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Ireland's Failure-And Belated Convergence

  • John FitzGerald

    (Economic and Social Research Institute (ESRI))

Ireland began its career as an independent state with many advantages. In particular, its standard of living in 1922 was higher than that of many other countries in Western Europe (Kennedy et al., 1988). In spite of these advantages, its ranking within Europe in terms of standard of living fell over the following 40 years. In the 15 years after the Second World War its economic performance was dismal, and some of this failure must be attributed to the inappropriate policies of successive post-war governments, continuing the protectionist stance of the pre-war years (O'Grada, 1994). With this background, the story of the Irish economy in the 20th century may be better considered as a case study in failure: the current boom is better seen as a belated catching up, consequent on the reversal of the ill-conceived policies of the immediate post-war years, rather than as an "economic miracle". The strategy of economic development adopted in Ireland since 1960 has involved the belated opening up of the goods and the capital markets as part of the long-term process of EU integration. However, there was more to Ireland's belated success than merely a liberalisation of markets. There was also active intervention by the state in investing, also belatedly, in human capital and in directly encouraging foreign direct investment. This two pronged approach has been pursued with consistency by all governments over the last 30 years. There were also a series of "enabling" factors that have facilitated the success of the last decade, as well as some policy mistakes that have rendered the convergence path unnecessarily bumpy. The next Section discusses some of the features that make the Irish experience different from that of its neighbours, factors that help explain its rather different performance in the 1990s. Section 3 discusses the economic record of the last 40 years and Section 4 analyses the process of convergence in the context of a simple model of the labour market.

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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP133.

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Length: 24 pages
Date of creation: Sep 2000
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Handle: RePEc:esr:wpaper:wp133
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  1. Duffy, David & FitzGerald, John & Kearney, Ide & Shortall, Fergal, 1997. "Medium-Term Review 1997-2003, No. 6," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR06, December.
  2. Sexton, J. J. & Nolan, Brian & McCormick, Brian, 1999. "A Review of Earnings Trends in the Irish Economy since 1987," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 1999(4-Decembe), pages 1-27.
  3. O Grada, Cormac, 1995. "Ireland: A New Economic History 1780-1939," OUP Catalogue, Oxford University Press, number 9780198205982, March.
  4. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
  5. Bradley, John & FitzGerald, John & Kearney, Ide, 1992. "The Role of the Structural Funds: Analysis of Consequences for Ireland in the Context of 1992," Research Series, Economic and Social Research Institute (ESRI), number PRS13.
  6. Bradley, John & FitzGerald, John & Honohan, Patrick & Kearney, Ide, 1997. "Interpreting the Recent Irish Growth Experience," Book Chapters, in: Medium-Term Review: 1997-2003, No.6, chapter 3, pages 35-66 Economic and Social Research Institute (ESRI).
  7. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), number PRS28.
  8. Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
  9. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  10. Bradley, John & FitzGerald, John & McCoy, Daniel, 1991. "Medium-Term Review: 1991-1996, No. 4," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR04, December.
  11. Koman, Reinhard & Marin, Dalia, 1997. "Human Capital and Macroeconomic Growth: Austria and Germany 1960-1992," CEPR Discussion Papers 1551, C.E.P.R. Discussion Papers.
  12. John FitzGerald, 1998. "An Irish Perspective on the Structural Funds," Papers WP094, Economic and Social Research Institute (ESRI).
  13. FitzGerald, John & Kearney, Ide & Morgenroth, Edgar & Smyth, Diarmaid, 1999. "National Investment Priorities For The Period 2000-2006," Research Series, Economic and Social Research Institute (ESRI), number PRS33.
  14. Bradley, John & Fitzgerald, John, 1988. "Industrial output and factor input determination in an econometric model of a small open economy," European Economic Review, Elsevier, vol. 32(6), pages 1227-1241, July.
  15. Callan, Tim & Wren, Anne, 1994. "Male-Female Wage Differentials: Analysis and Policy Issues," Research Series, Economic and Social Research Institute (ESRI), number GRS163.
  16. Ide Kearney, 1998. "Is There A Stable Migration Equation For Ireland?," Papers WP097, Economic and Social Research Institute (ESRI).
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