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THE END OF CONVERGENCE: MARKET SERVICES PRODUCTIVITY IN EUROPE

THE END OF CONVERGENCE: MARKET SERVICES PRODUCTIVITY IN EUROPE. Robert Inklaar, Marcel Timmer and Bart van Ark Groningen Growth and Development Centre, University of Groningen.

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THE END OF CONVERGENCE: MARKET SERVICES PRODUCTIVITY IN EUROPE

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  1. THE END OF CONVERGENCE:MARKET SERVICES PRODUCTIVITY IN EUROPE Robert Inklaar, Marcel Timmer and Bart van Ark Groningen Growth and Development Centre, University of Groningen This paper is written as part of the “EU KLEMS project on Growth and Productivity in the European Union”. This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

  2. Convergence norm in post-war period Post-war period

  3. But no more since mid-1990s

  4. Main findings • Convergence has stopped in Europe and between EU and US in mid-1990s • Market services important source • Skills, ICT and regulation are not the source of this divergence • Technology transfer in services still not well understood

  5. Market services important source of divergence

  6. Data on MFP growth and levels • Use MFP growth from EU KLEMS • Use output PPPs and labour and capital data to come up with input PPPs (45xII, 2xL, 6xK) • Multilateral MFP level comparison for 1997, extrapolated using relative growth • Look at MFP level relative to the leading country

  7. And also break in convergence

  8. More formal analysis Unconditional convergence: Positive: convergence Conditional convergence: Innovation Imitation

  9. Unconditional convergence stopped • Country, industry and year dummies included • MFP gap lagged once • Same picture for later break years • Period-average MFP growth => insensitive to MFP measures

  10. Human capital: some effect on convergence? • After 1995: closer to the frontier => more impact from human capital • No effect on innovation • Not consistent across measures, sensitive to break year • At best partial explanation

  11. Regulation: conflicting evidence for earlier period

  12. ICT: no additional impact on MFP

  13. Conclusions • End of convergence, but why? • Technology transfer in manufacturing • R&D + skills (Griffith et al., 2004) • Technology transfer in services • Organizational change, management practices? • How to find out? • Measurement of intangibles

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