We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolateits implications for the future path of Eastern Europe. The poorer Western European countries caughtup with the richer ones through both higher rates of physical capital accumulation and greater totalfactor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflectconvergence along two margins. One margin (between industry) is a massive reallocation of laborfrom agriculture to manufacturing and services, which have higher capital intensity and use resourcesmore efficiently. The other margin (within industry) reflects capital deepening and technology catchupat the industry level. In Eastern Europe the employment share of agriculture is typically quitelarge, and agriculture is particularly unproductive. Hence, there are potential gains from sectoralreallocation. However, quantitatively the between-industry component of the East's income gap isquite small. Hence, the East seems to have only one real margin to exploit: the within industry one.Coupled with the fact that within-industry productivity gaps are enormous, this suggests thatconvergence will take a long time. On the positive side, however, Eastern Europe already has levels ofhuman capital similar to those of Western Europe. This is good news because human capital gapshave proved very persistent in Western Europe's experience. Hence, Eastern Europe does start outwithout the handicap that is harder to overcome.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0668.
Francesco Caselli & Silvana Tenreyro, 2006.
"Is Poland the Next Spain?,"
NBER Chapters,
in: NBER International Seminar on Macroeconomics 2004, pages 459-534
National Bureau of Economic Research, Inc.
Find related papers by JEL classification: F15 - International Economics - - Trade - - - Economic Integration F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Francesco Daveri & Cecilia Jona-Lasinio, 2005.
"Italy's Decline: Getting the Facts Right,"
Giornale degli Economisti,
GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 365-410, December.
[Downloadable!]
Other versions: