Productivity, innovation and ICT in Old and New Europe

Abstract.This paper investigates the productivity performance of CEE countries vis-à-vis the EU-15 during the 1990s to detect sources of convergence between the two regions. The paper shows that changes in labour intensity have been an important source of productivity convergence during the 1990s, and are likely to remain so in the near future. It is also found that despite lower income levels, ICT capital in the CEE-10 has contributed as much to labour productivity growth as in the EU-15. Industry analysis shows that manufacturing industries that have invested heavily in ICT have been key to the restructuring process. As such ICT may therefore have been an important source of growth but probably temporary source of convergence. In the longer run the impact of ICT on growth will have to come primarily from its productive use in services. The paper therefore includes a New Economy Indicator that reflects the existence of conducive environment for continued ICT investment and diffusion. It shows that further reforms are much needed for CEE countries to enter a second convergence phase in the coming decades.

[1]  D. Pilat.  The economics of catch up : the experience of Japan and Korea , 1993 .

[2]  Aart Kraay,et al.  Governance Matters Iii: Governance Indicators for 1996-2002 , 2003 .

[3]  Pierre van der Eng.  Economic benefits from colonial assets , 1998 .

[4]  M. Timmer.  Catch Up Patterns in Newly Industrializing Countries. An International Comparison of Manufacturing Productivity in Taiwan , 1998 .

[5]  N. Mulder,et al.  The International Comparison of Performance in Distribution: Value Added, Labour Productivity and PPPs in Mexican and US Wholesale and Retail Trade 1975/7 , 1993 .

[6]  Bart van Ark,et al.  ICT investments and growth accounts for the European Union , 2002 .

[7]  A. Maddison,et al.  An International Comparison of Real Output, Purchasing Power and Labour Productivity in Manufacturing Industries: Brazil, Mexico and the USA in 1975 , 1994 .

[8]  B. Ark,et al.  New estimates of labour productivity in the manufacturing sectors of Czech Republic, Hungary and Poland , 2002 .

[9]  A. Hofman.  Latin American economic development.: A causal analysis in historical perspective , 1998 .

[10]  Bart van Ark,et al.  Changing Gear: Productivity, ICT and Service Industries in Europe and the United States , 2002 .

[11]  Marcin Piatkowski.  The new economy and economic growth in transition economies: The relevance of institutional infrastructure , 2002 .

[12]  N. Mulder.  Output and Productivity in Brazilian Distribution : A Comparative View , 1994 .

[13]  B. Ark.  Economic Growth and Labour Productivity in Europe: Half a Century of East-West Comparisons , 1999 .

[14]  Rainer Fremdling,et al.  Industrial Revolution and Scientific and Technological Progress , 1997 .

[15]  M. Landesmann.  Structural Change in the Transition Economies, 1989 to 1999 , 2000 .

[16]  Dale W. Jorgenson,et al.  Information Technology, Education, and the Sources of Economic Growth across U.S. Industries , 2002 .

[17]  Marcel P. Timmer,et al.  The Employment Effects of the ‘New Economy’. A Comparison of the European Union and the United States , 2003, National Institute Economic Review.

[18]  Mary O'Mahony,et al.  EU Productivity and Competitiveness: An Industry Perspective Can Europe Resume the Catching-up Process? , 2003 .

[19]  J. Sleifer.  Separated unity: the East and West German industrial sector in 1936 , 1999 .

[20]  B. Ark.  Issues in Measurement and International Comparison of Productivity - An Overview , 1996 .

[21]  Bart van Ark,et al.  Three phases of Dutch economic growth and technological change, 1815-1997 , 1999 .

[22]  Ben Gales.  In Foreign Parts : Free-Standing Companies in the Netherlands around the First World War , 1994 .

[23]  B. Ark.  Sectoral growth accounting and structural change in postwar Europe , 1995 .

[24]  Harry X. Wu.  Comparative labour productivity performance in Chinese manufacturing, 1952-1997 : an ICOP PPP approach , 2001 .

[25]  M. Timmer.  On the Reliability of Unit Value Ratios in International Comparisons , 1996 .

[26]  Paul Schreyer,et al.  Computer Price Indices and International Growth and Productivity Comparisons , 2002 .

[27]  Nanno Mulder,et al.  Transport and Communications Output and Productivity in Brazil and the USA, 1950-1990 , 1995 .

[28]  N. Mulder.  Transport and Communication in Mexico and the United States: Value Added, Purchasing Power Parities and Productivity , 1994 .

[29]  H. D. Jong,et al.  Comparative productivity and structural change in Belgian and Dutch manufacturing: 1936-1987 , 1997 .

[30]  M. Lavigne.  Grzegorz W. Kolodko, From Shock to Therapy, The Political Economy of Postsocialist Transformation , 2000 .

[31]  Prices, Real Value Added and Productivity in Dutch Manufacturing, 1921-1960 , 1993 .

[32]  Bart van Ark,et al.  "Changing gear": productivity, ICT and services: Europe and the United States , 2002 .

[33]  Harry X. Wu,et al.  "Losing ground" : Japanese labour productivity and unit laboour cost manufacturing in comparison to the U.S. , 2003 .

[34]  Marcin Piatkowski,et al.  Does ICT Investment Matter for Growth and Labor Productivity in Transition Economies? , 2003 .

[35]  Francesco Daveri,et al.  The New Economy in Europe (1992-2001) , 2002 .

[36]  Paul Krugman,et al.  The Myth of Asia's Miracle , 1994 .

[37]  Marcel P. Timmer,et al.  IT in the European Union: Driving Productivity Divergence? , 2003 .

[38]  A. Maddison,et al.  A Generalized Approach to International Comparison of Agricultural Output and Productivity , 1996 .

[39]  Aart Kraay,et al.  Government Matters III : Governance Indicators for 1996-2002 , 2003 .

[40]  Marcin Piatkowski,et al.  The 'New Economy' and Economic Growth in Transition Economies , 2002 .

[41]  V. Tassenaar.  Regional differences in standard of living in the Netherlands, 1800-1875: a study based on anthropometric data , 1995 .

[42]  A. Colecchia,et al.  ICT Investment and Economic Growth in the 1990s: Is the United States a Unique Case? A Comparative Study of Nine OECD Countries , 2002 .

[43]  B. Ark,et al.  Comparative Productivity in East and West German Manufacturing before Reunification , 1993 .

[44]  Bart van Ark,et al.  Productivity and employment growth: an empirical review of long and medium run evidence : background working paper for the world employment report 2004 , 2004 .

[45]  Mary O'Mahony,et al.  ICT and Europe's Productivity Performance: Industry-Level Growth Account Comparisons with the United States , 2005 .

[46]  R. Fremdling.  Anglo-German rivalry on coal markets in France, the Netherlands and Germany, 1850-1913 , 1995 .

[47]  Productivity and employment growth , 2004 .

[48]  Peter Vikström.  Long term patterns in Swedish growth and structural change, 1870-1990 , 2001 .

[49]  H. D. Jong,et al.  Accounting for economic growth in the Netherlands since 1913 , 1996 .

[50]  G. Jong.  An International Comparison of Real Output and Labour Productivity in Manufacturing in Ecuador and the United States , 1994 .

[51]  H. D. Jong,et al.  Industrial output and labour productivity in the Netherlands, 1913-1929: some neglected issues , 1994 .

[52]  P. Groote,et al.  Can growth theory contribute to our understanding of nineteenth century economic dynamics , 1994 .

[53]  H. Brinkman,et al.  GDP per capita and the biological standard of living in contemporary developing countries , 1997 .

[54]  Marcel P. Timmer,et al.  The 'appropriate technology' explanation of productivity growth differentials: an empirical approach , 2005 .

[55]  B. Ark.  The Productivity Problem of the Dutch Economy: Implications for Economic and Social Policies and Business Strategy , 2003 .

[56]  Productivity in French manufacturing: an international comparative perspective , 1994 .

[57]  B. Ark,et al.  The Delta-Model Revisited: Recent trends in the structural performance of the Dutch economy , 2000 .

[58]  Patrice Muller,et al.  Internet Use in Transition Economies: Economic and Institutional Determinants , 2002 .

[59]  Ronald M. Albers.  Human Capital and Economic Growth: Operationalising Growth Theory, with Special Reference to the Netherlands in the 19th Century" , 1997 .

[60]  Holland Hunter,et al.  Economic Backwardness in Historical Perspective , 1963 .

[61]  Robert J. Hill,et al.  Constructing Price Indexes across Space and Time: The Case of the European Union , 2004 .

[62]  A. Maddison.  Economic Growth and Standards of Living in the Twentieth Century , 1994 .

[63]  M. Abramovitz.  Catching Up, Forging Ahead, and Falling Behind , 1986, The Journal of Economic History.

[64]  George R. G. Clarke,et al.  Effect of Enterprise Ownership and Foreign Competition on Internet Diffusion in the Transition Economies , 2004 .

[65]  A. Szirmai,et al.  Growth and Divergence in Manufacturing Performance in South and East Asia , 1997 .

[66]  R. Fremdling.  Foreign trade-transfer-adaptation: the British iron making technology on the continent (Belgium and France) , 2002 .

[67]  Alwyn Young,et al.  The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience , 1994 .

[68]  G. Jong.  Canada's Post-War Manufacturing Performance: A Comparison with the United States , 1996 .

[69]  Marcel P. Timmer,et al.  The Impact of Computers on Productivity in the Trade Sector: Explorations with Dutch Microdata , 1999 .

[70]  B. Ark,et al.  Asia's Productivity Performance and Potential: The Contribution of Sectors and Structural Change , 2002 .

[71]  A. Maddison,et al.  The International Comparison of Value Added, Productivity and Purchasing Power Parities in Agriculture , 1993 .

[72]  Stefano Scarpetta,et al.  Regulation, Productivity and Growth: OECD Evidence , 2003 .

[73]  Gjalt de Jong,et al.  Innovation in services: overview of data sources and analytical structures , 1999 .

[74]  P. Havlík.  Restructuring of manufacturing industry in the central and east european countries , 2003 .

[75]  P. V. Mulligen.  Alternative price indices for computers in the Netherlands using scanner data , 2003 .

[76]  D. S. Prasada Rao,et al.  Multilateralisation of manufacturing sector comparisons: issues, methods and empirical results , 2000 .

[77]  J. Sleifer.  A benchmark comparison of East and West German industrial labour productivity in 1954 , 2002 .

[78]  N. Mulder.  New Perspectives on Service Output and Productivity: A Comparison of French and US Productivity in Transport, Communications Wholesale and Retail Trade , 1994 .

[79]  Marcin Piatkowski.  The Contribution of ICT Investment to Economic Growth and Labor Productivity in Poland 1995-2000 , 2003 .

[80]  Gascard,et al.  The New Economy beyond the Hype Organisation for Economic Co-operation and Development , 2022 .

[81]  M. Timmer,et al.  Manufacturing Performance in Indonesia, South Korea and Taiwan before and after the Crisis. An international Perspective, 1980-2000 , 2003 .

[82]  Stefano Scarpetta,et al.  Regulation, Productivity and Growth , 2003 .

[83]  I. Lee,et al.  Information Technology and Productivity Growth in Asia , 2003 .