Sectoral change and labour productivity growth during boom, bust and recovery in Central and Eastern Europe

This paper assesses the extent of structural or sectoral change and its importance for aggregate productivity growth during times of boom, bust and recovery. The analysis covers 10 EU countries from Central and Eastern Europe over the years 2001–2012. The reallocation of labour across sectors was substantial during the boom, very extensive in 2009 at the depth of the crisis and modest in the subsequent recovery period. The contribution of sectoral change to aggregate productivity growth is computed using various decomposition methods. Changes in labour productivity within sectors play the dominant role for aggregate productivity growth, while reallocation of labour between sectors is less important. This pattern is found through most of the sample period despite large differences in the extent of sectoral change during the boom, crisis and recovery.