Spatial Distribution of Key Macroeconomic Growth Indicators in the EU-27: A Theoretical and Empirical Investigation

Convergence, both nominal and real, is occurring in the EU, especially for new members. Among the macroeconomic variables and correlations closely related to the convergence process are inflation, per capita GDP, the natural rate of unemployment and the inflation-unemployment relationship. This study concentrates on empirical analyses of the spatial distribution of these macroeconomic variables for the EU-27. Moreover, taking into account that the current level of productivity is implicitly influenced by the current unemployment rate, a simple estimate for ‘pure’ productivity is proposed as a solution. Pure productivity must be neutral to short-run changes in employment, but in the long run it is affected by factors including general technological progress, rising education levels, growth of the R&D system and the expansion of the ‘new economy’. The estimated changes in the pure productivity level are compared to the dynamics of the natural rate of unemployment.