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Economic Growth and Change

Economic Growth and Change

National and Regional Patterns of Convergence and Divergence

Edited by John Adams and Francesco Pigliaru

The pursuit of economic growth is at the top of every nation’s policy agenda at the end of the 20th century. This authoritative and comprehensive book goes beyond the narrowly-based convergence model of economic growth by considering global, national and regional patterns of growth from a comparative perspective.

Chapter 8: European regional growth: do sectors matter?

Raffaele Paci and Francesco Pigliaru

Subjects: development studies, development economics, economics and finance, development economics, regional economics


Page 213  8. European regional growth:  do sectors matter?  Raffaele Paci and Francesco Pigliaru  8.1 INTRODUCTION*  The recent theoretical and empirical literature on economic growth has generally neglected the role played by the sectoral mix and structural change in aggregate  growth. This shortfall is hardly surprising since most studies are based on Solow’s one­sector growth model and on its prediction that initially poorer economies grow  faster than richer ones, due to decreasing return to capital (Barro and Sala­i­Martin, 1991; Mankiw, Romer and Weil, 1992). In other theoretical approaches, the  determinants of an economy’s sectoral mix and of its changes over time are assumed to have an impact on the growth performance. The reasons for this range from the  values of marginal factor productivity being not continuously equalized across the existing activities, as in Lewis (1954) and Kaldor (1966, 1968); to the existence of  significant differences across sectors in terms of accumulation of technological knowledge, as in several equilibrium models of endogenous growth and trade (see Lucas,  1988; Grossman and Helpman, 1991, among many others).  Is this emphasis on sectoral composition relevant for the analysis of regional growth in Europe? In our opinion, the answer to this question is positive. The assumptions  of the aggregate neoclassical growth model are perhaps more appropriate for the analysis of mature and well integrated economies. This condition is not satisfied across  the European regional economies because of the still remarkable differences of some of their structural characteristics. For instance, in the 1980s...

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