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Income convergence prospects in Europe: Assessing the role of human capital dynamics

Author

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  • Jesus Crespo Cuaresma

    () (Department of Economics, Vienna University of Economics and Business)

  • Miroslava Havettova

    () (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava)

  • Martin Labaj

    () (Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava and Institute of Economic Research, Slovak Academy of Sciences)

Abstract

We employ income projection models based on human capital dynamics in order to assess quantitatively the role that educational improvements are expected to play as a driver of future income convergence in Europe. We concentrate on income convergence dynamics between emerging economies in Central and Eastern Europe and Western European countries during the next 50 years. Our results indicate that improvements in human capital contribute significantly to the income convergence potential of European emerging economies. Using realistic scenarios, we quantify the effect that future human capital investments paths are expected to have in terms of speeding up the income convergence process in the region. The income projection exercise shows that the returns to investing in education in terms of income convergence in Europe could be sizeable, although it may take relatively long for the poorer economies of the region to rip the growth benefits.

Suggested Citation

  • Jesus Crespo Cuaresma & Miroslava Havettova & Martin Labaj, 2012. "Income convergence prospects in Europe: Assessing the role of human capital dynamics," Department of Economics Working Papers wuwp143, Vienna University of Economics and Business, Department of Economics.
  • Handle: RePEc:wiw:wiwwuw:wuwp143
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    Cited by:

    1. Miroslav Radiměřský & Vladimír Hajko, 2016. "Beta Convergence in the Export Volumes in EU Countries," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 2(1), pages 64-69, November.
    2. World Bank, 2012. "EU11 Regular Economic Report : Coping with External Headwinds," World Bank Other Operational Studies 11896, The World Bank.
    3. Crespo Cuaresma, Jesus & Loichinger, Elke & Vincelette, Gallina A., 2016. "Aging and income convergence in Europe: A survey of the literature and insights from a demographic projection exercise," Economic Systems, Elsevier, vol. 40(1), pages 4-17.
    4. Mihaela Simionescu, 2014. "A Comparative Analysis Of Real And Predicted Inflation Convergence In Cee Countries During The Economic Crisis," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 6(2), pages 142-155, July.
    5. Matkowski, Zbigniew & Prochniak, Mariusz & Rapacki, Ryszard, 2016. "Real Income Convergence between Central Eastern and Western Europe: Past, Present, and Prospects," EconStor Conference Papers 146992, ZBW - German National Library of Economics.
    6. Jesus Crespo Cuaresma & Peter Huber & Doris A. Oberdabernig & Anna Raggl, 2015. "Migration in an ageing Europe: What are the challenges?," WWWforEurope Working Papers series 79, WWWforEurope.

    More about this item

    Keywords

    Economic growth; income convergence; human capital; income projections; Europe; emerging economies;

    JEL classification:

    • 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
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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