Is the Convergence Party Over? Labour Productivity and the Technology Gap in Europe

Closing the technology gap to reduce labour productivity disparities across Europe is crucial for the European cohesion policy. This article explores the sources of labour productivity growth in Europe over the period 1993-2007 in light of the enlargement process. Labour productivity growth has been mostly driven by capital accumulation. New Member States have significantly reduced their inefficiency and their technology gap. Disparities in the levels of labour productivity are still substantial and, to a considerable extent, they can be attributed to technology gap differences. This raises concerns about the process of convergence in labour productivity in Europe and suggests further policies aimed at reducing the technology gap.