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How can growth be accelerated in Europe?

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  • Virén, Matti

Abstract

This paper deals with economic growth in Europe. The special emphasis is in key institutional factors that are commonly assumed to affect aggregate growth: functioning of labor markets, availability of labor and capital, and the size of government. For more explicit measures, we use the data on profit rates, average working hours, dependency ratios, tax rates and other measures of the size of government (e.g. employment shares), measures of price competitiveness, and finally the structure of production. The data also include the terms of trade, interest rates, and foreign demand as control variables. Empirical analysis makes use of cross-country panel data for EU15 countries for 1971-2010. The results suggest that profitability and competitiveness do indeed constitute the main determinants of growth. However, also other variables like working hours and the size of government appear to affect growth in an important manner. All in all, slowdown of growth in Europe does not appear to be a paradox but at least with some margin something can be done in achieving more ambitious growth rates.

Suggested Citation

  • Virén, Matti, 2012. "How can growth be accelerated in Europe?," Bank of Finland Research Discussion Papers 29/2012, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2012_029
    as

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    File URL: https://www.econstor.eu/bitstream/10419/212232/1/bof-rdp2012-029.pdf
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    References listed on IDEAS

    as
    1. Juha Kilponen & Matti Viren, 2010. "Why do growth rates differ? Evidence from cross-country data on private sector production," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(3), pages 311-328, July.
    2. Snower, Dennis J. & Burmeister, Johannes & Seidel, Moritz, 2011. "Dealing with the eurozone debt crisis: A proposal for reform," Kiel Policy Brief 33, Kiel Institute for the World Economy (IfW Kiel).
    3. Matti Virén & Erkki Koskela, 2000. "Is there a Laffer curve between aggregate output and public sector employment?," Empirical Economics, Springer, vol. 25(4), pages 605-621.
    4. David Mayes & Matti Viren, 2011. "Asset Prices, Asymmetries and Aggregation in the Euro Area," FindEcon Chapters: Forecasting Financial Markets and Economic Decision-Making, in: Władysław Milo & Piotr Wdowiński & Grzegorz Szafrański (ed.), FindEcon Monograph Series: Advances in Financial Market Analysis, edition 1, volume 9, chapter 1, pages 11-33, University of Lodz.
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    More about this item

    Keywords

    growth; working hours; taxes; competitiveness;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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