The productivity gap between East and West Europe: what role for sectoral structures during integration?

This paper is an analysis into the sources of lower levels of economic development between EU member countries and a selection of EU accession countries in Central and East Europe. There is a distinct lack of research into this subject-matter. To assist economic policy in supporting real economy convergence, additional knowledge about country-specific conditions are however necessary. These sources are assessed by analysing determinants of the productivity gap between the two economic regions. The paper focuses on sectoral structures and their role played in determining the potentials for the closure of the productivity gap. After providing a brief overview over comparative levels of national labour productivity levels between the EU-15 average, selected EU cohesion countries and the EU accession countries of Estonia, Poland, the Czech and Slovak Republics, Hungary and Slovenia, the paper proceeds to quantify the role played by individual sectors in explaining national productivity gaps and their development. The second part is concerned with the sectoral content of the economy-wide productivity gap which is rooted in the pattern of specialisation. If sectoral patterns are country-specific, i.e. path dependency exists, then the extent of economic convergence is determined by emerging specialisation patterns. The paper closes with some careful assessment of where economic policy can be efficient to assist real economy convergence.

01. July 2002

Authors Johannes Stephan

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