Athina Zervoyianni and Athanasios Anastasiou
Department of Economics, University of Patras, Greece
athina@upatras.gr; A.Anastasiou@upatras.gr
ABSTRACT
Using a Bayesian approach involving Markov-Chain Monte-Carlo estimation methods, we examine the effects on growth and convergence in European Union countries and other OECD economies since the 1980s of a set of variables, including investment in knowledge, labour-market institutions and policies, product-market integration and the government-debt history. Our results provide robust evidence suggesting that not all labour-market flexibility measures and budget-deficit restrictions have a positive effect on real growth, and this holds even if other determinants of growth rates are allowed for. For example, the degree of wage-bargaining coordination and the strictness of employment-protection legislation have a humped-shaped effect on output growth, while higher government-debt levels associated with increased infrastructure investment do not adversely affect growth. At the same time, we find that product-market integration and spending on education and R&D have had a robust favourable influence on economic growth in the countries of our sample, increasing the speed of convergence of real per capita incomes. These results have important policy implications, given the existing concern about the growth prospects of many economies in the coming years.
JEL Classification: F43, F16, F15, J08
Key words: economic growth, economic integration, labour markets
Corresponding author
Athina Zervoyianni
Department of Economics
University of Patras
University Campus, Rio
26500 Patras, Greece
e-mail: athina@upatras.gr