This study examines the lack of convergence among EU countries from a structural perspective. We apply the tradable-non-tradable
framework (T-NT) to evaluate the heterogeneity in labour productivity before and after the great recession. We find that,
across all countries, non-tradables were less relevant for aggregate productivity. The low productivity growth in peripheral
EU countries was accompanied by a specific structural change pattern: there was a sharp production increase of non-tradables
before the crisis relative to other EU countries. For most peripheral countries concerns about unfavourable sector structures
remain, implying a continuation of unsustainable growth patterns. This has implications for the European Commission's macroeconomic
imbalance procedures, since it allows identifying patterns of real divergence on a disaggregated level. Finally, we identify
a link between sectoral growth asymmetries and the quality of domestic governance institutions. Especially differences in
the legal system help to explain the observed productivity growth differentials.
JEL-Codes:E01, E02, E60, O43, O47
Keywords:Tradability, Labour Productivity, Growth, Institutions, EU, Imbalance
Forschungsbereich:Industrie-, Innovations- und internationale Ökonomie – Makroökonomie und öffentliche Finanzen