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This article presents an overview of this issue in relation to the periodical's twentieth anniversary. The author discusses the organization of a anniversary panel in London, England to mark the occasion, and to review articles from the history of the periodical focusing on economic-policy development during these 20 years. The article also provides an introduction to other articles presented in this issue, including one concerning the evolution of exchange-rate management, the effects of government debts on interest rates, and higher education reform in Europe.

This article charts the changing context of regional economic development and the advancement of both policy thinking and analysis on this issue. The shift away from 'traditional' regional policies, designed to bring about regional convergence, towards new approaches, designed to exploit the economic development potential of regions, is the focus of the article. Specific attention is paid to the emergence of regional development strategies in the process, where 'regions' may be defined functionally rather than administratively. We outline the elements of such strategies—including redefining objectives, new types of interventions, involvement of new actors, and the broadening and integration of regional interventions—which distinguish them from traditional policy and which will determine the degree of success achieved. In conclusion, the paper raises two points of interest, namely the need for more inclusive regional development processes and better implementation of these demanding strategies. [ABSTRACT FROM AUTHOR]

Europe's financial structure has become strongly bank-based-far more so than in other economies. We document that an increase in the size of the banking system relative to equity and private bond markets is associated with more systemic risk and lower economic growth, particularly during housing market crises. We argue that these two phenomena arise owing to an amplification mechanism, by which banks overextend and misallocate credit when asset prices rise, and ration it when they drop. The paper concludes by discussing policy solutions to Europe's 'bank bias', which include reducing regulatory favouritism towards banks, while simultaneously supporting the development of securities markets. [ABSTRACT FROM AUTHOR]

The objective of this paper is to summarise what is known about key trends and developments in working time across Europe. The European Region analysed in this paper includes not only the 27 current member states of the European Union (EU), but extends even beyond its borders. This paper review trends and patterns in working hours in the broadest range of countries possible given data limitations (especially outside the EU), with a focus on: average weekly hours of work and the proportion of workers working ‘excessively long hours’ (defined as usual working hours of 48 or more per week); developments regarding one unique form of working time arrangement, part-time work, with a focus on the incidence of part-time work in each country, changes in this incidence over time, the female share of part-time employment and issues related to the quality of part-time jobs; and finally considers trends in the organisation of working time across Europe, with a focus on the incidence of non-standard work schedules (e.g. night work and weekend work) and shift work, as well as the extent to which various types of flexible working time arrangements are being deployed in individual enterprises. Finally, the paper presents some policy suggestions within a broad framework designed to advance the International Labour Organisation (ILO) concept of decent work in the area of working time. [ABSTRACT FROM AUTHOR]

We construct a simple endogenous growth model to analyse the relationship between the composition of fiscal policy, economic growth and employment. The government sets different tax rates on labour income, capital income, and private consumption to finance productive expenditures, utility-enhancing consumption expenditures, and transfers related to structural non-employment. Our model is able to explain the different employment and growth records of European Countries and the US since the 1990s. We use the model to investigate the strength of the effects of various fiscal policy shocks on steady state employment and growth. We also develop the transitional dynamics for many variables, including welfare. Our results highlight the trade-offs that may occur between performance indicators, and between the short and the long-run. [ABSTRACT FROM AUTHOR]

For quite some time, European countries have felt the need to compare their respective performances through the application of benchmarking and scoreboard tools, the findings of which are typically processed into country rankings, which in turn guarantee considerable publicity in the media and the interested public. Within the scope of such activities, the European Innovation Scoreboard (EIS) has established itself as probably the most widely watched benchmarking tool in the discussion of European technology policy. In this paper we consider its current status and discuss some of the strengths and weaknesses of the EIS indicators. We show that there is a process of convergence in innovation performance in Europe but that the possibilities of short-term influences by policy on the variables measured by the EIS are limited. Given the quality and availability of the data, we argue that the publishing cycle should be extended to two years. [ABSTRACT FROM AUTHOR]

Many transition economies are characterised by a relatively rudimentary institutional framework. Weak legislative structures and the absence of effective market regulation and property right enforcement rules diminish the chance of mutually profitable business transactions and-more generally-restrict the chances for innovation and sustainable growth. Against this background, we analyse the extent to which more efficient governance mechanisms can contribute to a more favourable business environment. In doing so, we adopt a network perspective. We argue that both in developed market economies as well as in centrally planned economies much of economic exchange takes place in networks. However, the characteristics of these networks, in particular the concept of trust, can differ significantly. This leads us to conclude that the real challenge of the process of economic transition is connected to building new economic exchange networks. In this paper, we discuss this argument and analyse how the current enlargement of the EU into Eastern Europe may favourably affect this process of institutional change in the accession countries. [ABSTRACT FROM AUTHOR]

In this paper we take a critical look at current European regional policies. First, we document the motivation for such policies, that is, the large income disparities across the regions of the EU15. Large disparities are certainly present. Second, we illustrate the various instruments adopted and discuss their underpinnings in established economic theories. Next, we look at available data, searching for three kinds of evidence: (1) if disparities are either growing or decreasing, we conclude they are neither; (2) which are the major factors explaining such disparities and, in particular, if they are the factors predicted by the economic models adopted by the Commission to justify current policies, we conclude this is most certainly not the case; (3) if there are clear signs that EU policies, as opposed to other social and economic factors, are actually reducing such disparities, we cannot find any clear sign of such desired impact. Our conclusion is that regional and structural policies serve mostly a redistributional purpose, motivated by the nature .of the political equilibria upon which the European Union is built. They have little relationship with fostering economic growth. This casts a serious doubt on their social value and, furthermore, strongly questions extending such policies to future members of the European Union. A successful EU enlargement, in our view, calls for an immediate and drastic revision of regional economic policies. [ABSTRACT FROM AUTHOR]

Expectations that biotechnology will become a major contributor to economic growth and impact on quality of life explain its high priority on the political agenda of EU Member States. Theoretical advances in understanding innovation processes and instruments for innovation policy have created an increasing demand for empirical tools to develop policy from a systems perspective. This paper aims to provide policy-makers with tools to assist in biotechnology policy-making. Key aspects considered are: the systemic nature of the innovation process in biotechnology; the different policy areas involved in its promotion; and the time lag between policy action and potential policy outcomes. The benchmarking approach combines quantitative and qualitative indicators in order to assess policy activity in relevant policy areas and the achievement of policy goals. [ABSTRACT FROM AUTHOR]

The significant diversity of EU rural areas in terms of population, natural resource endowments and socio-economic structures is likely to result in different impacts of policy changes and economic developments. This paper attempts to reveal how EU structural policy during 1989–1993 affected remote rural areas (with mixed and agriculturally dependent economic structures, respectively) in Northern and Southern Europe, and to quantify the impacts on local growth generation through the use of a general equilibrium model. Finally, the impacts of three structural policy scenarios (including Agenda 2000) on the rural economies studied are estimated. [ABSTRACT FROM AUTHOR]

This paper examines social networks in cross-national comparison, especially the assumption that in modem societies kin ties are loosening while non-kin ties are gaining importance in people's social networks. This assumption can be held only for the Northwest-European cultural area and the New World-countries descending from them. Americans and Australians have gone further in the loosening of kin ties than Britons, Germans and Austrians. Italians and Hungarians do still maintain very close kin relations. It is argued that level of economic development as well as sociocultural characteristics of these societies (traditions of close kin-relations in South/East-Europe vs. loosened kin ties in Northwestern-Europe dating back to preindustrial times; higher geographic mobility in America and Australia; individualistic lifestyle in the Anglo-Saxon nations) play a significant role in explaining for these differences. Reduced face-to-face contacts do not imply, however, that primary groups in general lose their function of providing social support. Close kin and friends are named as most important persons when one is in need of instrumental and emotional help in all examined nations, professional assistance as yet seems to be of minor importance. [ABSTRACT FROM AUTHOR]

This article involves a conceptual evaluation of a large-scale innovation policy experiment—so-called smart specialization strategies (S3s)—that took place within the framework of the European regional cohesion programs between 2011 and the present. The goal is to provide a collection of reflections offering a wealth of lessons and information regarding the capacity of regional governmental agencies and other actors involved in the innovation system to implement a mission-oriented research and development support program and regarding the institutional and cultural conditions that can facilitate its practical application. In the first section, I briefly review the fundamentals of S3s. In the second section, I propose a framework for the identification of mission-oriented policies and I explain how S3 fits into this category. The following section shows how this policy represents a break with the policies that have long dominated the regional policy landscape. The fourth section describes the designing of this policy whose objective is to make strategic choices and decentralization of information and initiatives compatible. And finally, the last section reports on the emerging institutional forms that seem to facilitate the putting into practice of this design. [ABSTRACT FROM AUTHOR]

European Union Is Killing MigrantsAt Europe's Edge: Migration and Crisis in the Mediterranean. A stark and unavoidable conclusion in Mainwaring's and Stierl's respective studies is that the immigration control policies of the European Union (EU) and its member nation-states are killing unauthorized migrants. Mainwaring begins by showing that the response of the European Union (EU) to what is widely characterized by nation-states, most media, and even some migration scholars as a "migration crisis" has been entirely disproportionate, even perverse (p. 5). [Extracted from the article]

Does culture have a causal effect on economic development? The data on European regions suggest that it does. Culture is measured by indicators of individual values and beliefs, such as trust and respect for others, and confidence in individual self determination. To isolate the exogenous variation in culture, we rely on two historical variables used as instruments: the literacy rate at the end of the 19th century, and the political institutions in place over the past several centuries. The political and social history of Europe provides a rich source of variation in these two variables at a regional level. The exogenous component of culture due to history is strongly correlated with current regional economic development, after controlling for contemporaneous education, urbanization rates around 1850, and national effects. [ABSTRACT FROM AUTHOR]

Europe's growth slowed in the 1990s, reinforcing the overall impression of a need to catch up with the US regarding standards of living. In reaction, EU leaders adopted the famous Lisbon Agenda in 2000. The Agenda is now under review, the aim being to determine why progress on its pro-growth goals has been unsatisfactory and what can be done about it. The first crucial step in this process is to understand the true sources of the European growth slowdown. Sources-of-growth calculations have always been imprecise, but evidence from the US suggests that‘quality upgrading’– especially in capital goods– has substantially worsened the precision problem since the 1990s. Unfortunately, quality adjusted sources-of-growth calculations, however, have not performed satisfactorily for Europe, so Europe's leaders are working with potentially misleading accounts of Europe's growth slowdown. Redressing this omission is the goal of this paper.Failure to account properly for capital quality improvements leads to two mistakes. First, overall GDP is underestimated. Our calculations, for example, show that euro area GDP growth was underestimated on average by 0.7 percentage points annually in the late 1990s. However, similar quality-adjustment figures raise US growth figures in the same period by even more, so quality-adjusting suggests that the US–EU growth gap was even more pronounced than previously believed. Secondly, the sources-of-growth calculations used to prioritize Europe's pro-growth policies are skewed. Our calculations show that the contribution of the slowdown in disembodied technical progress to the overall slowdown is more pronounced after quality adjustment.Our findings point to the need for adoption of microeconomic measures aimed at enhancing overall efficiency and boosting innovation activity. Such measures would aim at a better business environment, e.g. by easing regulatory and administrative burden and liberalizing energy and telecommunications markets.— Plutarchos Sakellaris and Focco Vijselaar [ABSTRACT FROM AUTHOR]

This paper reviews the controversy over Europe's Stability and Growth Pact and offers a proposal for its reform. It argues that Europe would be best served by focusing on the fundamental causes of unsustainable debts -- public enterprises that are too big to fail, unfunded public pension schemes that are too big to ignore, inefficient and costly labor market and social welfare problems, and budget making institutions that create common pool and free-rider problems -- rather than on arbitrary numerical indicators like whether the budget deficit is above or below 3 percent of GDP. It proposes defining an index of institutional reform with, say, a point each for reform of budget making arrangements, reform of public pension schemes, and reform of labor markets and unemployment insur-ance. Countries receiving three points would be exempt from the Pact's numerical guide-lines, since there is no reason to think that they will be prone to chronic deficits. The others, whose weak institutions render them susceptible to chronic deficits, would in contrast still be subject to its warnings, sanctions and fines. [ABSTRACT FROM AUTHOR]

This paper analyses the sources of U.S. labour productivity growth in the late 1990s and presents projections for both output and labour productivity growth. We show that investment in information technology (IT) played a substantial role in the U.S. productivity revival and that similar trends are evident in data for other leading OECD countries. We then outline a methodology for projecting trend output and pro-ductivity growth for the broadly defined U.S. economy. Our base-case projection puts trend productivity growth at 1.78 percent per year over the next decade with a range of 1.14 to 2.38 percent, reflecting fundamental uncertainties about the rate of technical progress in IT-production and investment in IT-equipment and software. Our central projection is below the average growth rate of 2.07 percent during 1995 -2000. Similar projections for Europe must await more complete information. (JEL J2). [ABSTRACT FROM AUTHOR]

I discuss possible problems engendered by loss of national monetary policies, and study them from three empirical perspectives. First, are business cycles sufficiently synchronized across EMU member countries? The evidence suggests that economic activity in those countries has become increasingly correlated in the 1990s, and that policy co-ordination has played a role in generating that outcome. Second, are there asymmetries in the mechanisms through which policy affects economic activity? The paper documents that policy transmission was indeed heterogeneous in the member countries, and that structural and financial factors were sensibly related to cross-country differences in the response of output to a monetary policy shock. Third, how is policy implemented in an environment of diverse business cycle fundamentals and transmission mechanisms? Estimation of monetary policy reaction functions finds that the European Central Bank is closer to an aggregate of the central banks in Germany, France, and Italy than to the Bundesbank alone. [ABSTRACT FROM AUTHOR]

The most pressing economic problem in Europe today is the apparently endless surge in unemployment. Other industrial countries have also seen an increase in unemployment over time, though to a smaller extent. To the layman, the upward trend in unemployment is related to the slowdown in economic growth, which is also apparent in most industrial countries and in particular in Europe. Both trends are illustrated in Table 1, which contrasts Europe and the U.S. Over the last 30 years, the unemployment rate has risen by more than 7 percentage points in the EU, and by just 1.3% in the U.S. Per-capita GDP growth fell markedly in both Europe and the U.S., but the growth slowdown in Europe was clearly more pronounced. Moreover, U.S. growth has turned around dramatically since the mid-1990s. No such sharp acceleration is in sight in Europe. Given the long time period, these two trends are not simply the result of business cycle fluctuations, but reflect long run tendencies.

The concepts of σ-convergence, absolute β-convergence and conditional β-convergence are discussed in this paper. The concepts are applied to a variety of data sets that include a large cross-section of 110 countries, the sub-sample of OECD countries, the states within the United States, the prefectures of Japan, and regions within several European countries. Except for the large cross-section of countries, all data sets display strong evidence of σ-convergence and absolute β-convergence. The cross-section of countries exhibits σ-divergence and conditional β-convergence. The speed of conditional convergence, which is very similar across data sets, is close to 2% per year. [ABSTRACT FROM AUTHOR]

Economic research concerning the skill structure of the employed population and based upon official statistical sources often utilises occupationally classified data as a proxy for skill. This paper elaborates upon the use of occupation as a proxy measure, showing how the concept of skill is operationalised within an occupational classification both in national and international sources. By reference to the process of revising the national UK occupational classification and through international comparisons of occupational structure, the strengths and weaknesses of this approach to skill measurement are revealed. [ABSTRACT FROM AUTHOR]

We present new evidence about the long-run relationship between state capacity - the fiscal and administrative power of states - and economic performance. Our database is novel and spans 11 European countries and four centuries from the Old Regime to World War I. We argue that national governments undertook two political transformations over this period: fiscal centralisation and limited government. We find a significant direct relationship between fiscal centralisation and economic growth. Furthermore, we find that an increase in the state's capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance. Our analysis shows systematic evidence that state capacity is an important determinant of long-run economic growth. [ABSTRACT FROM AUTHOR]

Background In the past, upward shifts of the so-called Preston curve, which relates life expectancy to national income, have contributed importantly to worldwide increases in life expectancy. These shifts were due to rapid diffusion of knowledge and technology for infectious disease control from high-income to low-income countries. We assessed to what extent life expectancy growth in Europe has been accompanied by upward shifts in the relation between national income and life expectancy in later parts of the 20th century, when progress in cardiovascular disease control was the main driver of life expectancy growth.Methods Data on national income (gross domestic product per capita, in 1990 international dollars), life expectancy and cause-specific mortality covering the period 1900–2008 were extracted from international data banks. (Change in) life expectancy and age-standardized mortality was regressed on (change in) national income, and the regression parameters were used to estimate the contribution to rising life expectancy and declining mortality in Europe as a whole of changes in national income vs shifts in the relation between national income and health outcomes.Results Large upward shifts in the relation between national income and life expectancy only occurred before 1960, and were due to rapid declines in mortality from infectious diseases which were independent of rises in national income. These shifts account for between two-thirds and four-fifths of the increase in life expectancy in Europe as a whole during this period. After 1960, upward shifts in the relation between national income and life expectancy were much smaller, and contributed only between one-quarter and one-half to the increase in life expectancy in Europe as a whole. During the latter period, declines in mortality from cardiovascular disease were mainly attributable to increases in national income.Conclusions In contrast to earlier periods, recent life expectancy growth in European countries appears to have been dependent on their economic growth. More rapid diffusion of knowledge and technology for cardiovascular disease control from higher- to lower-income countries in Europe may be needed to close the East–West life expectancy gap, but it is unlikely that this can be achieved in the absence of more equal economic conditions. [ABSTRACT FROM AUTHOR]

Economic geographers and regional economists have long been concerned with the problems provoked by uneven regional development and the ways by which policy intervention may be able to reduce such inequalities. However, in recent years the traditional argument for seeking to secure a reduction in the spatial concentration of economic activity in particular regions has been questioned and in some cases it has been suggested that policies that try to reduce regional economic inequalities may even reduce national efficiency. This article examines the evidence for a link between growth in productivity and the degree of spatial agglomeration across the nations of Europe. In doing so it considers how spatial agglomeration should be measured and how the relationship between agglomeration and the growth of productivity can be modelled. [ABSTRACT FROM PUBLISHER]

The article focuses on the implications of human rights expectations in China and Europe. It mentions that demand for human rights in China was expected to grow as a result of economic development. It adds that younger Chinese could be a key feature of modernization, holding stronger views on human rights, if the expectation that continuing development in China would lead to greater demand s of human rights was accepted.

One of the biggest issues currently plaguing many advanced industrialized countries is the persistence of below-replacement fertility rates (fewer than 2.1 children per woman). Decreasing fertility rates threaten economic growth, while government budgets have to accommodate more pension and health services, as the number of adults of working age who contribute to older generations' pensions diminishes. In addressing the dilemma of low fertility in Europe, we are inevitably confronted with a combination of institutional and human factors: while governments can attempt to put into place institutions and policies that will encourage childbirth (such as subsidies for children, family leave policies, and day care facilities), population reproduction is fundamentally a micro-level decision. The crux of the matter is that women and men must choose to have children; no number of institutional configurations will by themselves result in the birth of babies. Rather, it is the combination of systems of welfare provision, people's ability to provide for their well-being, and the choice of women and men to conceive children, that will likely result in increased fertility rates across Europe. This article examines several factors that influence the makeup of state, market, and family decisions, surveying literature in the field of work and family reconciliation and fertility decisions. The article concludes by highlighting several issues of societal polarization that are related to family policy and indicates avenues for future research on fertility and government policies. [ABSTRACT FROM AUTHOR]

This article surveys an influential new research program on historical paths of institutional development and their consequences for economic growth. The research program exploits the experience of European colonialism as a kind of "natural experiment" whose results bear on the way institutions affect development. The central hypothesis of this research is that societies that began with more extreme inequality were more likely to develop institutions allowing much of the population only limited access to economic opportunities. Studies of institutions in India using data rich enough to permit hypothesis-testing provide evidence supporting the hypotheses.

Among countries colonized by European powers during the past 500 years, those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal weighs against a view that links economic development to geographic factors. Instead, we argue that the reversal reflects changes in the institutions resulting from European colonialism. The European intervention appears to have created an "institutional reversal" among these societies, meaning that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the late eighteenth and early nineteenth centuries, and resulted from societies with good institutions taking advantage of the opportunity to industrialize. [ABSTRACT FROM AUTHOR]

Just one decade ago millions of men and trillions of dollars of equipment stood ready for combat in Europe. The demise of the political systems in eastern Europe and the Soviet Union defused the situation. This political creative destruction opened the door to great opportunities, but also to great dangers. On the bright side, a continuing success story in eastern Europe will lock in democracy and promarket reforms. Moreover, a hundred million eastern consumers with rising incomes are a bonanza for western European businesses. Continuing economic success in the east will foster prosperity and peace throughout the continent. On the dark side, however, stagnant or failing incomes and impoverishment of a large slice of the population could foster widespread disillusionment with market economics and democracy. Most worrying of all is that this may occur while a power vacuum exists in central Europe.

The article discusses the factors behind the continued growth of foreign direct investment in Europe and its wider consequences on home and host economies. Changing patterns of demand for products inevitably change the pattern of locational advantage. The process of the growth and decline of countries and regions is not, however, autonomous. As the authors have demonstrated, there is a growing body of research into the interrelationships between trade, investment,and economic growth in Europe. Industrial policies, trade policies, and other developments within regional economic groups, such as the Single Market Programme, affect patterns of advantage because they change the environment within which firms operate. They have argued that foreign direct investment can act as an important channel for the diffusion of ideas and new innovations even between developed economies. Such investments can enhance the growth process in the host economy and raise welfare in the home economy by providing an additional flow of income to an investment in knowledge.

The impacts of faster growth in China and India for Europe are analysed taking into account terms-of-trade effects, second-best welfare impacts and improvements in product quality and variety. More rapid growth in these giants could improve Europes terms of trade, but second-best effects on energy markets could lower welfare unless these taxes are Pigovian. Whether growth arises from productivity or capital accumulation has important implications, with capital-driven growth involving higher energy and agricultural prices. When quality and variety growth are taken into account, the benefits to Europe are substantially greater. If agricultural protection in emerging Asia increases with growth, the impacts on Europe appear to be adverse but small. [ABSTRACT FROM AUTHOR]