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Is Poland the next Spain?

Caselli, Francesco and Tenreyro, Silvana (2005) Is Poland the next Spain? 11045. National Bureau of Economic Research, Cambridge, MA., USA.

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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 catch-up 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 withinindustry 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.

Item Type: Monograph (Working Paper)
Official URL: http://www.nber.org
Additional Information: © 2005 Francesco Caselli and Silvana Tenreyro
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
F - International Economics > F1 - Trade > F15 - Economic Integration
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N10 - General, International, or Comparative
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 11045
Date Deposited: 03 Jun 2008 14:08
URL: http://eprints.lse.ac.uk/5290/

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