Research Discussion Papers, Bank of Finland
How can growth be accelerated in Europe?
Abstract: This paper deals with economic growth in Europe. The
special emphasis is in key institutional factors that are commonly assumed
to affect aggregate growth: functioning of labor markets, availability of
labor and capital, and the size of government. For more explicit measures,
we use the data on profit rates, average working hours, dependency ratios,
tax rates and other measures of the size of government (e.g. employment
shares), measures of price competitiveness, and finally the structure of
production. The data also include the terms of trade, interest rates, and
foreign demand as control variables. Empirical analysis makes use of
cross-country panel data for EU15 countries for 1971–2010. The results
suggest that profitability and competitiveness do indeed constitute the
main determinants of growth. However, also other variables like working
hours and the size of government appear to affect growth in an important
manner. All in all, slowdown of growth in Europe does not appear to be a
paradox but at least with some margin something can be done in achieving
more ambitious growth rates.
Keywords: growth; working hours; taxes; competitiveness; (follow links to similar papers)
JEL-Codes: O40; O43; (follow links to similar papers)
15 pages, October 24, 2012
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