Structural Change Deconstructed: A Centre-Periphery Divide in Europe

After more than a decade since the outbreak of the financial crisis, overall economic growth in the Eurozone is still disappointing. An increasing group of economists attributes the inadequate economic performance to large and deeply engrained differences between the productive structures of the Northern and Southern Eurozone. To find out whether there is reason to believe this, we apply the Economic Complexity Index to a variety of European countries and map their structural differences over time. The Economic Complexity Index is usually recognized by the disadvantage that it can only explain us something about the structural change of the production of goods in an economy. Given the particularly high importance of trade in services in the Eurozone, this is a considerable disadvantage. Hence, we construct a new trade database that contains data for both goods and services. This allows us to derive a truly representative measurement of the productive structure complexity of the European countries. We conclude that there are indeed large and increasing structural differences between the Southern and the Northern Eurozone.