EMPTYING THE SCHOOL OF ATHENS A quantitative analysis of the link between the Eurozone crisis and declining worker productivity in the Greek economy

Abstract: The purpose of this thesis is to investigate the causes of Greece’s worker productivity decline in the aftermath of the euro crisis. Through the employment of three groups of time-series regressions, the empirical analysis of the thesis demonstrates that: 1) there exists an unambiguous correlation between the unfolding of the euro crisis and Greece’s declining worker productivity – a correlation which is entirely disconnected from the progression of the country’s competitiveness; 2) the progression of the crisis is intimately correlated with Greece’s recent surge in human capital emigration; and 3) this outflow of human capital-rich workers may explain a large portion of Greece’s worker productivity decline since 2008. These findings are of utmost significance for the discussion on the optimality of the Eurozone as a currency area, as they suggest that crisis-induced migration is inherently asymmetric in the sense that it disproportionately “selects” the highly educated. Thus, presuming that the common currency in combination with Greece’s relatively low level of economic development is largely to blame for the severity of the Greek crisis, the EMU appears to be indirectly hampering the productivity development of its economically weakest member state.