Convergence and growth. Labour productivity dynamics in the European Union

This paper investigates labour productivity dynamics for 1263 regional economies of the European Union during 1991–2007. Despite convergence is usually found to occur conditionally to economy-wide factors, results reveal a clear process of unconditional convergence for financial and business-related market services. Such an evidence is not found for manufacturing and aggregate productivity, for which long run distribution dynamics are characterized by bimodality. The decomposition of the growth rate of aggregate labour productivity reveals that pure productivity gains drive growth. Structural change plays a minor role in the process, however it halves the contribution of the manufacturing sector for the richest regions, while it enhances the weight of financial market services.