Manufacturing Productivity Growth across European Union States: 1978 – 94

Abstract

This paper explores the sources of rising manufacturing output and labour productivity across thirteen European Union states between 1978 and 1994. Despite the severe deindustrialisation trends of the past two decades, manufacturing output continued to expand and thus contribute to overall economic growth. The analysis here reveals several key aspects of this process. First, the geographical distribution of the sector across Europe for the entire period is characterised by considerable stability. Contrary to some initial fears, the slow but steady integration process has not led to the wholesale migration of manufacturing activity from one member state to another. Second, total factor productivity increases seem to account for most of the recorded output and labour productivity gains. Third, there is, however, significant spatial variation in the performance of individual industrial bases. Smaller countries' growth rates appear to surpass those of the larger states, and the European South demonstrates higher growth rates than the North. Nevertheless, and this is the final point, there is an absence of clear signs of convergence. Geographical inequalities continue to hold, as the technology gap between advanced and lagging economies remains as wide as ever. Such findings raise some important issues about the role of EU regional policies and the challenges that they face at the dawn of the 21st century.