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© 2005 International Monetary Fund


IMF Working Paper

Office of Executive Director for Albania, Greece, Italy, Malta, Portugal, San Marino and Timor-Leste

Technology Diffusion, Services, and Endogenous Growth in Europe: Is the Lisbon Strategy Useful?

Prepared by Paolo Guerrieri, Bernardo Maggi, Valentina Meliciani, and Pier Carlo Padoan1

May 2005


This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

We explore the role of business services in knowledge accumulation and growth and the determinants of knowledge diffusion including the role of distance. A continuous-time model is estimated on several European countries, Japan, and the United States. Policy simulations illustrate the benefits for EU growth of the deepening of the single market, the reduction of regulatory barriers, and the accumulation of technology and human capital. Our results support the basic insights of the Lisbon Agenda. Economic growth in Europe is enhanced to the extent that: trade in services increases, technology accumulation and diffusion increase, regulation becomes both less intensive and more uniform across countries, and human capital accumulation increases in all countries.

JEL Classification Numbers: F150, O140, O330

Keywords: Economic integration, manufacturing and services, technology diffusion

Author(s) E-Mail Address: mc1976@mclink.it; bernardo.maggi@uniroma1.it; vmeliciani@unite.it; ppadoan@imf.org

1 We thank the European Commission (Contract 2001-00057, Project no.: SERD-2000-00126) and the College of Europe, Bruges, for supporting this project. We are particularly indebted to Cliff Wymer, who is involved in the follow- up of this project, for helpful assistance, valuable suggestions and for having allowed the utilization of the most recent version of his programs for estimation of panel data systems in continuous time. We also thank Alfonso Arpaia, Anthony Bartzokas, Michael Deppler, Robert Flood, and Joaquim Oliveira for very useful comments. The usual disclaimer applies.

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