It is by now more than a decade ago that the formally centrally planned economies in Central and Eastern Europe have started to transform into market economies when the collapse of the Soviet system was confirmed in 1989. In fact, they constitute a unique historical example with a large set of economies undergoing this extremely drastic systemic change within a very short period of time. The adoption of a new model based on free market economy supports the rebuilding of one Europe which will benefit from high economic and social growth potential as well as political stability and security.
One essential characteristic of a free market economy is a high proportion of services. Realizing this quality in the transition economies signifies a great challenge as their service sector was extremely underdeveloped in the planned economies.
In this paper, the development of the service sector in the transition economies of Central and Eastern Europe are depicted on the background of the economic characteristics of their socialist past. In this portrayal, both domestic growth and international trade of services will be accounted for. Finally, it will be discussed in which way the service sector represents a strong impetus in the fight against unemployment and hence contributes to a sustainable development in the future.
Table of Contents
1 INTRODUCTION
2 BACKGROUND
2.1 Services - A definition of the tertiary sector in developed market economies
2.2 Economic features of planned economies and the relevance of services
3 THE DEVELOPMENT OF SERVICES IN THE DOMESTIC AND INTERNATIONAL TRADE OF TRANSITION ECONOMIES
3.1 The growth of the service sector since 1990
3.2 Trade in Services
4 CONTRIBUTION TO DEVELOPMENT SUSTAINABILITY
5 RESUME AND FUTURE OUTLOOK
Objectives and Topics
The paper examines the evolution and significance of the service sector within the economies of Central and Eastern Europe following their transition from planned to market-based systems. It specifically investigates the historical neglect of services under socialism, the subsequent growth patterns in domestic and international trade, and the sector's potential role in addressing unemployment and fostering long-term sustainable development.
- Historical context of the service sector in socialist planned economies
- Economic transition and the growth of service industries since 1990
- Comparative analysis of domestic and international trade in services
- Impact of service sector expansion on employment and economic restructuring
- Role of strategic business services in long-term development sustainability
Excerpt from the Book
2.1 Services - A definition of the tertiary sector in developed market economies
Services are broadly defined as consisting of all economic activities other than agriculture, mining, manufacturing, construction and electricity, gas and water (utilities) whereas service providers are the enterprises whose main purpose is the rendering of services (United Nations 2001, p. 6).
The service sector – often dubbed tertiary sector besides the agriculture (primary) and industry sector (secondary) - comprises intangible goods, on the one hand such well-known as the government, education and health, on the other hand such new as modern communications, information, and business and financial services. Characteristically, producing services involves the provision of human capital in the form of labor, knowledge and skills while it is likely to require less natural capital and more human capital than producing agricultural or industrial goods. Services can be either based on high technology and advanced service or on large quantities of low-skilled labor.
In comparison to goods, services have the following four characteristic features (Fidrmuc 1997, p. 8) :
1. Services are non-storable and thus have to be produced and consumed simultaneously at the same time and at the same location.
2. Many services are non-tradable.
3. The quality of services can only be assessed after the consumption because of their intangibility which leads to problems of asymmetric information; the sale of services strongly depends on the experience and credence of the buyer which enhances the role of the reputation of the provider of services.
4. Due to the existence of market failures associated with e.g. imperfect information and competition, services are regulated in most countries.
Summary of Chapters
1 INTRODUCTION: This chapter introduces the historical shift of Central and Eastern European economies from centrally planned to market systems and highlights the initial underdevelopment of the service sector.
2 BACKGROUND: This section defines the tertiary sector in market economies and analyzes the specific economic doctrines and state-ownership structures that caused the severe service sector deficiency under former socialist regimes.
3 THE DEVELOPMENT OF SERVICES IN THE DOMESTIC AND INTERNATIONAL TRADE OF TRANSITION ECONOMIES: This chapter details the growth trends of services since 1990 and evaluates the position of transition countries in international trade, focusing on comparative advantages and trade barriers.
4 CONTRIBUTION TO DEVELOPMENT SUSTAINABILITY: This part explores the definition of sustainability and examines how the service sector, particularly through strategic business services and employment creation, acts as a key driver for sustainable economic development.
5 RESUME AND FUTURE OUTLOOK: The final chapter summarizes the findings, emphasizing the importance of deregulation, institutional transformation, and technological progress for the future competitiveness of transition economies.
Keywords
Transition Economies, Service Sector, Tertiary Sector, Planned Economies, Market Economy, Economic Restructuring, Strategic Business Services, International Trade, Employment, Sustainable Development, Institutional Transformation, Comparative Advantage, Privatization, Infrastructure, Socialism.
Frequently Asked Questions
What is the primary focus of this academic work?
The paper focuses on the development, challenges, and economic significance of the service sector in Central and Eastern European countries as they transitioned from centrally planned to free market economies.
What are the central thematic areas covered?
Key themes include the historical underdevelopment of services under communism, the structural shift towards services during the 1990s, international trade in services, and the sector's role in sustainable development and employment.
What is the research goal of the study?
The study aims to assess whether post-communist economies have successfully integrated service sectors into their economic models and to discuss how this integration contributes to modernization, employment, and structural adjustments.
Which scientific methodology is applied?
The author uses a descriptive and analytical approach, drawing on historical data, economic development theories, and comparative country analysis to evaluate the transition process.
What is addressed in the main body of the paper?
The main body covers the definition of the service sector, the specific economic reasons for its neglect under socialism, empirical developments since 1990, the trade performance of various transition countries, and the relationship between services and sustainability.
Which keywords characterize this paper?
The work is characterized by terms such as transition economies, service sector, economic restructuring, strategic business services, and sustainable development.
How did socialist economic doctrine affect the service sector?
Socialist doctrine prioritized the "material" production sphere (industry and agriculture), viewing services as non-productive and unnecessary, which led to a systemic neglect of financial, business, and retail services.
What is the role of "strategic business services" in the transition process?
Strategic business services (such as R&D, IT, and marketing) are identified as essential drivers of competitiveness and efficiency, critical for upgrading human capital and facilitating long-term economic growth.
- Citation du texte
- Master of International Business Administration Carolin Wobben (Auteur), 2003, The development of services in transition economies, Munich, GRIN Verlag, https://www.grin.com/document/20679
