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What explains the differences in income and labour utilisation and drives labour and economic growth in Europe? A GDP accounting perspective

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  • Gilles Mourre

Abstract

The paper decomposes GDP both in terms of level per capita and growth rate, so as to identify the sources of income differences and of economic growth for all EU27 member states. This accounting approach has multiple advantages, although a number of substantial caveats should be borne in mind when interpreting the results. In particular, the detailed accounting approach helps distinguish exogenous from policy-influenced growth drivers. The combination of lower per-hour productivity and lower labour utilisation is the cause of relatively low per capita GDP in euro area and EU15 countries, while weak productivity remains the main concern in the new member states. GDP growth rate has been broken down into 12 items, including an indicator of labour quality, based upon the composition of employment by educational attainment.

Suggested Citation

  • Gilles Mourre, 2009. "What explains the differences in income and labour utilisation and drives labour and economic growth in Europe? A GDP accounting perspective," European Economy - Economic Papers 2008 - 2015 354, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0354
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    References listed on IDEAS

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    Cited by:

    1. Richard Harris & John Moffat, 2011. "Plant-level Determinants of Total Factor Productivity in Great Britain, 1997-2006," SERC Discussion Papers 0064, Spatial Economics Research Centre, LSE.
    2. Dana Kloudová, 2016. "Does Using Nairu In The Production Function Influence Estimation Of Potential Output And Output Gap?," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(2), pages 1-21, June.
    3. Lorenzo Codogno & Francesco Felici, "undated". "Assessing Italy's Reform Challenges:What Do Growth Accounting and Structural Indicators Say?," Working Papers 8, Department of the Treasury, Ministry of the Economy and of Finance.
    4. Richard Harris & John Moffat, 2012. "Total Factor Productivity Growth in Local Economic Partnership Regions in Britain, 1997-2008," SERC Discussion Papers 0112, Spatial Economics Research Centre, LSE.
    5. International Monetary Fund, 2012. "Republic of Croatia; Selected Issues," IMF Staff Country Reports 12/303, International Monetary Fund.
    6. Richard Harris & John Moffat, 2015. "Total Factor Productivity Growth in Local Enterprise Partnership Regions in Britain, 1997-2008," Regional Studies, Taylor & Francis Journals, vol. 49(6), pages 1019-1041, June.
    7. Louis N. Christofides & Maria Michael, 2010. "Structural Weaknesses in the Economy of Cyprus: How Do We Score Relative to the EU15?," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 4(2), pages 43-71, December.
    8. Gerba, Eddie, 2015. "Have the US macro-financial linkages changed? The balance sheet dimension," LSE Research Online Documents on Economics 59886, London School of Economics and Political Science, LSE Library.
    9. Dana Kloudová, 2016. "Calculation Of Capital-To-Output Ratio In A Production Function By Estimating Potential Output And Output Gap: The Case For The Czech Republic And Slovakia," Proceedings of Economics and Finance Conferences 3206128, International Institute of Social and Economic Sciences.
    10. Dana Kloudova, 2015. "Estimating Output Gap and Potential Output for Russia and Its Usefulness by Forecasting Inflation," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(1), pages 45-59, March.
    11. Kloudová Dana, 2014. "Estimating Output Gap and Potential Output for Russia and Its Uselfulness by Forecasting Inflation," Proceedings of Economics and Finance Conferences 0402134, International Institute of Social and Economic Sciences.
    12. Bergljot B Barkbu & Jesmin Rahman & Rodrigo O. Valdes, 2012. "Fostering Growth in Europe Now," IMF Staff Discussion Notes 12/07, International Monetary Fund.

    More about this item

    Keywords

    GDP accounting; European Union; Aggregate employment; Average hours worked; Quality of Labour; Mourre; What explains the differences in income and labour utilsation and drives labour and economic growth in Europe? A GDP accounting perspective;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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