A New Metrics of Technology Upgrading: The Central and East European Countries in a Comparative Perspective

We explore the issues of measurement of technology upgrading of the economies moving from middle to high-income status. In particular, our focus is on the central and eastern European economies (CEE) within the context of a sample of 42 economies ranging from lower middle income to upper high-income level economies. Central and Eastern European countries (CEECs) are largely middle-income economies, but it is not certain whether they have achieved a threshold of technological capability required for catching up to high-income economies status. In exploring this issue, we apply theoretically relevant and empirically grounded middle level conceptual and statistical framework based on three dimensions: intensity and breadth of technological upgrading, and technology and knowledge exchange. As an outcome, we construct a composite indicator of technology upgrading based on 35 indicators which reflect different drivers and patterns of technology upgrading of countries at different income levels. Based on the simple statistical analysis we show that the middle-income trap is present in all dimensions of technology upgrading, but their importance varies across different dimensions. A trap seems to be higher for dimensions of ‘breadth’ of technology upgrading than for index of ‘intensity’ of technology upgrading. We explore in detail positioning of the CEE economies in the broader comparative context. Among the many interesting results, we highlight the following. The highest ranked countries regarding index of technology upgrading are Sweden, Korea, Japan and Germany. Poland has been fast growing CEE economy in the last 20 years, but its potential for technology-based growth is moderate. China’s ranking regarding index of technology upgrading is well above its income per capita which suggests room for further growth based on technology. CEECs are spread widely along index of technology upgrading which reflects partly their income per capita levels but also the different potential for further growth. An important structural feature of the CEE technology upgrading is their openness regarding technology and knowledge flows. A comparative analysis of technology upgrading profiles shows that there is a quite significant EU North – South technology upgrading gap. Regarding index of technology upgrading index, EU regions are ordered from EU North, South, Central and East with the difference between South and Central being relatively small. Regarding technology capability, EU has very strong core – periphery features as the gap between North and three other regions is quite substantial