sure, language barriers do play a role, as does the lack of portability of pensions and healthcare benefits. Moreover, qualification requirements and certification procedures create an additional constraint. In particular in services, making up over 70 percent of euro area GDP 47, entry and conduct regulations are often overly restrictive. The 2016 EU Regular Economic Report No. 3 focused on this largely unfinished reform agenda of creating a single market for services 48. As a result, population movements within the EU contribute little to economic convergence, even over longer periods. The economic convergence or catching-up process can be decomposed into two components: the first capturing population movement to lower and higher income countries and regions, and the second capturing catching-up growth in GDP per capita. Between 2000 and 2016, only 5 percent of the observed catching-up process could be attributed to population movements 49. Population movement accounted also for only 7 percent of the decline in the coefficient of variation (i.e. the standard deviation divided by the mean — a measure of variability) between 2000 and 2008 (Figure 2.2). Figure 2.2 Population movements contribute little to economic convergence
Decline in coefficient of variation
Decomposition of the decline in coefficient of variation into that due to changes in population compared to changes in GDP per capita 0.10 0.08 0.06 0.04 0.02 0 –0.02 2000–2008
2008–2016
2000–2008
National Change due to population movements
2008–2016 NUTS-2
Change due to GDP convergence
Note: World Bank estimates using purchasing power standard (PPS) per inhabitant at the national and NUTS-2 level (dataset identifier: nama_10r_3gdp). The decomposition is conducted by comparing the coefficient of variation using yearly population weights compared to holding population weights fixed at the beginning of the period (2000 or 2008). The comparison of these figures gives an estimate of the amount of dispersion that could be linked to population movement. Note that this estimate can be considered to be a lower bound since population shifts contribute to changes in GDP and also feed through directly to GDP per capita. Source: World Bank calculations.
Is labor migration in response to economic shocks an optimal short run economic response? Within the EU, a recent study shows, large emigration of talent can have a negative impact on the “sending” member states and depress economic growth by reducing the productivity of the smaller and less-skilled workforce 50. Given its costs, only the adjustment to a permanent change in the national (or regional) economic perspectives could justify migration on a larger scale. Even then, this would imply running the risk of depleting a nation (or region) of its labor force, often particularly high-skilled labor, which would limit future regional growth opportunities.
Eurozone institutional architecture: a work in progress The eurozone’s institutional architecture was significantly strengthened as a result of the crises of the last decade. The crisis triggered reforms in key areas of the EMU. For instance, it became clear that the EMU needed a centralized, discretionary, fiscal backstop (but with strong conditionality), and stronger banking supervision under a single supervisory mechanism, complementing the centralized rule-setting (already in existence before the crisis) with centralized implementation. The current institutional set up is summarized in Box 2.3.
Part Two: Building resilience in the EU | 77
