TY  - JOUR
AU  - Caselli, Francesco
AU  - Tenreyro, Silvana
TI  - Is Poland the Next Spain?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11045
PY  - 2005
Y2  - January 2005
DO  - 10.3386/w11045
UR  - http://www.nber.org/papers/w11045
L1  - http://www.nber.org/papers/w11045.pdf
N1  - Author contact info:
Francesco Caselli
Department of Economics
London School of Economics
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: (44) (0) 2079557498
E-Mail: f.caselli@lse.ac.uk

Silvana Tenreyro
London School of Economics
Department of Economics
Houghton St
St. Clement's Building, S.600
London, WC2A 2AE
United Kingdom
Tel: 44-2079556018
E-Mail: S.Tenreyro@lse.ac.uk
M1  - published as Francesco Caselli, Silvana Tenreyro. "Is Poland the Next Spain?," in Richard H. Clarida, Jeffrey Frankel, Francesco Giavazzi and Kenneth D. West, editors, "NBER International Seminar on Macroeconomics 2004" The MIT Press (2006)

AB  - We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East's income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.
ER  -