Tradability and productivity growth differentials across EU Member States

Abstract

This study examines the lack of convergence among EU countries from a structural perspective. We apply the tradable-non-tradable framework (T-NT) to evaluate the heterogeneity in labour productivity before and after the great recession. We find that, across all countries, non-tradables were less relevant for aggregate productivity. The low productivity growth in peripheral EU countries was accompanied by a specific structural change pattern: there was a sharp production increase of non-tradables before the crisis relative to other EU countries. For most peripheral countries concerns about unfavourable sector structures remain, implying a continuation of unsustainable growth patterns. This has implications for the European Commission's macroeconomic imbalance procedures, since it allows identifying patterns of real divergence on a disaggregated level. Finally, we identify a link between sectoral growth asymmetries and the quality of domestic governance institutions. Especially differences in the legal system help to explain the observed productivity growth differentials.

Productivity homogenisation trends of six advanced industrial economies: A vertically hyper-integrated approach

“…More in general, results support the claim put forward by Friesenbichler and Glocker (2019): aggregate productivity growth is not independent from the economy's sectoral composition. And by making cross-country comparisons in terms of growing subsystems, sectoral productivity growth rates embed the change in the structural proportions with which different industries participate in every hyper-integrated sector.…”

“…Tables 7 and 8 report cross-country homogenisation trends for hyper-integrated labour productivity levels within each subsystem for each sub-period. 31 Recent attempts at linking the relative tradability of primary and manufacturing products over services to the convergence in industry productivity levels (Inklaar and Diewert, 2016), as well as to their differential influence on aggregate productivity growth (Friesenbichler and Glocker, 2019), motivates organising sectoral information into separate panels for primary-cum-manufacturing and service sectors (panels (A) and (B), respectively). Within each panel, subsystems are displayed in decreasing order of crosscountry average productivity growth.…”

The Impact of Economic Specialization on Regional Economic Development in the European Union: Insights for Formation of Smart Specialization Strategy

“…If an external demand is growing and the region's output enjoys increasing rations of its unit price relative to imports, it benefits the economy's overall income. The tradable sectors considerably impact overall productivity in the European Union (Friesenbichler and Glocker 2019).…”