Differences in Human Capital and Openness to Trade as Barriers to Growth and Convergence in the EU

Marta Simões (), João Andrade and Maria Adelaide Duarte

A chapter in The Euro and the Crisis, 2017, pp 73-94 from Springer

Abstract: Abstract Growth in Southern European EU member states has been weak and is resulting in divergent growth paths relative to the richer EU countries. Convergence in terms of income levels requires more rapid growth in the economically weaker member states but it can succeed or fail depending on possessing necessary human capital and openness to trade levels, fundamental determinants of innovation and diffusion activities that drive productivity growth and thus long-run per capita income growth and convergence. We apply a thresholds regression approach to examine the growth and convergence process of 11 EU member states over the period 1960–2014 using human capital and openness to trade proxies as thresholds identification variables allowing us to determine specific policy implications for different human capital/trade regimes. Our findings confirm the existence of different regimes according to trade levels corresponding to different growth performances due to technological catch-up, external competitiveness, the weight of tradable goods, physical capital accumulation, government size and public debt.

Keywords: Economic growth; Convergence; Human capital; Trade; EU; Thresholds analysis (search for similar items in EconPapers)
JEL-codes: C23 F10 I25 O47 O52 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-319-45710-9_6

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DOI: 10.1007/978-3-319-45710-9_6

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