Economic growth and labour productivity in Europe : half a century of east-west comparisons

This paper discusses the comparative productivity performance of Eastern and Western Europe since 1950. Firstly, it looks at the productivity estimates since the beginning of transition in 1989. Despite a decline in output, the turmoil of the late 1980s affected labour participation more strongly, so that labour productivity growth has been less affected than per capita income growth. Presently, there are signs of a renewed slowdown in productivity growth in Central and Eastern European countries (CEEC’s), even though there is much diversity between the countries. Secondly an historical approach is adopted by taking into account the growth performance of CEEC’s for the period 1950-1989. The estimates suggest a long-term trend towards productivity slowdown in Eastern Europe beyond the slowdown in Western Europe since 1973. Indeed the growth path in the CEEC’s before transition can be characterised as “extensive growth”. Growth was based on rapid accumulation of resources without successful application of new technologies, which led to declining efficiency in the use of resources. It is argued that the present difficulties in closing the productivity and income gap between East and West are still partly due to the legacy of the past. Policies to improve work organisation, change production strategies, and strengthen quality of training are typically effective in the long run and will not materialise in immediate sustained gains in productivity. Thirdly the paper takes a look at the convergence and divergence trends in productivity since 1950. It outlines a continuous process of productivity divergence between Eastern and Western Europe, despite convergence within each of the two regions. It is argued that the brief episode of convergence since 1992 is primarily the result of the recovery of shock effects of the transition. A long term process of productivity convergence depends on the success by which the past process of extensive growth can be transformed into intensive growth, i.e., growth based on efficient resource use and successful adaptation of new technologies. This requires institution building to strengthen the effectiveness of product, labour and capital markets in the long run.

Accumulation, productivity and technology: measurement and analysis of long term economic growth

This paper provides a brief overview of the "state of the art" on research on the sources of long term economic growth. It is argued that, despite the enormous progress in development of the theory and empirics on long term economic growth, we are still not able to unambiguously distinguish between the determinants of growth. The distinction between accumulation, productivity and technology is a useful device to structure the debate, as the former two tend to emphasize the importance of investment and increased efficiency in use of resources, whereas the latter puts the contribution of invention and innovation change into the spotlight. However, the most powerful explanations of economic growth are those which combine these various aspects of growth with an explicit focus on historical, institutional and political factors in the growth process. To strengthen empirical research, the paper recommends greater attention for reconstruction of historical national accounts, the development of a broad range of technology indicators.

New estimates of labour productivity in the manufacturing sectors of Czech Republic, Hungary and Poland

In this paper we provide benchmark comparisons of manufacturing unit value ratios and productivity levels for the Czech Republic, Hungary and Poland relative to Germany in 1996. On average, manufacturing prices were about half of those in Germany for all three countries. Hungary was characterised by relatively low price levels in Food Processing, but relatively high price levels in Chemicals, Rubber and Plastic Products, Non-Metallic Mineral Products and Electrical Equipment. Poland appeared weak on price competitiveness in Wood and Wood Products and Printing and Publishing. The Czech Republic has relatively low price levels in Chemicals. For Total Manufacturing, Hungary shows a clear productivity advantage despite a comparable relative price level (compare Figure 1). The Hungarian productivity advantage is in strong Food Products, Paper and Printing, and Wood Products (even though in the latter case it is benefitting from low relative price levels), but also in Machinery and Transport Equipment and in Other Manufacturing. The Polish productivity level is high in Rubber and Plastic Products, and in the Czech Republic it is high in Chemicals, which in both cases is reflected by relatively low price levels. Czech productivity is also relatively high in Non-Metallic Minerals.

Comparisons of real output in manufacturing

This study is concerned with the conceptual and measurement problems which arise in comparisons of levels of per capita output and productivity in different countries. The author stresses the reliance of standarized valuations of the different elements of output rather than official exchange rates when making comparisons. Two approaches are noted; (1) the expenditure approach and (2) the production approach. The production approach, discussed here, looks at the industry of origin and provides a basis for growth accounting, comparative structural analysis, studies of technological performance, and work on labor productivity and total factor productivity. This approach provides a sounder base for constructing relative indicators of productivity. It also reveals trade protection policies and their incidence on different sectors of the economy. The approach shows which data are anomalous and which analytically useful in industrial census. It also shows how new insights might be gained by exploiting some official sources which often remain untapped by international agencies.Environmental Economics&Policies,Access to Markets,Markets and Market Access,Economic Theory&Research,Banks&Banking Reform

ICT and Productivity Growth in Transition Economies: Two-Phase Convergence and Structural Reforms

This paper investigates the role of information and communication technology (ICT) as a driver of improved productivity performance of Central and Eastern European (CEE) countries and Russia (CEER) relative to the EU-15 and the U.S. during the 1990s. The paper investigates how, and to what extent, ICT contributed to a narrowing in the productivity gap. Although investment in ICT capital has strongly increased, total factor productivity (TFP) growth has made the largest contribution to convergence during the 1990s. In a few CEER countries, notably the Czech Republic and Hungary, ICT production contributed more to productivity growth than the EU-15 average. Spillovers from a productive use of ICT in both CEER countries and the EU-15 are still considerably lower than in the U.S.. The paper argues that the convergence process between CEER countries and the EU-15 is characterized by two phases. In the first “restructuring” phase, convergence has been driven by enterprise restructuring in manufacturing, which was facilitated by rapid ICT investment in new plants, and by growth in ICT production in particular through FDI. In the second “expansionary” phase the sustained convergence has to rely more on productivity growth in sectors that make intensive use of ICT, in particular the service sector. While the first phase is dependent largely on openness and basic fundamental reforms, the second phase requires deeper structural reforms focused on product and labor market flexibility, business re-organization and investment in human capital and ICT skills.productivity, economic growth, convergence, ICT, Eastern Europe