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Differences in Human Capital and Openness to Trade as Barriers to Growth and Convergence in the EU

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Book cover The Euro and the Crisis

Part of the book series: Financial and Monetary Policy Studies ((FMPS,volume 43))

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Abstract

Growth in Southern European EU member states has been weak and is resulting in divergent growth paths relative to the richer EU countries. Convergence in terms of income levels requires more rapid growth in the economically weaker member states but it can succeed or fail depending on possessing necessary human capital and openness to trade levels, fundamental determinants of innovation and diffusion activities that drive productivity growth and thus long-run per capita income growth and convergence. We apply a thresholds regression approach to examine the growth and convergence process of 11 EU member states over the period 1960–2014 using human capital and openness to trade proxies as thresholds identification variables allowing us to determine specific policy implications for different human capital/trade regimes. Our findings confirm the existence of different regimes according to trade levels corresponding to different growth performances due to technological catch-up, external competitiveness, the weight of tradable goods, physical capital accumulation, government size and public debt.

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Notes

  1. 1.

    For example, exogenous growth models emphasize the importance of human capital for growth through factor accumulation to be used in final goods production (see Mankiw et al. 1992), while more recent endogenous growth models emphasize its importance for productivity growth (Lucas 1988; Romer 1990; Nelson and Phelps 1966).

  2. 2.

    We considered a wide set of potential control variables besides the ones retained in our preferred regressions, such as different proxies of human capital, openness to trade, the capital stock, different shares for non-tradables, and price deflators. Details on these variables and associated estimated regressions can be obtained from the authors.

  3. 3.

    Notice that new variables such as first difference variables or variables with lags of order one or two were not included in Table 1 for economy of space reasons.

  4. 4.

    Data will be available upon request from the authors.

  5. 5.

    See also Robert Hansen’s homepage: http://www.ssc.wisc.edu/~bhansen/

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Authors and Affiliations

  1. GEMF – Group for Monetary and Financial Studies and Faculty of Economics, University of Coimbra, Av. Dias da Silva 165, 3004-512, Coimbra, Portugal

    Marta C. N. Simões, João A. S. Andrade & Adelaide P. S. Duarte

Authors
  1. Marta C. N. Simões
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  2. João A. S. Andrade
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  3. Adelaide P. S. Duarte
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Correspondence to Marta C. N. Simões .

Editor information

Editors and Affiliations

  1. CIDEEFF - School of Law, University of Lisbon, Alameda da Universidade, Lisbon, Portugal

    Nazaré da Costa Cabral

  2. CIDEEFF - School of Law, University of Lisbon, Alameda da Universidade, Lisbon, Portugal

    José Renato Gonçalves

  3. CIDEEFF - School of Law, University of Lisbon, Alameda da Universidade, Lisbon, Portugal

    Nuno Cunha Rodrigues

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Simões, M.C.N., Andrade, J.A.S., Duarte, A.P.S. (2017). Differences in Human Capital and Openness to Trade as Barriers to Growth and Convergence in the EU. In: da Costa Cabral, N., Gonçalves, J., Cunha Rodrigues, N. (eds) The Euro and the Crisis. Financial and Monetary Policy Studies, vol 43. Springer, Cham. https://doi.org/10.1007/978-3-319-45710-9_6

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