembourg) with a PPP 40% above the EU average. For a country that not so long ago was considered one of the ‘poorer’ EU members this is truly stunning.

It is generally well known that Ireland had (and continues to have) one of the highest fertility and population growth rates in the EU, but this has not been regarded as especially important since conventional neo-clasical growth theory (and the new ‘super-duper’endogenous growth theory for that matter) argue that increased population means a bigger economy, but not necessarily an increase in per capita income. However, as I said yesterday, it’s all about population structure. What we are now understanding is that the right age structure can produce very rapid increases in per capita income, and Ireland is, of course, a good case in point.

In the case of the ‘Celtic Tiger’, New Economic Paradigm theorists David Bloom and David Canning, who have made a specific study of the Irish case, reached the following conclusions:
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