Catching up in Europe: Finland's Convergence with Sweden and the EU151

Abstract

Finland is an obvious case of economic convergence in the 20th century. Is this due to the fact that the Finnish industrialisation phase started late compared with Sweden and the EU15 average? In this article the Finnish post-World War II catch up process is traced by analysing the major – i.e., primary, secondary and tertiary-industries. First we explore whether the Finnish catch up can be explained only by late industrialisation. Then we delineate the phases of structural change, and finally, we show how primary, secondary and tertiary production and labour productivity growth have contributed to aggregate development and catch-up. Our analysis brings new results on timing and locating convergence. Secondary production had its biggest impact on Finnish GDP growth later than in Sweden. However, it was not solely the advantages of secondary production growth that caused Finland's catch-up. The labour productivity growth contribution from services was essential for Finland's catch up especially in 1965–80.