Sectoral reallocations, real estate shocks, and productivity divergence in Europe

white and blue glass walled high rise building

By Thomas Grjebine, CEPII, Paris, France

Jérôme Héricourt, Univ. Lille, CNRS, IESEG School of Management, UMR 9221, LEM, Lille Économie Management, 59000 Lille, France

Fabien Tripier, Université Paris-Dauphine, Université PSL, LEDA, CNRS, IRD, 75016 PARIS, FRANCE & CEPREMAP, Paris, France



This paper investigates the role of sectoral reallocations in the divergence of productivity in Europe, based on a database for 33 sectors and 14 countries between 1995 and 2015. Using the contribution of sectoral productivity growth to Total Factor Productivity (TFP) dynamics at the country level, we highlight that variations in the relative size of sectors—less productive sectors growing relatively to more productive ones—have been at the origin of variable productivity losses in main Europea countries. Parallel to this divergence, European countries experienced heterogeneous real estate price dynamics, which took the form, in some economies, of massive boom-bust cycles. We investigate real estate shocks as a potential source of sectoral reallocations through a collateral mechanism. These shocks turn out to be a strong driver of productivity divergence between European countries.



Productivity · Sectoral Reallocations · Real Estate Shocks · Collateral