Growth and Convergence in Portugal

Contrary to other EU countries, Portugal has become relatively poorer for almost a quarter of century. Growth decomposition exercises show that this is due to a reduction in capital accumulation and a sharp fall in total factor productivity. There are areas in which the country can act to reduce the fall, by capitalizing on national comparative advantages and the diverse but complementary features of its two largest metropolitan regions, Lisbon and Porto. However, this requires policy changes.