A quantile regression analysis of growth and convergence in the EU: potential implications for Portugal

Abstract

This paper applies a quantile regression approach to examine the growth and convergence process of fourteen EU member states over the period 1986-2009. From the results of the estimation of an accounting growth regression we conclude that an increase in the weight of the non-tradables sector and a loss of (price) competitiveness are especially harmful for growth for under-performing countries, while these benefit the most from physical capital accumulation and are less negatively affected by an increase in government consumption. Additionally, technological convergence is felt less strongly by low-growth member states. The variables retained are robustly related to growth at all quantiles, but the quantitative importance of the respective coefficients differs across quantiles in some cases. Given the changes in growth rhythms that Portugal recorded throughout the period under analysis, we derive some potential implications from these results for a better understanding of the Portuguese growth and convergence process after European integration. Our findings suggest that, given the growth deceleration that the Portuguese economy has been experiencing since the late 1990s, policies to enhance growth should pay more attention to promoting competitiveness and changing the specialization pattern away from the nontradables sectors, as well as to increasing investment.