ast pate t apass st aa

1
Growth, Accumulation and Real Convergence in
Cyprus Republic

• Stylised factsSince 1995
• Labour Productivity rises at a constant rate
  (Y/N)
• Capital Intensity also rises at a constant rate
  (K/N)
• Capital Output remains broadly constant (Y/K)
• as do the Labour Share (L/Y)
• and the Rate of Profit on Fixed Capital (R)
• Full Employment (U) is
• Sustainable Trade Balance of Goods and Services
  (X-M)

Stylised facts that describe a steady-state
growth path (Kaldor 1961, Maddison 1991)
Stylised facts that describe the balance of
payments constraint on growth (Thirlwall 1979,
Williamson 1994)
The Cyprus Labour Institute PEO Elias
Ioakimoglou Nicosia 28 May 2005
Growth
Capital Accumulation
Real Convergence
Discussion
2
Growth, Accumulation and Real Convergence in
Cyprus Republic
Labour Productivity
2004-2005 Estimation DGII
Labour Productivity
6
GDP
5
Stylised facts
Gross Fixed Investment
4
Employment
3
2
External Balance
1
Rate of Unemployment
0
Public Deficit as a of GDP
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
3
Growth, Accumulation and Real Convergence in
Cyprus Republic
GDP growth
Labour Productivity
( annual changes)
2004-2005 Estimation DGII
12
GDP
10
Gross Fixed Investment
8
Employment
6
4
External Balance
2
Rate of Unemployment
0
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
Public Deficit as a of GDP
Growth
Capital Accumulation
Real Convergence
Discussion
4
Growth, Accumulation and Real Convergence in
Cyprus Republic
Gross Fixed Investment as a of GDP
36
Labour Productivity
34
GDP
32
30
Gross Fixed Investment
28
26
Employment
24
22
External Balance
20
18
Rate of Unemployment
16
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
Public Deficit as a of GDP
Growth
Capital Accumulation
Real Convergence
Discussion
5
Growth, Accumulation and Real Convergence in
Cyprus Republic
Employment
Labour Productivity
( annual changes)
8,0
7,0
GDP
6,0
Gross Fixed Investment
5,0
4,0
Employment
3,0
2,0
External Balance
1,0
Rate of Unemployment
0,0
-1,0
Public Deficit as a of GDP
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Growth
Capital Accumulation
Real Convergence
Discussion
6
Growth, Accumulation and Real Convergence in
Cyprus Republic
Balance of Goods and Servicesand Current Account
as of GDP
Labour Productivity
5
3
Stylised facts
GDP
1
-1
Gross Fixed Investment
-3
Employment
-5
-7
External Balance
-9
Current Account
-11
Rate of Unemployment
Balance of Goods and Services
-13
-15
Public Deficit as a of GDP
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Thirlwall and Mc Combie, Williamson
Growth
Capital Accumulation
Real Convergence
Discussion
7
Growth, Accumulation and Real Convergence in
Cyprus Republic
Rate of Unemployment ()
6,0
Labour Productivity
Stylised facts
5,5
Eurostat
5,0
GDP
4,5
Gross Fixed Investment
4,0
3,5
Employment
3,0
2,5
External Balance
2,0
1,5
Rate of Unemployment
National definition
1,0
0,5
Public Deficit as a of GDP
0,0
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Growth
Capital Accumulation
Real Convergence
Discussion
8
Growth, Accumulation and Real Convergence in
Cyprus Republic
Labour Productivity
GDP
Gross Fixed Investment
Employment
External Balance
Rate of Unemployment
Public Deficit as a of GDP
Growth
Capital Accumulation
Real Convergence
Discussion
9
Growth, Accumulation and Real Convergence in
Cyprus Republic
Fixed Capital Intensity
annual changes
6
Capital Intensity
Stylised facts
5
Output Capital ratio
4
Labour Share
3
Rate of Return
2
1
0
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
10
Growth, Accumulation and Real Convergence in
Cyprus Republic
Output Capital Ratio
48
47
Capital Intensity
46
Stylised facts
45
Output Capital ratio
44
43
Labour Share
42
41
Rate of Return
40
39
38
37
36
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
11
Growth, Accumulation and Real Convergence in
Cyprus Republic
Labour Share
as a of GDP at factor prices
74
72
Capital Intensity
70
Output Capital ratio
68
Labour Share
66
Rate of Return
Stylised facts
64
62
60
58
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
12
Growth, Accumulation and Real Convergence in
Cyprus Republic
Rate of Return on Fixed Capital
18
17
Stylised facts
Capital Intensity
16
15
14
Output Capital ratio
13
12
11
Labour Share
10
9
8
Rate of Return
7
6
5
4
3
2
1
0
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
13
Growth, Accumulation and Real Convergence in
Cyprus Republic
GDP per capita and Labour Productivity
as a of ?U-15 average
80
at PPPs
78
GDP and Productivity
76
74
Participation Rate
72
Rate of Unemployment
70
68
66
GDP
Labour Productivity
64
62
60
1990
1992
1994
1996
1998
2000
2002
2004
Growth
Capital Accumulation
Real Convergence
Discussion
14
Growth, Accumulation and Real Convergence in
Cyprus Republic
Participation Rate
( of total population)
48
46
GDP and Productivity
44
Participation Rate
42
40
Rate of Unemployment
38
EU-15
Southern Cyprus
36
34
32
30
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
Growth
Capital Accumulation
Real Convergence
Discussion
15
Growth, Accumulation and Real Convergence in
Cyprus Republic
Rate of Unemployment EU-15 / Southern Cyprus
4,0
3,5
GDP and Labour Productivity
Participation Rate
3,0
Rate of Unemployment
2,5
2,0
1,5
1,0
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Growth
Capital Accumulation
Real Convergence
Discussion
16
Growth, Accumulation and Real Convergence in
Cyprus Republic
GDP and number of tourists
Annual changes
10
50
9
Number of tourists
40
8
GDP
Diminishing returns on tourism
30
7
Running out of steam?
6
20
changes in the number of tourists
changes in GDP
5
Sources of Growth
10
4
3
0
2
-10
1
0
-20
1981
1984
1987
1990
1993
1996
1999
2002
Growth
Capital Accumulation
Real Convergence
Discussion
17
Growth, Accumulation and Real Convergence in
Cyprus Republic
Diminishing returns on tourism
Running out of steam?
Sources of Growth
Growth
Capital Accumulation
Real Convergence
Discussion
18
Growth, Accumulation and Real Convergence in
Cyprus Republic
19
Growth, Accumulation and Real Convergence in
Cyprus Republic
Human Capital (Lucas) Infrastructure
(Barro) Knowledge (Romer) Pôles de competitivitè
(Laffay) Tourism restructuring Development of
an agri-food complex Knowledge based services
Diminishing returns on tourism
Running out of steam?
Sources of Growth