chapter  4
24 Pages

Low- and high-skills equilibria

What role for the government?
BySilvana Tarlea

This chapter focuses on how parties in government can influence the sophistication of the economy and on their motivations when doing so. The demand for sophisticated labour tends to be relatively low in both private and public firms, both domestic and foreign-owned. While all countries have democratized and opened up their economies to international trade and investment, only some have moved from low- to high-skills equilibria in the production of goods and services. If non-governmental institutions, lead firms, citizens themselves as well as the government fulfil their short-term goals, this keeps a low equilibrium afloat, including the supply and demand for skills. Many factors need to be corroborated in order for economic activities to move from low- to higher-skills equilibria and governments can be instrumental in the process. The chapter acknowledges the interdependencies between firms and institutions of skill formation. It suggests that political parties should figure more prominently in political economy scholarship focusing on Central and Eastern Europe.