Productivity Growth and Structural Reform in Bulgaria: Restarting the Convergence Engine

21 Pages Posted: 9 Aug 2012

See all articles by Pritha Mitra

Pritha Mitra

International Monetary Fund (IMF)

Cyril Pouvelle

Banque de France

Date Written: May 2012

Abstract

Labor productivity levels in Bulgaria lag well behind that in the EU, weighing on the convergence process. Stronger productivity growth would allow Bulgaria to close the income gap with the EU average more quickly and to alleviate the structural problems in its labor market, reflected in its high long–term and youth unemployment. Our analysis of the drivers of labor productivity suggest that for Bulgaria closing the gap with EU standards in the areas of institutional and infrastructure quality, goods market efficiency, higher education, and innovation would permanently boost productivity growth by a total of 1 percentage point a year. This would be enough to close the income gap with the EU average by 2040, compared to the status quo where it would take an additional 10 years.

Keywords: Economic Growth, Productivity, Cross-country Convergence, Employment, Unemployment, Wages, European Union, Fiscal Reforms, Income, Labor Markets, Labor Productivity, Production Growth

JEL Classification: E24, O47, O52

Suggested Citation

Mitra, Pritha and Pouvelle, Cyril, Productivity Growth and Structural Reform in Bulgaria: Restarting the Convergence Engine (May 2012). IMF Working Paper No. 12/131, Available at SSRN: https://ssrn.com/abstract=2127025

Pritha Mitra (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Cyril Pouvelle

Banque de France ( email )

Paris
France

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