While only very few countries have actually succeeded in joining the group of high-income economies over the past few decades, partial income convergence is a reality. Of the 24 countries with a population of 60 m or more, nine countries have a per capita income of USD 5,000 or less. Of these nine, a full seven are located in a geographically almost contiguous crescent stretching from Pakistan in the West to Indonesia in the East. With a combined population of 2 bn, these Indian Ocean economies are bound to emerge as a major centre of economic gravity over the course of this century. [more]

Greece, Ireland and Portugal require economic growth, increased productivity and more innovations. All three countries have pronounced weaknesses in business innovation activity. The conditions for corporate innovations could be improved via measures such as developing technology centres, ameliorating innovation funding and enhancing entrepreneurial expertise. The regional policy competence of administrative authorities also needs to be upgraded. While Ireland’s innovation system is already well developed, Portugal occupies a lower mid-table position in a European ranking of innovation systems. There is little potential in Greece to leverage the development of fast-growing industries with high productivity levels. Therefore, the upgrading of traditional industries and services is of major importance. [more]

European firms reduced their degree of vertical integration by about 1.5 percentage points between 2003 and 2007. A major factor in this was the trend towards outsourcing – particular with regard to services. This gives rise to the question of whether there is a systematic relationship between vertical integration and corporate performance metrics. A dynamic analysis shows that a low level of vertical integration tends to have a positive impact on productivity and earnings growth. Thus the basic idea of division of labour and specialisation still appears to have something going for it. [more]