Abstract

http://ssrn.com/abstract=728440
 
 

References (43)



 
 

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Is Poland the Next Spain?


Francesco Caselli


London School of Economics & Political Science (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Silvana Tenreyro


London School of Economics (LSE)

January 2005

CEPR Discussion Paper No. 4877

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 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.

Number of Pages in PDF File: 62

working papers series


Date posted: May 24, 2005  

Suggested Citation

Caselli, Francesco and Tenreyro, Silvana, Is Poland the Next Spain? (January 2005). CEPR Discussion Paper No. 4877. Available at SSRN: http://ssrn.com/abstract=728440

Contact Information

Francesco Caselli (Contact Author)
London School of Economics & Political Science (LSE) - Department of Economics ( email )
Houghton Street
London WC2A 2AE
United Kingdom
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Silvana Tenreyro
London School of Economics (LSE) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
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