GDP per capita in Lithuania rose from one third to two thirds of the OECD average level between 1995 and 2014, despite internal and external crises. Productivity catch-up was critical to this process, although the level of labour productivity also remains around one-third below the OECD average. Further productivity gains will partly rely on improvements in resource allocation. In particular, the Lithuanian government should promote better governance of state-owned enterprises, more effective bankruptcy procedures and new forms of business financing. However, convergence will also require policy settings that encourage advances in within-firm productivity growth. Improvements to the quality of education at all levels and increasing the role of workplace training will be important. So too will be further measures that support the innovation capacity of the business sector, including innovation policies that promote the absorptive capacity of firms and do not favour incumbents at the expense of young businesses. This Working Paper relates to the 2016 OECD Economic Survey of Lithuania (www.oecd.org/eco/surveys/economic-survey-lithuania.htm)