The Baltic Growth Model: Balanced Growth Under the EMU Playbook

• In Event: Baltic Political Economies in a Broader Perspective

Abstract

This paper provides an analysis of the growth model of the Baltic States. Contrary to the prevailing accounts in the literature, it argues that after the Global Financial Crisis (GFC), the Baltic States transitioned into a balanced growth model. While exports were an important source of growth, the Baltics also saw increasing wage shares and a broad distribution of wage increases across both sheltered and exposed sectors. Crucially, balanced growth requires sustained gains on the supply side, which challenges the model’s sustainability over the long term. The article’s contribution to the growth model debate is two-fold. First, the outcome of Economic and Monetary Union’s macroeconomic governance regime depends on the institutional features of the economy and may not necessarily translate to purely export-led growth. Second, balanced growth does not require wage coordination, but can be supported by alternative configurations, with labour market flexibility playing a prominent role in the Baltics.

Short Bio

PhD candidate at Vilnius University

Author

• Simonas Algirdas Spurga, Vilnius University