Productivity and Economic Growth in Europe: A Comparative Industry Perspective

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Abstract

This article, drawing on the authors’ book Economic Growth in Europe, provides a comprehensive analysis of the Europe-U.S. productivity divergence since 1995 from both growth accounting and sectoral perspectives. It finds that contributions from the ‘knowledge economy’ — defined to include labour composition, ICT capital intensity, and MFP — to labour productivity growth fell in Europe while increasing in the United States. A much smaller contribution from market services (0.6 versus 1.8 percentage points per year in 1995-2007) is identified as the key sectoral difference. The article uses an updated EU KLEMS database including preliminary 2007-2009 crisis estimates.

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