Structural Change in Europe During the Crisis

Transcription

1 olicy rief r. 22, änner 214 tructural hange in urope uring the risis eter avlik esearch economist he Vienna nstitute for nternational conomic tudies (wiiw) his note examines the extent and patterns of structural changes that have occurred in uropean economies during the recent crisis using some stylised facts on changing output and employment structures at detailed sectoral level. ocusing mainly on the new U member states, we compare the performance of various uropean countries by looking at the differentiated impact of the recent crisis on structural shifts in their economy. We start with stylised facts related to output and employment structures at broader sectoral (-2) level and attempt to find out whether there has been a structural convergence (or divergence) of the ew U ember tates () compared to the more advanced old U countries () during the crisis. inally, we provide also some policy conclusions related to the future role of the in the economy of an integrated urope, especially in view of post-crisis growth challenges. he financial crisis adversely affected manufacturing industry more than services particularly in terms of employment and accelerated structural change in favour of the services sector. he latter tendency was more pronounced in the though even here country specific differences were remarkable. he importance of industry in this group of countries remains strong. here has been no U-wide uniform pattern of structural change; the formulation of industrial policy at U level even reaching the 2% target of industry s share in is challenging and hardly attainable. 1. istorical patterns of output and employment restructuring he majority of have inherited an oversized and inefficient industrial sector from the period of central planning. t the same time, the services sector in particular market services such as trade, financial and insurance activities as well as real estate was grossly underdeveloped (andesmann, 2). ue to considerable structural distortions and production inefficiencies, the high degree of industrialisation initially turned out to be a drawback rather than an advantage: it implied, among other problems, also the underdevelopment of other sectors, especially of market services. n all, industry mining as well as manufacturing - suffered over-proportionately from the 'transformational recession' at the beginning of transition in early 199s. y the year 21 only ungary and oland produced more industrial output, by 6% and 7% respectively, than in 199. y contrast, in ulgaria and omania industry shrank by more than 3% during that period, in the altic tates by half, while in the remaining the cumulative output decline amounted to about %. y the year 211, only the zech epublic and omania had a manufacturing industry with a share of more than 2% of about the same as in the two most industrialised old U ember tates () ermany and reland (igure 1). mong the, ustria, ermany and ortugal were the only countries to succeed in maintaining the share of manufacturing in more or less constant over the past two decades (at 2% and 15% respectively of see igure 1); in all other, manufacturing shrank considerably over that period. t the beginning of the current decade, the shares of manufacturing in in the majority of were higher than in West and outh uropean U ember tates. n the majority of U-27 countries, real estate, renting and business activities replaced manufacturing as the largest sector. 1 t the global scale, manufacturing accounted for 17% of in 2 (33% in hina, 28% in outh orea, 2% in apan, 17% in exico and 12% in the United tates see c insey, 212; eutsche ank, 213). Within the U, there is a huge diversity across individual member states in terms of manufacturing importance: value added shares ranged between 5% (yprus) and more than 2% of (zech epublic and reland). he target set by the U ommission to increase the share of industry in to 2% on average by 22 will not be reached (uropean ommissions, 212; see also eutsche ank, 213). employment underwent even more dramatic change. s a rule, employment declined more than output and millions of jobs were lost in the region dur- 1 n the U-27 average, manufacturing value added accounted for less than 15% of in 1999 whereas market services accounted for 5% of see uropean ommission (211), p. 37. nly ulgaria, oland, stonia and atvia have similarly low manufacturing shares. olicy rief r. 22, änner 214 1

2 2. tructural change during the recent crisis ing the first transition decade (andesmann, 2; rinberg et al., 28). 2 nother labour market shock occurred as a consequence of the crisis in 29 and thereafter: with the exception of oland, the share of manufacturing employment dropped in all U countries between 25 and 211 (igure 2). till the manufacturing industry remains an important job provider in many ; the highest employment shares in the manufacturing industry are recorded in the zech epublic, stonia, lovakia and lovenia (more than 2% of total employment in 211 see igure 2). n all bar atvia, yprus and alta, and despite a relative decline in the importance of manufacturing as a job provider in the first years of U membership, manufacturing jobs still account for more than 15% of the total. uch relatively high shares of manufacturing employment have remained only in a few : ortugal, taly, ustria, ermany and inland see igure 2. udged by the current differences in value added and employment shares, ulgaria, stonia and oland have the most labour-intensive manufacturing industry among the while surprisingly omania and ithuania are least labour-intensive. part from these two countries, ermany, the etherlands and ustria also have relatively efficient and more productive manufacturing sector which generates more value added with less employment (igure 3). 3 gain, the differences within the U are huge also in this respect. igure 1: anufacturing value added in % of Y V U Z U ote: orted by the relative size of manufacturing in 211. igure 2: anufacturing employment in % of total ote: orted by the relative size of manufacturing in 211. ata for United ingdom not available. ource: wn calculations based on wiiw atabase and urostat. igure 3: ifferences in manufacturing industry shares: V versus employment shares, year 211, in pp Y V U Z U V Z Y ource: wn calculations based on wiiw atabase and urostat. 2. tructural change during the recent crisis hanges in the importance of manufacturing industry obviously mirror shifts in the importance of other economic sectors. n order to evaluate the overall speed and patterns of structural change we use the structural change indicator which evaluates aggregate shifts in sectoral shares. 4 able 1 provides the results for changes in the structure of U countries (gross 2 or more details on labour market developments during the 199s see Vidovic (22). 3 eedless to say, these differences are affected by the sectoral composition of manufacturing industry branches and their varying capital intensity. he extreme example is reland where more than 2% of total value added was generated in manufacturing while it employed just 11% of total labour in he structural change indicator is calculated from 1-digit ev. 2 data for sectoral gross value added (at current prices) and employment using the formula: t t t * ( sh sh ) ( sh / ) k 2 k 1 2 k 1 k k = individual ev 2 sector sh k = share of sector k in total output or employment (in %) ti = time index, where i denotes different years (28, 211). 2 olicy rief r. 22, änner 214

3 3. onclusions value added - V) and employment in the crisis period n this period, omania, atvia, ithuania and ulgaria experienced the fastest structural change in output among the whereas the output structures of the zech epublic and oland remained most stable. mong the the least restructuring was observed, apart from elgium and weden, again in ustria, ermany and rance whereas structural changes in output were most pronounced in reland, inland and reece. mployment structures in ungary (and alta) as well as in ustria, ermany and rance changed very little. n the other hand, in the altic states and in omania, and even more so in reland and pain, employment structures changed much more during the crisis period (able 1). more detailed picture of structural change patterns is provided by the set of igures 4 and 5 which show sectoral changes in shares of gross value added in (igure 4) and employment (igure 5) during the period for selected U countries for which comparable data are available. tructural change during the crisis differed a lot in individual U member states. part from a certain revival of manufacturing (e.g. in ungary, omania and in the altic tates where the shares of manufacturing ev. 2 code - increased during the period) it was mostly construction () and trade () which suffered most from declining value added shares during the crisis. n contrast, shares of manufacturing declined in the zech epublic, lovakia and lovenia. tructural change was least pronounced in the zech epublic during this period, similarly to a number of (e.g. ustria, rance, ermany, elgium, taly and weden). n oland the only U country which did not experience a decline in during the crisis period a certain return to a traditional structural pattern occurred as a number of productive sectors (energy, construction and trade) managed to increase their shares in while the shares of information and communication services () and especially financial services () had declined. mong the, rance, taly, enmark, inland and weden experienced declining shares of manufacturing while the main burden of the crisis in reece and pain fell on construction. n ustria, very little structural change happened yet the observed sectoral patterns mirrored ermany: a minor drop in the share of manufacturing and financial services in ustria contrasted with an increase of these sectors in ermany. n real estate activities () the opposite was the case: its share in increased in ustria yet dropped in ermany. s far as changes in employment structures are concerned, the most striking development has been the sharp decline, in nearly all, in employment shares of manufacturing and construction (the latter particularly in the altic tates and excepting the zech epublic and oland see the set of igures 5). he most pronounced drop in manufacturing employment occurred in the zech epublic, oland, lovakia, lovenia and omania. on-market services such as administrative and support services activities (), public administration () and education () partly compensated (at least in relative terms) job losses in manufacturing and construction sectors e.g. in oland, the altic states and lovenia. mong the, employment cuts in the construction industry of a similar (relative) magnitude occurred in reece, reland and pain which all suffered from the construction bubble whereas the share of manufacturing jobs dropped nearly everywhere (especially in ustria, ermany, taly, inland, enmark and weden see igure 5). able 1: tructural change during *) mployment /V mployment /V U Z U V U Y *) -indicator, calculated from data according to ev. 2 see footnote 4 for definition. ource: wn calculations based on urostat. 3. onclusions he recent crisis period not only has had strong effects on the levels of economic activity and employment, but it has also affected the sectoral structures of uropean countries. owever, both the structure and the extent of structural shifts were very much differentiated across the individual U countries. rowth of value added was recorded not only in oland (the only U country which did not experience negative output growth during that crisis period), but also in the zech epublic, lovakia, ustria, ermany, rance, the etherlands and weden. n the zech epublic and oland both the manufacturing industry and trade dominated the positive output growth (in lovakia it was just manufacturing). n ustria and weden, there was also a positive growth in manufacturing and trade. inland provides an opposite example as both output and employment sharply dropped during the period. hares of manufacturing industry in range from 5% in yprus to more than 2% in the zech epublic and reland; manufacturing employment shares display a similar variance within the U. espite restructuring and the growing importance of services, manufacturing industry continues to play an important role in the in fact more important than in most especially in terms of employment. he pace of olicy rief r. 22, änner 214 3

4 4. eferences structural change in the has generally been greater than in the majority of. he patterns of structural change in terms of both output and employment have again been very much differentiated, both across time and individual uropean countries. n general, the were affected more by the crisis and structural changes have been more pronounced with regards to employment than to output (implying large shifts in productivity performance), with broad shifts from industry towards services. specially ulgaria, omania and the altic tates have experienced more structural change than the zech epublic, lovakia and lovenia. mong the, economic structures in ustria, ermany and the etherlands have remained more stable than in other countries. he structural shifts during the crisis period have had more differentiated effects and, interestingly, these were not overwhelmingly negative. ositive structural growth effects were recorded in a number of U countries (apart from oland also in the zech epublic, lovakia, ustria, ermany, rance, the etherlands and weden). gain, manufacturing industry and trade provided a key impetus for aggregate growth even in the period of crisis. eclining importance of manufacturing in the zech epublic, lovakia and lovenia was mirrored by growing shares of value added in their services sectors. n ungary and in the altic states shares of manufacturing increased. hares of manufacturing value added shrank also in a number of between 28 and 211 (e.g. taly, rance, inland and weden). n terms of employment, manufacturing shares dropped not only in the majority of, but in most as well. n general, the financial crisis affected manufacturing industry more than services particularly in terms of employment and accelerated structural change in favour of the services sector, especially in the. evertheless, manufacturing industry remains important in this group of countries. oreover, rising shares of manufacturing value added coupled with declining shares of employment imply impressive improvements of manufacturing labour productivity in ungary, omania and the altic states. mong the, a similar pattern of output/employment structural change rising importance and efficiency of manufacturing - was observed only in ermany. he wide diversity of uropean economic structures represents a challenge for the formulation of U-wide industrial policy. he 2% target set by the U ommission for increasing the share of industry by 22 is in all likelihood neither attainable nor owing to a large diversity among U member states - desirable for the U as a whole; it may be attained by some (and possibly also ermany). 4. eferences eutsche ank (213), urope s re-industrialisation. U onitor uropean integration, ovember. uropean ommission (211), U industrial structure 211. rends and erformance,, uxembourg. uropean ommission (212). ' tronger uropean ndustry for rowth and conomic ecovery'. ommunicatios from the ommission to the uropean arliament, ctober, russels ((212)582 final. rinberg,.,. avlik and. avrylyshyn (eds) (28), conomic estructuring and ntegration in astern urope. xperiences and olicy mplications, omos, aden- aden. avlik,.,. eitner and. tehrer (212), rowth resurgence, productivity catching-up and labour demand in entral and ast uropean ountries, in:. as and. tehrer (eds), ndustrial roductivity in urope. rowth and risis, dward lgar. andesmann,. (2), tructural hange in the ransition conomies, 1989 to 1999', conomic urvey of urope, U, eneva, o. 2/3, pp as,. and. tehrer (eds) (212), ndustrial roductivity in urope. rowth and risis, dward lgar. c insey lobal nstitute (212), anufacturing the future: he next era of global growth and innovation. immer,..,. nklaar,. ahony and. van rk (2), conomic rowth in urope. omparative ndustry erspective, ambridge University ress. Vidovic,. (22), he ervices ectors in entral and astern urope, wiiw esearch eports, he Vienna nstitute for nternational conomic tudies (wiiw), o. 289, eptember. utor: eter avlik esearch economist he Vienna nstitute for nternational conomic tudies (wiiw) elefon: mail: havlik@wiiw.ac.at mpressum: ie olicy riefs erscheinen in unregelmäßigen bständen zu aktuellen außenwirtschaftlichen hemen. erausgeber ist das ompetenzzentrum orschungsschwerpunkt nternationale Wirtschaft (W). as W wird im uftrag des undesministeriums für Wirtschaft, amilie und ugend (W) im ahmen der nternationalisierungsoffensive der undesregierung von drei nstituten (W, wiiw, W) betrieben. s bietet den Zugang zu internationalen ußenwirtschafts-atenbanken, eine orschungsplattform und nformationen zu außenwirtschaftsrelevanten hemen. ür die nhalte der olicy riefs sind die utornnen verantwortlich. ontakt: W-rojektbüro rsenal bjekt 2-3 Wien elefon: mail: fiw-pb@fiw.at Webseite: 4 olicy rief r. 22, änner 214

5 olicy rief r. 22, änner igure 4: tructural change in selected U states sectoral shares in (in pp), ev. 2 codes description see below igure 4 (cntd) ource: wiiw calculations based on urostat. -1, -,5,,5 1, 1,5 ungary, , 2-1, -,5,,5 1, oland, , lovakia, , lovenia, , omania, , U ulgaria, , 2 () ithuania, , atvia, , stonia, , 2-1, -,5,,5 1, zech epublic, , 2

6 6 olicy rief r. 22, änner 214 igure 4 (cntd) ource: wiiw calculations based on urostat reece, , pain, , 2-2, -1,, 1, taly, , 2-1,5-1, -,5,,5 1, rance, , 2-1,5-1, -,5,,5 1, ermany, , 2-1,5-1, -,5,,5 1, ustria, , 2 -,6 -,4 -,2,,2,4 weden, , inland, , 2-2, -1,, 1, enmark, , 2

7 olicy rief r. 22, änner igure 5: tructural change sectoral shares in employment (in pp), ev. 2 codes description see below ource: wiiw calculations based on urostat zech epublic, , oland, , stonia, , atvia, , 2-1, -,5,,5 1, 1,5 ungary, , lovakia, , lovenia, , omania, , 2) ithuania, , U ulgaria, , 2 ()

8 8 olicy rief r. 22, änner 214 igure 5 (cntd) ource: wiiw calculations based on urostat reece, , reland, , 2-2, -1,, 1, taly, , 2-1,, 1, 2, etherlands, , 2-1, -,5,,5 1, ustria, , 2-1, -,5,,5 1, ermany, , 2-2, -1,, 1, 2, elgium, , 2-2, -1,, 1, inland, , 2-2, -1,5-1, -,5,,5 1, 1,5 enmark, , 2-2, -1,, 1, weden, , 2

9 2 ( ev. 2) classification codes griculture, forestry and fishing ining and quarrying anufacturing lectricity, gas, steam and air cond.supply Water supply, sewerage, waste management, etc onstruction Wholesale, retail trade, repair of motor vehicles ransportation and storage ccommodation and food service activities nformation and communication inancial and insurance activities eal estate activities rofessional, scientific and technical activities dministrative and support service activities. ublic admin., defense, compulsory social services ducation uman health and social work activities rts, entertainment and recreation ther service activities ctivities of households as employers & for own use U ctivities of extraterritorial organizations & bodies olicy rief r. 22, änner 214 9