Portugal is experiencing a slowdown of productivity growth, similar to the one occurring in advanced economies. Given that aggregate productivity growth is the main source of per capita income growth, this slowdown is associated with a slower improvement of living standards. In a neoclassical world, Portugal, poorer than most developed economies, would be expected to converge both in the level of productivity and in the average wealth of the population.
A number of hypotheses my explain why this is not happening: a decline in the birth rate of innovative firms able to deal with greater regulatory complexity, insufficient investment in infrastructure, equipment, R&D and information and communication technology, a slower pace of technology diffusion, non-competitive product markets and capital misallocation, rigid labour markets leading to skills and labour mismatches or insufficient knowledge – based and human capital accumulation.
