Dynamics and Convergence of Labour Productivity in Bulgaria towards the Euro Area: A Comparative Analysis with Other Central and Eastern European Countries

The paper provides an analysis of labour productivity dynamics in Bulgaria in 1970–2019 and assesses the convergence to the euro area in comparison with other CEE countries. Based on the data from Pen world table, we measure convergence by the deviations from euro area average productivity levels and by employing panel models of absolute ?-convergence. The results show an increasing tendency in labour productivity, a decreasing trend in its growth rates, the existence of significant peculiarities and internal heterogeneity of the three distinct periods (the last two decades of socialism, the 1990s and the first two decades of the 21st century). It is proved that at the end of the first period Bulgaria was ahead of Romania, Poland and Estonia in terms of labour productivity, at the end of the second period – only of Romania, and in the third period it started to lag behind all other CEE countries. The strongest deterioration in Bulgaria's relative position over time has been recorded vis-a-vis Romania, and the largest lag in the level by 2019 is vis-a-vis Poland. The results from the estimation of the ?-convergence model at 1990 base year indicate the existence of a catching-up process for the countries as a whole and the absence of such a process for Bulgaria. In the 2000-based model, labour productivity in Bulgaria converges with the euro area, but least among all countries in the region. Compared to Hungary, Slovenia and Slovakia, this is a consequence of a lower starting base, compared to Romania – of lower growth rates, and compared to the other countries – of a combination of both.