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Economic growth and labour productivity in Europe: half a century of East-West comparisons

  • Ark, Bart van

    (Groningen University)

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    Abstract This paper discusses the comparative productivity performance of Eastern and Western Europe since 1950. Firstly, it looks at the productivity estimates since the beginning of transition in 1989. Despite a decline in output, the turmoil of the late 1980s affected labour participation more strongly, so that labour productivity growth has been less affected than per capita income growth. Presently, there are signs of a renewed slowdown in productivity growth in Central and Eastern European countries (CEEC’s), even though there is much diversity between the countries. Secondly an historical approach is adopted by taking into account the growth performance of CEEC’s for the period 1950-1989. The estimates suggest a long-term trend towards productivity slowdown in Eastern Europe beyond the slowdown in Western Europe since 1973. Indeed the growth path in the CEEC’s before transition can be characterised as extensive growth. Growth was based on rapid accumulation of resources without successful application of new technologies, which led to declining efficiency in the use of resources. It is argued that the present difficulties in closing the productivity and income gap between East and West are still partly due to the legacy of the past. Policies to improve work organisation, change production strategies, and strengthen quality of training are typically effective in the long run and will not materialise in immediate sustained gains in productivity. Thirdly the paper takes a look at the convergence and divergence trends in productivity since 1950. It outlines a continuous process of productivity divergence between Eastern and Western Europe, despite convergence within each of the two regions. It is argued that the brief episode of convergence since 1992 is primarily the result of the recovery of shock effects of the transition. A long term process of productivity convergence depends on the success by which the past process of extensive growth can be transformed into intensive growth, i.e., growth based on efficient resource use and successful adaptation of new technologies. This requires institution building to strengthen the effectiveness of product, labour and capital markets in the long run.

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    Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 00C01.

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    Date of creation: 2000
    Date of revision:
    Handle: RePEc:dgr:rugsom:00c01
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    1. Beintema, Nienke & Ark, Bart van, 1993. "Comparative Productivity in East and West German Manufacturing before Reunification," GGDC Research Memorandum 199305, Groningen Growth and Development Centre, University of Groningen.
    2. Alan Heston & Robert E. Lipsey, 1999. "International and Interarea Comparisons of Income, Output, and Prices," NBER Books, National Bureau of Economic Research, Inc, number hest99-1, August.
    3. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
    4. Ofer, Gur, 1987. "Soviet Economic Growth: 1928-1985," Journal of Economic Literature, American Economic Association, vol. 25(4), pages 1767-1833, December.
    5. Bergson, Abram, 1987. "Comparative Productivity: The USSR, Eastern Europe, and the West," American Economic Review, American Economic Association, vol. 77(3), pages 342-57, June.
    6. Boretsky, Michael, 1987. "The tenability of the CIA estimates of Soviet economic growth," Journal of Comparative Economics, Elsevier, vol. 11(4), pages 517-542, December.
    7. Bart van Ark & Erik Monnikhof & Marcel Timmer, 1999. "Prices, Quantities, and Productivity in Industry: A Study of Transition Economies in a Comparative Perspective," NBER Chapters, in: International and Interarea Comparisons of Income, Output, and Prices, pages 327-367 National Bureau of Economic Research, Inc.
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