Department of Social Science History

University of Helsinki (Finland)

September 27-29, 2007

Abstract

In a workshop of Irish, Portuguese and Finnish scholars we will study economic convergence of the respective economies to the western European levels after the Second World War. We will look at structural changes, productivity, competitiveness and international trade, human capital, investment, research and development, fiscal and monetary policies. Also institutional factors, such as EU accession are of importance in the analysis of convergence patterns.

Organizing Team

Riitta Hjerppe (University of Helsinki)

Concepción García-Iglesias (University of Helsinki)

Frank Barry (Trinity College Dublin)

Pedro Lains (University of Lisbon)

Scientific Summary

The development patterns of Finland, Ireland and Portugal, as small open economies, share certain characteristics, as all started from low levels of GDP to converge on the richer countries of Western Europe. In general, factors such as structural changes, productivity, competitiveness and international trade, human capital, investment, research and development, fiscal and monetary policies, and EU accession are of importance in the analysis of convergence patterns.

In the papers of this workshop, the emphasis will be on the three sample countries either individually or together. More specific research will be conducted on areas such as trade, foreign direct investment and economic policy. In addition, the role of capital (including human and intangible capital) in economic growth will be explored.

The workshop closely connects to the ESF GlobalEuronet research area 3, Globalization, growth and productivity: technological change, human capital and diffusion of knowledge.

During the workshop, there will be four different sessions. The opening session will introduce the different basic characteristics of these three economies in comparison. An analysis of their main macroeconomic variables with an emphasis on economic growth will compare the economic development of Finland, Ireland and Portugal after the Second World War. Moreover, in this first session we will focus on intangible and human capital as an integrating part of economic growth. Human capital can be considered as an asset of a nation (or a person), that can be used in production and income generation. However, there is a shortage of data on investments in and stocks of human capital and so other variables are used as proxies (i.e., literacy rate, school enrollment, number of educated people). Therefore, one of the papers will explore empirically the impacts of investing in human capital as well as its accumulation on Finland’s fast GDP growth after WWII. An analysis of annual capital investment on GDP will be carried out and the long-run connection between human capital accumulation and GDP growth then evaluated. The other paper in this session will deal with intangible capital. With the ongoing ICT revolution there has been already a shift towards fixed capital, including information and communication equipment and software. In addition to traditional fixed capital such as buildings, machinery and equipment, the capital needed for production is more and more of the intangible kind. The importance of intangible capital has increased over the years. Therefore, this paper will present new estimates of intangible capital at the macro level for Finland, the United Kingdom and the Netherlands, and will provide a comparison with Japan and the United States.

The second session will deal with trade and FDI as well as economic policies for individual country cases. With respect to this last topic, a survey of the theory in the emergence and conditions for success of pro-reform coalitions will follow. Moreover, this paper will add to our understanding of the process by looking at the politics of trade reform in the case of the three small European economies of Ireland, Finland and Portugal. We will continue our research agenda by looking at Portugal’s trade potential. In the last two decades, the external setting of the Portuguese economy has changed several times and in significant ways. These changes have been accompanied by significant changes in the geographical distribution of Portugal’s trade. Yet, they have also been followed by a poor performance of exports. This poor performance can be related to both internal and external factors. It will be the main objective here to address the impact of changes in the external environment on Portuguese trade potential. If we concluded that Portugal’s trade potential has increased in the last decades and that the country’s exports have not responded to that increase, then we would have to stress the need for further structural reforms that would lead to a better functioning of the factor and product markets. If, on the contrary, Portugal’s trade potential has been declining, policy makers at the domestic and the European Union level should draw other type of conclusions. In this same line of research, we will tackle the importance of Foreign Direct Investment on the economies and on the internationalization process of these countries. Specifically two analyses will cover the cases of Finland and Portugal and their convergence to the other Western European countries.

The third session will focus on the innovation systems of Ireland and Finland compared. In the literature of economics and innovation, the concept of convergence has been approached from a plurality of perspectives. Most commonly, convergence has been understood in technological terms or in the context of regional economic development within or between nations. In the past, the innovation concept has not been linked explicitly to convergence. During the last decades, by contrast, innovation has become very prominent as means of convergence. Therefore, the analysis of this phenomenon, on the one hand, will be at the level of individual innovations and innovations processes in which specific variables as collaboration, public funding and patenting converge towards undefined levels of optimal innovation performance. On the other hand, a comparison of the national innovation systems of Ireland and Finland will be pursued. This paper will identify the institutions pertaining to both countries’ current innovative performance. In turn there will be an outline of the various contributions of Science & Technology Indicators and an exploration of their motives for engaging in innovation and collaborative innovation in both systems. The workshop will conclude with planning for future research and a possible common publication.