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Is Poland the next Spain?

Francesco Caselli and Silvana Tenreyro ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We revisit Western Europe’s record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catchup at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East’s income gap is quite 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 that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe’s experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.

Keywords: Economic integration; economic growth; labor; technology; productivity gaps; Europe (search for similar items in EconPapers)
JEL-codes: O11 O47 F15 O14 F43 N10 (search for similar items in EconPapers)
Date: 2005-01
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http://eprints.lse.ac.uk/3564/ Open access version. (application/pdf)

Related works:
Chapter: Is Poland the Next Spain? (2006) Downloads
Working Paper: Is Poland the Next Spain? (2005) Downloads
Working Paper: Is Poland the Next Spain? (2005) Downloads
Working Paper: Is Poland the Next Spain? (2005) Downloads
Journal Article: Is Poland the next Spain? (2004) Downloads
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