Advanced Search

The potential growth of the Belgian economy and its determinants

Contents:

Author Info

  • C. Rigo

    (National Bank of Belgium, Research Department)

Registered author(s):

    Abstract

    The potential growth path of the economy is at the centre of various fundamental economic questions, particularly in connection with the conduct of monetary policy and the management of public finances. It also determines the progress of living standards, so that the adverse population prospects confronting the European economies have rekindled interest in the subject. The first chapter of the article reports on the developments recorded over the past twenty years, using a method derived from the one adopted by the EC and based on the use of a production function. The role played by the three determinants – labour, capital and total factor productivity – is discussed, focusing on the case of the Belgian economy while comparing the results with those recorded in the EU-15. With potential growth averaging 2.2 p.c. for the private sector and 2.1 p.c. in the whole economy, Belgium is in the middle group of European countries. A growth breakdown between labour volume and labour productivity is proposed in chapter 2. Belgium’s advantages and disadvantages are assessed, not only in comparison with the EU-15 average but also in relation to the United States. Particular attention is drawn to the divergent picture in terms of productivity on the two continents. The improving performance in the United States in this respect contrasts with the deceleration recorded in Europe. The slowdown was also experienced in Belgium although, in the past ten years, the weaker growth in labour productivity here was due essentially to a slower increase in capital intensity. Having diminished between 1985 and 1995, the growth of total factor productivity, which in principle measures the overall productive capacity of the economy, stabilised at a level above the European average and close to that of the United States. This relatively good performance could be due to the fairly widespread use of ICT, as Belgium’s investment expenditure on this item is greater than that of the majority of European countries. The highly skilled labour force provides additional support for total factor productivity, although its impact has not been quantified in the case of Belgium. Expenditure on research and development could also yield substantial productivity returns. Particular efforts in these three fields, in a context within which market forces provide appropriate incentives to the economic agents, could hold possibilities for enhancing productivity growth. This could contribute to stimulate growth in view of the anticipated adverse demographic developments in the coming decades, that will also require raising the rates of participation in the labour market.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.nbb.be/doc/oc/repec/ecrart/ecorevIII2005_H2.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by National Bank of Belgium in its journal Economic Review.

    Volume (Year): (2005)
    Issue (Month): III (September)
    Pages: 45-64
    Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
    Handle: RePEc:nbb:ecrart:y:2005:m:september:i:iii:p:45-64

    Contact details of provider:
    Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
    Phone: (+ 32) (0) 2 221 25 34
    Fax: (+ 32) (0) 2 221 31 62
    Email:
    Web page: http://www.nbb.be/
    More information through EDIRC

    For corrections or technical questions regarding this item, or to correct its listing, contact: ().

    Related research

    Keywords: potential output; labour productivity; growth accounting; total factor productivity;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    1. Nicholas Oulton, 2002. "ICT and Productivity Growth in the United Kingdom," Oxford Review of Economic Policy, Oxford University Press, vol. 18(3), pages 363-379.
    2. Robert Inklaar & Mary O'Mahony & Marcel Timmer, 2005. "ICT AND EUROPE's PRODUCTIVITY PERFORMANCE: INDUSTRY-LEVEL GROWTH ACCOUNT COMPARISONS WITH THE UNITED STATES," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 505-536, December.
    3. Cette, G. & Kocoglu, Y. & Mairesse, J., 2004. "L’ effet de la diffusion des technologies de l’information et de la communication (TIC) sur la productivité par employé en France," Bulletin de la Banque de France, Banque de France, issue 121, pages 33-46.
    4. Cette, Gilbert & Mairesse, Jacques & Kocoglu, Yusuf, 2005. "ICT diffusion and potential output growth," Economics Letters, Elsevier, vol. 87(2), pages 231-234, May.
    5. Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen.
    6. Ark, Bart van & Inklaar, Robert & McGuckin, Robert, 2002. ""Changing gear" : productivity, ICT and services: Europe and the United States," GGDC Research Memorandum 200260, Groningen Growth and Development Centre, University of Groningen.
    7. Ronald M. Albers, 2002. "New technologies and productivity growth in the Euro area," Working Paper Series 122, European Central Bank.
    8. Paolo Guarda, 2002. "Potential output and the output gap in Luxembourg: some alternative methods," BCL working papers 4, Central Bank of Luxembourg.
    9. Paula De Masi, 1997. "IMF Estimates of Potential Output: Theory and Practice," IMF Working Papers 97/177, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:nbb:ecrart:y:2005:m:september:i:iii:p:45-64

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.