National and Regional Patterns of Convergence and Divergence
Edited by John Adams and Francesco Pigliaru
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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