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Causes of Lagging Behind of New Member States of EU: Empirical Analysis by Montgomery Decomposition

  • Daniel Dujava

We use the method of ideal Montgomery decomposition to explain differences in product per capita in new member states of EU and selected benchmark country of EU5 ? Netherlands ? on differences in total factor productivity (TFP), capital per inhabitant, rate of capacity utilization, rate of employment, average number of hours worked and in human capital. We find that in 2009 average TFP in new member countries reached only 60% of TFP of the Netherlands. Differences in TFP explain almost 80% of differences in product per capita. We investigate the role of technology and of allocative efficiency in low TFP. Our analysis suggests that unless a lag in technology is longer than 20 years, most part of low TFP is due to inferior allocative efficiency and not due to technology.

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Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 2012 (2012)
Issue (Month): 2 ()
Pages: 222-244

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Handle: RePEc:prg:jnlpol:v:2012:y:2012:i:2:id:839:p:222-244
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  1. Erik Dietzenbacher & Bart Los, 1998. "Structural Decomposition Techniques: Sense and Sensitivity," Economic Systems Research, Taylor & Francis Journals, vol. 10(4), pages 307-324.
  2. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
  3. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  4. Paul De Boer, 2009. "Multiplicative Decomposition And Index Number Theory: An Empirical Application Of The Sato-Vartia Decomposition," Economic Systems Research, Taylor & Francis Journals, vol. 21(2), pages 163-174.
  5. Pedro Cantos & José Pastor & Lorenzo Serrano, 1999. "Productivity, efficiency and technical change in the European railways: A non-parametric approach," Transportation, Springer, vol. 26(4), pages 337-357, November.
  6. ALVARO ANGERIZ & JOHN McCOMBIE & MARK ROBERTS, 2006. "Productivity, Efficiency And Technological Change In European Union Regional Manufacturing: A Data Envelopment Analysis Approach," Manchester School, University of Manchester, vol. 74(4), pages 500-525, 07.
  7. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  8. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455.
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