The convergence performance of Ireland among EU countries: 1960 to 1990

Abstract

Uses a specially constructed data set to present new evidence on the convergence performance of Ireland among European Union (EU) countries at the aggregate, sectoral and industry levels for the period 1960 to 1990. Overall, aggregate convergence occurred among the EU 12 over the period. Ireland did exhibit catch‐up on the EU average. However, Ireland’s convergence performance becomes distinctly less favourable if adjustments are made for the increase in net factor outflows during the late 1980s. This is especially the case when gross national product is used instead of gross domestic product (GDP) to measure Irish living standards as this results in a divergent trend emerging. For labour productivity the adjustment of Irish GDP to take account of transfer pricing by multinationals leads to the finding that labour productivity convergence performance in Irish manufacturing is substantially overstated if “official” GDP estimates are used. This translates into more muted convergence performance at the aggregate level if the adjustments are made.