Aggregate and Sectoral Convergence among Irish Regions: The Role of Structural Change, 1960-96

This article presents new evidence on the degree of aggregate and sectoral productivity convergence among Irish planning regions between 1960 and 1996. It introduces a modified shift-share technique to measure the effect of structural change on the degree of regional convergence (divergence) observed. Aggregate productivity converged strongly between 1960 and 1979, mainly due to the convergent effect of structural change and to converging service sectors. Between 1979 and 1996, aggregate productivity diverged weakly, mainly due to strong divergence among manufacturing and service sectors. Aggregate divergence would have been stronger only for the continued convergent effect exerted by structural change. Productivity is adjusted for transfer pricing effects and the methodology is applied for alternative definitions of structural change, without substantial alterations to the results.