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Immigration, Social Dialogue and Economic Growth in
the Old Periphery of Europe: The Celtic and Latin Tigers?

By Oscar Molina
University College Dublin


The boundaries between the so-called economic core and periphery of Europe have shifted dramatically during the last two decades, as a consequence of a catch-up by some member states, as well as the most recent eastward enlargement of the European Union (EU). Only two decades ago, the European Economic Community was sharply divided between a rich core and a poor periphery comprising all Southern European countries and extending to Ireland. In 1985, the unemployment rate reached record highs of 16.8% in the Emerald Isle and 17.8% in Spain. The same year, Gross Domestic Product (GDP) per head in Ireland stood at 68.9% of the EU-15 average, whilst Spain’s was at 71.9%. Accordingly, the two countries absorbed a large share of European Community (EC) regional development funds as they strived to converge with the rest of Europe. In spite of the generosity of these funds, official statistics showed little signs of convergence during the 1980s. Instead, there seemed to be increasing divergence between a buoyant core and a sluggish periphery that struggled to catch up. By those years, many commentators and even policymakers had developed the idea of a two-speed Europe as the only way to move forward in the process of economic integration, and, more specifically, in order to make the project of a European Monetary Union viable.

Graph 1: Employment Growth. Annual % change (Source: Eurostat)


Graph 2: GDP Growth. Annual % change (Source: Eurostat)

This picture has changed dramatically during the past fifteen years. The two laggards of Europe have experienced their most prolonged periods of economic expansion in their recent economic history. This has been particularly intense in the case of Ireland, as demonstrated by certain economic indicators. In 2005, the unemployment rate in Ireland had plummeted to around 4.4%, while in Spain it had also decreased to a record low of 7.8%, close to the EU-15 average of 7%. Moreover, per capita GDP in Ireland now stands at around 130% of the EU-15 average, right after Luxembourg with the highest per capita income in Europe. In the case of Spain, this figure has reached 91%, its highest level in the post-World War II period. Graphs 1 and 2 show the performance of these two countries compared to the average of the EU-15 group, regarding the labour market and economic growth. Within the context of what some scholars have portrayed as a sluggish, rigid and sclerotic Europe, the exceptional performance of the Irish economy led some authors to compare it with the growth experiences of some Asian countries, hence acquiring the epithet of ‘the Celtic Tiger’. Even though the performance of the Spanish economy has not reached the levels recorded in Ireland, it nonetheless remains exceptional both in historical and comparative terms. As a consequence of these changes, the new economic cleavages within the EU are no longer characterised in terms of north-south, but by a west-east division.

The question that arises immediately on examining this data relates to what explains these experiences and whether one can find any similarities between the two countries. For, given the increase in income levels registered in both countries, there are probably lessons to be learned from these success stories by scholars and policymakers alike. An obvious candidate to explain them would be the impact of the process of European integration in triggering economic convergence among member states. There are good grounds to support this argument if one looks at the positive impact of European funds aimed at creating physical and social capital in these two countries, or the growth-enhancing effects of macroeconomic stability brought about by their participation in the European Monetary Union. However, European integration fails to explain differences in the growth paths between countries. In this article, however, I will explore the role of other three variables whose impact has also been critical in initiating and sustaining processes of economic development: these are the role of migration and the transition from emigration to immigration countries, inward flows of Foreign Direct Investment (FDI) and national social dialogue. Difficult as it is to provide magic recipes for growth and job creation, I argue in this article that in addition to the beneficial framework provided by EU policies, the three variables just mentioned have been key ingredients contributing to boosting employment growth, achieving above EU-average economic performance and hence reversing the traditional laggard stance of the two countries analysed here.


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Copyright © Society for Irish Latin American Studies, 2007

Online published: 29 August 2007
Edited: 07 May 2009

Molina, Oscar, 'Immigration, Social Dialogue and Economic Growth in the Old Periphery of Europe: The Celtic and Latin Tigers?
' in Irish Migration Studies in Latin America, 5:2 (July 2007), pp. 112-116. (www.irlandeses.org), accessed .


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