Over the past few years, the countries of Eastern Europe and the Former Soviet Union have seen rapid productivity growth that has driven up living standards and reduced poverty. 'Unleashing Prosperity: Productivity Growth in Eastern Europe and the Former Soviet Union' examines the microfoundations of the recent growth. The report shows that these countries have enjoyed substantial productivity gains from the reallocation of labor and capital to more productive sectors and firms, from the entry of new firms and the exit of obsolete firms, and from the more efficient use of resources. 'Unleashing Prosperity' also illustrates that policy reforms that promote governance and macroeconomic stability, market competition, infrastructure quality, financial deepening, labor market flexibility, and skill upgrading are important in achieving higher productivity growth.
However, significant challenges remain in sustaining productivity growth. The report argues that for the early reformers (most of the 10 new members of the European Union, plus Turkey), policy reforms aimed at improving the ability of firms to innovate and compete in global markets are a main concern. By contrast, for the late reformers (most of Southeastern Europe and the Commonwealth of Independent States), policy reforms aimed at addressing the legacy of transition continue to be a top priority. 'Unleashing Prosperity' shows why microeconomic reforms deserve more attention. It is a must-read for policy makers, government officials, researchers, and economists who are interested in furthering growth and prosperity in the region.