-  27  -

**Table 20** : _Bulgaria’s endowments in comparative perspective: CEEC-11 and EU-15_

||Land,<br>km2<br>per<br>capita|Land use,<br>arable land<br>(% of land<br>area),<br>2001|<br>Economically<br>active population<br>with secondary<br>education (%)|Economically<br>active<br>population (% of<br>total population)|<br>Labor<br>Market<br>Partici-<br>pation /b|Electricity<br>production<br>(kwh per<br>capita),<br>2002|Electricity<br>consumption<br>(kwh per<br>capita),<br>2002|<br>Natural<br>Resources<br>Index,<br>2004 /c|
|---|---|---|---|---|---|---|---|---|
|Bulgaria|0.014|40.0|55.3|42.0|49.2|5,424|3,056|0|
|Croatia|0.013|26.1|60.4 /3|..|..|2,752|2,834|0|
|Romania|0.010|40.8|60.2|44.4|54.7|2,463|4,979|1|
|Czech Republic|0.008|39.8|79.2|50.0|59.3|7,484|3,882|0|
|Estonia|0.031|16.0|58.1|48.9|58.7|6,278|3,099|0|
|Hungary|0.009|50.1|65.7|41.2|49.8|3,559|2,074|0|
|Latvia|0.027|29.7|65.8|48.5|57.5|1,700|1,929|0|
|Lithuania|0.019|45.2|63.2|47.4|58.2|5,108|2,498|0|
|Poland|0.008|45.9|70.9|44.4|54.7|3,770|1,595|1|
|Slovak Republic|0.009|..|79.1|48.7|60.2|6,028|4,222|0|
|Slovenia|0.010|8.6|63.2|49.0|56.5|7,480|5,998|0|
|CEEC-11 /d|0.014|34.2 /1|66.1|46.4|55.9|4,732|3,288||
|Bulgaria as % of<br>CEEC-11average|<sup>98%</sup>|117%|84%|90%|88%|115%|93%||
|EU15 /d|0.014|24.3 /2|44.4/4|47.1|56.7|7,073|6,086||

Notes: All data are for 2003, unless otherwise specified; 1/ Excluding Slovak Republic; 2/ Excluding Luxembourg; /3 2001 data; 4/ Excludes France (no secondary ed. data available); 2002 data used for the Netherlands. /a Upper secondary and post-secondary non-tertiary education - levels 3-4 (ISCED 1997); /b ILO Methodology: Economically active population divided by total population over 15. /c Falcetti et al. EBRD 2004. Countries are rated from 0 to 2, 2 being the highest. /d Simple average. Sources: EUROSTAT, WDI 2004.

Furthermore, the cost of labor as measured in terms of the average gross monthly wage is very low by regional standards. In fact, it was well below the levels not only in CEEC-8, i.e., new EU members, but also in SEE countries. Albania’s average gross monthly, the second lowest, was 11 percent higher in 2003 and 23 percent higher in 2004. Romania’s average wage was 30 percent above that of Bulgaria’s in 2004. Had there been no other constraints, this alone would have made Bulgaria extremely attractive for labor intensive activity.

In all, like other CEEC-10, Bulgaria has the potential to specialize in labor intensive products, with the possible bias in favor of skilled labor intensive goods, and, to a lesser extent, natural resource intensive products embracing mostly agricultural goods. On might also add to this list the capital-intensive goods, albeit with a caveat. The experience of transition countries shows significant contribution of FDI taking advantage of relatively cheap and highly skilled labor thus reducing relative shortage of capital.

# **B** **_._** _Factors content of Bulgaria’s exports in comparative perspective_

Patterns in trade in goods reflect differences in comparative advantage as determined by different factor endowments among countries. A country tends to export those goods, which use factors in relative abundance. However, this fully takes place if there is a competitive market mechanism efficiently allocating resources. By the same token, the persistence in disconnect between country’s endowments in factors of production and factor intensities of its exports point to major institutional and policy deficiencies in the existing economic regime.

Exploring a full causal chain linking factor endowments, comparative advantage and trade patterns are not relevant for this discussion.<sup>13</sup> The question germane here concerns 13 The goodness of results obtained hinges critically on the quality of a classification used to examine export baskets over time by factor mix. The choice is always controversial. There are woeful difficulties to define and measure factor intensity, and trade theorists have long wrestled with it. Special problems emerge when a classification aims to capture “quality” of factors involved (Winters 1997). Some definitions of the groups of goods by factor intensity are overlapping and non-exhaustive. Definitions used here do not suffer