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Long-term labour productivity and GDP projections for the EU25 Member States : a production function framework

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  • Carone, Giuseppe
  • Denis, Cécile
  • Mc Morrow, Kieran
  • Mourre, Gilles
  • Röger, Werner

Abstract

This paper presents the results of long run labour productivity and GDP growth rate projections (until 2050) for each of the 25 EU Member States and provides a detailed overview of the forecast methodology used. These projections were undertaken in order to provide an internationally comparable macroeconomic framework against which to assess the potential economic and fiscal effects of ageing populations. The projections presented in this paper, using a common production function methodology for all 25 countries, show the GDP growth rate effects of an assumptions-driven extrapolation of recent trends in employment and labour productivity. These base case projections reflect the working assumption of “no policy change”.Various sensitivity tests are carried out to check the GDP per capita impact of some factors which have been excluded from the baseline scenario for reasons of simplicity or because of a lack of consensus in the academic literature. Some of the interesting conclusions that emerge from these sensitivity tests include : • Firstly, the GDP per capita impact of changes in the participation rate assumption used in the projections is much greater than for assumed changes in the share of part-time employment (i.e. in average hours worked per worker). • Secondly, the negative effect of a change in the age-structure of the population is fairly limited, although it is accepted that the labour productivity of an individual is likely to decline after the age of 55. A very strong fall in the productivity of older workers compared with that of prime-age workers would be required to significantly depress total labour productivity. Such an outcome, on the basis of current evidence, appears rather unlikely. • Thirdly, changing the TFP growth rate targets (e.g. use of the 1990’s average instead of the long-term 1970-2004 average) could strongly affect the projections. • Finally, an assumption of productivity convergence in levels substantially alters the projections for most EU10 countries but leaves the EU15 almost unchanged. JEL classific

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 744.

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Date of creation: Aug 2006
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Handle: RePEc:pra:mprapa:744

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Keywords: Productivity; ageing; long-term projections; production function; labour productivity; older workers;

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Cited by:
  1. P. Halmai & V. Vásáry, 2011. "Crisis and economic growth in the EU," Acta Oeconomica, Akadémiai Kiadó, Hungary, Akadémiai Kiadó, Hungary, vol. 61(4), pages 465-485, December.
  2. Péter Halmai & Viktória Vásáry, 2010. "Growth crisis in the EU — challenges and prospects," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 45(5), pages 329-336, September.
  3. Robert Holzmann & Landis MacKellar & Jana Repansek, 2009. "Pension Reform in Southeastern Europe : Linking to Labor and Financial Market Reforms," World Bank Publications, The World Bank, number 2587, August.
  4. Péter Halmai & Viktória Vásáry, 2012. "Convergence crisis: economic crisis and convergence in the European Union," International Economics and Economic Policy, Springer, Springer, vol. 9(3), pages 297-322, September.
  5. Luke Brander & Ingo Bräuer & Holger Gerdes & Andrea Ghermandi & Onno Kuik & Anil Markandya & Ståle Navrud & Paulo Nunes & Marije Schaafsma & Hans Vos & Alfred Wagtendonk, 2012. "Using Meta-Analysis and GIS for Value Transfer and Scaling Up: Valuing Climate Change Induced Losses of European Wetlands," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 52(3), pages 395-413, July.
  6. Herman de Kwaatsteniet, 2011. "Demand Variability in Supply Chains: The Influence of Global developments and Globalization on the Local Dutch Steel Industry," Working Papers, Maastricht School of Management 2011/32, Maastricht School of Management.
  7. Halmai, Péter, 2011. "Válság és a potenciális növekedés az Európai Unióban
    [Crisis and potential growth in the European Union]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1059-1081.
  8. Heidler, Matthias & Müller, Christoph & Weddige, Olaf, 2009. "Measuring accrued-to-date liabilities of public pension systems: Method, data and limitations," FZG Discussion Papers 37, Research Center for Generational Contracts (FZG), University of Freiburg.
  9. G. Lalanne & E. Pouliquen & O. Simon, 2009. "Oil price and potential output growth in the long run," Documents de Travail de la DESE - Working Papers of the DESE, Institut National de la Statistique et des Etudes Economiques, DESE g2009-09, Institut National de la Statistique et des Etudes Economiques, DESE.
  10. Jana Znidarsic, 2010. "Age management in Slovenian enterprises: the viewpoint of older employees," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 28(2), pages 271-301.
  11. Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn, 2012. "Using capabilities to project growth, 2010–2030," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 153-166.
  12. Fritz Breuss, 2006. "Why Does Austria's Economy Grow Faster than Germany's?," WIFO Working Papers, WIFO 280, WIFO.
  13. Péter Halmai & Viktória Vásáry, 2010. "Real convergence in the new Member States of the European Union (Shorter and longer term prospects)," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(1), pages 229-253, June.
  14. Barrios, Salvador & Burgelman, Jean-Claude, 2007. "Information and Communication Technologies, Market Rigidities and Growth: Implications for EU Policies," MPRA Paper 5838, University Library of Munich, Germany.
  15. Gilles Mourre, 2009. "What explains the differences in income and labour utilisation and drives labour and economic growth in Europe? A GDP accounting perspective," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 354, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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