Learning and Dynamic Comparative Advantage: Lessons from Austria's Postwar Pattern of Growth for Eastern Europe

This paper looks at Austria's pattern of development and its
lessons for Eastern Europe. Austria's development path is
characterized by two features. In the post-war era Austria was
among the countries with the fastest convergence rate. At the same
time Austria's movement up the technological ladder was slow
compared to other European countries. The paper uses insights from
recent dynamic theories of trade to explain these two stylized
facts. It is argued that resource endowments, international
knowledge spillovers, learning, and government policy have
contributed to Austria's post war growth and the evolution of its
pattern of trade over time. The paper looks at two lessons for
Eastern Europe. First, Austria as a possible economic case for a
gradual approach to economic reform. Second, in light of the
Austrian experience a recent industrial and trade policy proposal
for Eastern Europe is discussed.