Matjaz Novak, M.Sc, Department of Economics, Faculty of Management, University of Primorska, Cankarjeva ul. 5, Koper, 6000, Slovenia and Maks Tajnikar, Ph.D, Department of Economic Theory and Policy, Faculty of Economics, University of Ljubljana, Kardeljeva pl. 17, Ljubljana, 1000, Slovenia.
1. Objectives
There are two basic objectives of the proposed paper. First, we will present empirical data, which indicate an interesting feature of real convergence between new and old EU-member states. The recognized feature is related to the problem of accelerating divergence of labor productivity that progresses in favor of the old EU-member states. Second, in order to explain this divergence of labor productivity we will analyze technology convergence and equalities in human capital endowments between exposed groups of economies. As extension to this we will also provide a comparative empirical analysis of technical efficiency between exposed groups of economies. Our main aim is to show that divergence of labor productivity between old and new EU-member states can be explain only by differences in technical efficiency.
2. Data and methods used
From the methodological point of view all empirical estimates are related to the aggregate production function. We will estimate its parameters by using convenient econometric techniques applicable for panel data. The panel will include data for time period 1996–2004 and will be related to 23 EU-member states: Belgium, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Latvia, Lithuania, Luxembourg, Hungary, Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Sweden and United Kingdom.
3. Results
The obtained results indicated that the difference between new and old EU-member states is not significantly different in relation to technological progress and human capital endowments. However, the estimates of technical efficiency indicate a significant difference in favor of old EU-member states. This explains the observed divergence of labor productivity between old and new EU-member states as a consequence of rising technical inefficiency in the case of new member countries.
4. Conclusions
We will conclude the article with discussion on appropriate economic policy recommendations that should be focused towards removing the recognized problem of technical inefficiency in case of new EU-member states.