Club Convergence in EU Countries: A Sectoral Perspective

We employ This analysis provides several results. First, the EU countries do not converge to a unique path; instead, we observe clustered patterns for aggregate and sector-level productivity growth. Second, although successful integration in global production networks enabled most Central-Eastern European countries to catch up to other EU countries, asymmetries have increased following the recent financial crisis. Third, the heterogeneity in countries' long-run productivity levels reflects differences in their vertical specialization; countries approaching the high-growth paths specialize in knowledge-intensive production, and the foreign value-added content of their exports is lower. Our analysis is relevant to the ongoing debate on the effects of internationalizing production, as it sheds light on countries' growth prospects and indicates possible directions for policy actions.