Sustainability of Estonian Competitiveness

Estonia has been amongst the most successful countries in the transition from Communism and planned economy to Western style democracy, market ecomomy, and rule of law. The reasons for Estonia's success in the past have been analyzed by various authors and institutions before, including the present authors. This new paper aims in a different direction. The analysis here presented looks at the sustainability of Estonian competitiveness, i.e., the prospects of this small Northeast European country for future economic success. After a brief introduction to Estonia's economic background, the authors discuss available physical capital, human capital, and social capital, and their respective strengths and weaknesses. Particular emphasis is placed on the potential of social capital as the driving factor for sustainable growth in Estonia. In their conclusions, the authors identify a number of challenges to be overcome, and make proposals for the difficult choices faced by the Estonian government and private sector.