Tradability and Productivity Growth Differentials Across EU Member States

WIFO Working Papers 547 (2019)

34 Pages Posted: 22 Apr 2019

See all articles by Klaus Friesenbichler

Klaus Friesenbichler

Austrian Institute of Economic Research; Austrian Institute of Economic Research (WIFO)

Christian Glocker

Austrian Institute of Economic Research (WIFO)

Date Written: March 20, 2019

Abstract

We apply the tradable-nontradable framework (T-NT) to evaluate the lack of convergence in labor productivity among EU Member States. Our results show that increases in overall productivity are primarily due to the tradable and not the nontradable sectors of production. The low productivity growth in peripheral EU countries before the crisis was accompanied by a sharp increase in the production of nontradables (i.e. nontradable goods and services) relative to other EU countries. We identify differences in the legal systems and the quality of public institutions, among others, as factors relevant for explaining the observed productivity growth differentials. Our findings have implications for the European Commission’s macroeconomic imbalance procedures since the T-NT approach allows identifying patterns of real divergence on a disaggregated level.

Keywords: tradability, labor productivity, growth, institutions, structural change

JEL Classification: E01, E02, E60, O43, O47

Suggested Citation

Friesenbichler, Klaus and Glocker, Christian, Tradability and Productivity Growth Differentials Across EU Member States (March 20, 2019). WIFO Working Papers 547 (2019), Available at SSRN: https://ssrn.com/abstract=3356667 or http://dx.doi.org/10.2139/ssrn.3356667

Klaus Friesenbichler

Austrian Institute of Economic Research ( email )

P.O. Box 91
Wien, A-1103
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Christian Glocker (Contact Author)

Austrian Institute of Economic Research (WIFO) ( email )

Arsenal, Objekt 20
Vienna, 1030
Austria

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