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Income convergence prospects in Europe: Assessing the role of human capital dynamics

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  • Jesus Crespo Cuaresma

    ()
    (Department of Economics, Vienna University of Economics and Business)

  • Miroslava Havettova

    ()
    (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava)

  • Martin Labaj

    ()
    (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava and Institute of Economic Research, Slovak Academy of Sciences)

Abstract

We employ income projection models based on human capital dynamics in order to assess quantitatively the role that educational improvements are expected to play as a driver of future income convergence in Europe. We concentrate on income convergence dynamics between emerging economies in Central and Eastern Europe and Western European countries during the next 50 years. Our results indicate that improvements in human capital contribute significantly to the income convergence potential of European emerging economies. Using realistic scenarios, we quantify the effect that future human capital investments paths are expected to have in terms of speeding up the income convergence process in the region. The income projection exercise shows that the returns to investing in education in terms of income convergence in Europe could be sizeable, although it may take relatively long for the poorer economies of the region to rip the growth benefits.

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Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp143.

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Date of creation: Jul 2012
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Handle: RePEc:wiw:wiwwuw:wuwp143

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Keywords: Economic growth; income convergence; human capital; income projections; Europe; emerging economies;

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Cited by:
  1. World Bank, 2012. "EU11 Regular Economic Report : Coping with External Headwinds," World Bank Other Operational Studies 11896, The World Bank.

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