Regional Productivity Convergence in Advanced and Emerging European Economies

Abstract:

Finding ways to boost Europe’s economic growth in today’s post-crisis world is more important than ever. In this European Policy Analysis, the authors investigate which factors drive productivity across Europe’s regions.

While regions in ‘old’ Europe mainly rely on internal sources such as human capital quality, research and development, regions in the ‘new’ EU are largely driven by the convergence effect arising from the productivity gap. If the size of the productivity gap is too large, however, regions are at risk of permanent underdevelopment. Convergence should therefore be replaced by the establishment of more sophisticated lines of business and an increase in product and service variety.