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    • a.

      SEE (Albania, Bosnia and Herzegovina, Bulgaria, Macedonia, Romania, Serbia and Montenegro)

    • b.

      Middle income CIS (Belarus, Kazakhstan, Russian Federation, Ukraine)

  • V.

    Low income CIS (Armenia, Azerbaijan, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Uzbekistan)

We will sometimes refer to Groups I and II as the “pre-2001 EU” or “developed market economies” (DMEs), and groups III-V as “transition economies” (TEs).

The income classification uses the standard World Bank scheme based on GNI per capita in 1999 (see Table II.3). The division between I, II, III and IV is based on EU status as of 2005, but also matches GNI per capita in 1999 almost exactly. The division between IV and V is from the World Bank income classification. Croatia is an outlier – located in South-Eastern Europe, this country has GNI per capita that is substantially higher than that of the other countries of the region – and is therefore omitted from the analysis. East Germany as well as Turkey, Korea and Vietnam were also included in the BEEPS 2004- 05 surveys, but these countries are too heterogeneous for aggregation; we omit them from the aggregation scheme and most of the analysis, but occasionally make use of them.


Growth and convergence

As mentioned in the introductory section, this paper looks at the function of, and convergence in, markets and firm behavior of the transition countries with those in the developed market economies. Our focus is on competition and market structure, finance and the structure of lending to firms, and how firms respond to the economic environment by restructuring. We begin, however, by briefly reviewing the existing literature on growth and convergence in the transition countries at the micro level, assembling basic stylized facts and comparing them to the evidence from the BEEPS data. The purpose of this is two-fold: first, to set the scene for subsequent discussion, and second, to show important similarities between the previous findings in the literature and the BEEPS data. The latter will reinforce the evidence from the studies conducted in


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