Is Poland the Next Spain?

Francesco Caselli, Silvana Tenreyro

NBER Working Paper No. 11045
Issued in January 2005
NBER Program(s):   EFG

We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East's income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.

download in pdf format
   (1034 K)

email paper

This paper is available as PDF (1034 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11045


Users who downloaded this paper also downloaded these:
Kongsamut, Rebelo, and Xie w6159 Beyond Balanced Growth
Goh and Smarzynska Javorcik w11143 Trade Protection and Industry Wage Structure in Poland
Eichengreen The Breakup of the Euro Area
Lipsey w12996 Defining and Measuring the Location of FDI Output
Feldstein w5397 The Effect of a Consumption Tax on the Rate of Interest
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us