Lecture 5: The case of Europe Results of the decomposition of the level of GDP per capita for the EU

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Lecture 5 The case of EuropeResults of the
decomposition of the level of GDP per capita for
the EU

• Wide gap between countries, with EU5 and with the
  US
• Some development catch-up by EU10, but for EU and
  EU15 the gap with the US widened
• For EU10 main reason for the gap low
  productivity, both because of lower capital
  intensity and lower TFP
• for EU15 mainly lower average working hours,
  weaker participation and higher unemployment
• Reminder EU15old members, EU10new members from
  2005, mainly from Eastern Europe, EU5small best
  developed

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Results of the decomposition of the GDP growth
rate for the EU

• First five years of the Lisbon startegy not
  successful, growth rate only 2 1 because of
  productivity (both TFP and capital deepening), 1
  labour
• Labour quality, net migration, older workers
  participation contributed positively
• Average hours, SWP contributed negatively
• EU10 4 growth, mainly productivity. But
  declining youth participation, higher unemployment

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The role of the EU Commission in reforms

• National ownership of reforms each member
  country identifies key challenges
• Commission assesses progress on the basis of
  Implementation Reports by the countries
• Need for consistent assessment across Integarted
  guidelines of factors of income disparities and
  sources of growth and clarification if key
  challenges are right and if growth due to reforms
  or exogenous

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What growth drivers can be influenced and how

• Outside control (exognous) native population,
  SWP
• Partly controlled female participation, net
  migration, capital deepening, average hours, TFP
• Highly controlled (endogenous) Youth and
  old-worker participation, unemployment