Economic Change and Restructuring

, Volume 50, Issue 1, pp 21–43 | Cite as

Sectoral change and labour productivity growth during boom, bust and recovery in Central and Eastern Europe

  • Andres Kuusk
  • Karsten StaehrEmail author
  • Uku Varblane


This paper assesses the extent of structural or sectoral change and its importance for aggregate productivity growth during times of boom, bust and recovery. The analysis covers 10 EU countries from Central and Eastern Europe over the years 2001–2012. The reallocation of labour across sectors was substantial during the boom, very extensive in 2009 at the depth of the crisis and modest in the subsequent recovery period. The contribution of sectoral change to aggregate productivity growth is computed using various decomposition methods. Changes in labour productivity within sectors play the dominant role for aggregate productivity growth, while reallocation of labour between sectors is less important. This pattern is found through most of the sample period despite large differences in the extent of sectoral change during the boom, crisis and recovery.


Labour productivity Structural change Reallocation Productivity decomposition 

JEL Classification

L16 E32 P23 



The authors would like to thank, without implicating, two anonymous referees, the editor of Economic Change and Restructuring, Jaan Masso, Jaanika Meriküll and Tairi Rõõm for useful comments to earlier versions of the paper. The paper has also benefitted from comments received at presentations in Eesti Pank, a research seminar at Tartu University and the 2014 EACES conference in Budapest. Financial support from the project IUT20–49 “Structural Change as the Factor of Productivity Growth in the Case of Catching up Economies” is acknowledged. Part of the article was written when Andres Kuusk was a visiting researcher at Eesti Pank. The views expressed are those of the authors and not necessarily those of Pank or other parts of the Eurosystem.


  1. Bailey M, Hulten C, Campbell D (1992) Productivity dynamics in manufacturing plants. Brook Pap Econ Act Microecon 4:187–267CrossRefGoogle Scholar
  2. Baily MN, Bartelsman EJ, Haltiwanger J (2001) Labor productivity: structural change and cyclical dynamics. Rev Econ Stat 83(3):420–433CrossRefGoogle Scholar
  3. Barlevy G (2003) Credit market frictions and the allocation of resources over the business cycle. J Monet Econ 50(8):1795–1818CrossRefGoogle Scholar
  4. Baumol WJ (1967) Macroeconomics of unbalanced growth: the anatomy of urban crisis. Am Econ Rev 57(3):415–426Google Scholar
  5. Bresnahan T, Raff D (1991) Intra-industry heterogeneity and the great depression: the American motor vehicles industry, 1929–1935. J Econ Hist 51(2):317–331CrossRefGoogle Scholar
  6. Brown D, Earle J (2008) Understanding the contribution of reallocation to productivity growth: lessons from a comparative firm-level analysis, IZA Discussion Paper, No. 3683, Institute for the Study of LabourGoogle Scholar
  7. Carree MA (2003) Technological progress, structural change and productivity growth: a comment. Struct Change Econ Dyn 14(1):109–115CrossRefGoogle Scholar
  8. Chansomphou V, Ichihashi M (2013) Structural change, labor productivity growth, and convergence of BRIC countries, IDEC DP2 Series 3, No 5, Graduate School for International Development and Cooperation, Hiroshima University, pp 1–66Google Scholar
  9. Cimoli M, Wellington P, Porcile G (2011) Structural change, technology, and economic growth: Brazil and the CIBS in a comparative perspective. Econ Change Restruct 44(1):25–47CrossRefGoogle Scholar
  10. Connolly R (2012) The determinants of the economic crisis in post-socialist Europe. Europe-Asia Stud 64(1):35–67CrossRefGoogle Scholar
  11. Cörvers F, Meriküll J (2007) Occupational structures across 25 EU countries: the importance of industry structure and technology in old and new EU countries. Econ Change Restruct 40(4):327–359CrossRefGoogle Scholar
  12. Davis SJ, Haltiwanger J (1990) Gross job creation and destruction: microeconomic evidence and macroeconomic implications. In: Blanchard O, Fischer S (eds) NBER macroeconomics annual. MIT Press, Cambridge, MA, pp 123–168Google Scholar
  13. Davis SJ, Haltiwanger J (1999) On the driving forces behind cyclical movements in employment and job reallocation. Am Econ Rev 89(5):1234–1258CrossRefGoogle Scholar
  14. Davis SJ, Faberman J, Haltiwanger J (2012) Labor market flows in the cross section and over time. J Monet Econ 59(1):1–18CrossRefGoogle Scholar
  15. de Vries GJ, Erumban AA, Timmer MP, Voskoboynikov I (2012) Deconstructing the BRICs: structural transformation and aggregate productivity growth. J Comp Econ 40(2):211–227CrossRefGoogle Scholar
  16. Fagerberg J (2000) Technological progress, structural change and productivity growth: a comparative study. Struct Change Econ Dyn 11(4):393–412CrossRefGoogle Scholar
  17. Foster L, Haltiwanger J, Krizan CJ (2001) Aggregate productivity growth: lessons from microeconomic evidence. In: Dean E, Harper M, Hulten C (eds) New developments in productivity analysis. University of Chicago Press, ChicagoGoogle Scholar
  18. Foster L, Grim C, Haltiwanger J (2016) Reallocation in the great recession: cleansing or not? J Labour Econ 34(1):S293–S331CrossRefGoogle Scholar
  19. Griliches Z, Regev H (1995) Firm productivity in Israeli industry: 1979-1988. J Econom 65(1):175–203CrossRefGoogle Scholar
  20. Havlik P (2005) Structural change, productivity and employment in the new EU member states, WIIW Research Report, No. 313, Vienna Institute for International Economic StudiesGoogle Scholar
  21. Havlik P (2013) Structural change and economic growth in the new EU member states, mimeo (GRINCOH delivery P1.4), Vienna Institute for International Economic StudiesGoogle Scholar
  22. Havlik P, Leitner S, Stehrer R (2012) Growth resurgence, productivity catching-up and labour demand in Central and East European Countries. In: Mas M, Stehrer R (eds) Industrial productivity in Europe. growth and crisis. Edward Elgar, Cheltenham, pp 219–264Google Scholar
  23. Kuusk A, Staehr K, Varblane U (2015) Sectoral change and productivity growth during boom, bust and recovery in Central and Eastern Europe, Working Papers of Eesti Pank, No. 2/2015Google Scholar
  24. Maddison A (1987) Growth and slowdown in advanced capitalist economies: techniques of qualitative assessment. J Econ Lit 25(2):649–698Google Scholar
  25. McMillan M, Rodrik D (2011) Globalization, structural change and productivity growth. In: Bacchetta M, Jense M (eds) Making globalization socially sustainable, International Labour Organization and World Trade Organization, pp 49–84Google Scholar
  26. Milesi-Ferretti GM (2012) Global imbalances, capital flows, and the crisis. In: Nowotny E, Mooslechner P, Ritzberger-Grünwald D (eds) European integration in a global economy: CESEE and the impact of China and Russia. Edward Elgar, CheltenhamGoogle Scholar
  27. Mortensen D, Pissarides C (1994) Job creation and job destruction in the theory of unemployment. Rev Econ Stud 61(3):397–415CrossRefGoogle Scholar
  28. Olley S, Pakes A (1996) The dynamics of productivity in the telecommunications industry. Econometrica 64(6):1263–1297CrossRefGoogle Scholar
  29. Osotimehin S Pappada F (forthcoming) Credit frictions and the cleansing effect of recessions, Econ J doi: 10.1111/ecoj.12319
  30. Peneder M (2003) Industrial structure and aggregate growth. Struct Change Econ Dyn 14(4):427–448CrossRefGoogle Scholar
  31. Saccone D, Valli V (2009) Structural change and economic development in China and India. Eur J Comp Econ 6(1):101–129Google Scholar
  32. Schuh S, Triest R (1998) Job reallocation and the business cycle: new facts for an old debate. In: Fuhrer J, Schuh S (eds) Beyond shocks: what causes business cycles. Federal Reserve Bank of Boston, Boston, pp 271–337Google Scholar
  33. Timmer MP, Szirmai A (2000) Productivity growth in Asian manufacturing: the structural bonus hypothesis examined. Struct Change Econ Dyn 11(4):371–392CrossRefGoogle Scholar
  34. Timmer MP, Inklaar R, O’Mahony M, van Ark B (2010) Economic growth in Europe. Cambridge University Press, A Comparative Industry PerspectiveCrossRefGoogle Scholar
  35. van Ark B, O’Mahony M, Timmer M (2012) Europe’s productivity performance in comparative perspective: trends, causes and recent developments. In: Mas M, Stehrer R (eds) Industrial productivity in Europe: growth and crisis. Edward Elgar Publishing, Cheltenham, pp 65–92Google Scholar
  36. Van Biesebroeck J (2005) Firm size matters: growth and productivity growth in African manufacturing. Econ Dev Cult Change 53(3):545–583CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Faculty of Economics and Business AdministrationUniversity of TartuTartuEstonia
  2. 2.Department of Finance and EconomicsTallinn University of TechnologyTallinnEstonia

Personalised recommendations