Is dualism still a source of convergence in Europe?

Abstract

This paper aims at assessing whether dualism represents a significant source of the aggregate labour productivity convergence observed across the European regions in the 1980s. We use a model of the dual economy based on the work of Dixit (Oxford Economic Papers, 22, 229-34, 1970), and Mas-Colell and Razin (Oxford Economic Papers, 25, 72-79, 1973) to obtain hypotheses to be tested in cross-region growth regressions. We use aggregate and sectoral data for 109 territorial units from 1980 to 1990. Our cross-section results are consistent with the major predictions of the dual model. Ignoring dualism as a source of convergence could therefore lead to inaccurate interpretations of the relative roles played by each of the forces behind the process, and to inexact assessments of what actions should be taken- if any- by the European regional policy to help the process become more pervasive.