The Roots of the New Economy: An Institutional Perspective

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Abstract

This article analyses the structural, institutional, and organizational changes underlying the New Economy, focusing on whether the U.S. productivity acceleration of the late 1990s is sustainable and whether it will spread to major European countries. The author argues that the New Economy is driven by a combination of ICT diffusion, flexible labour markets, and complementary institutional reforms. European countries face structural barriers — including stronger labour protections, less flexible product markets, and weaker venture capital markets — that limit the replicability of the U.S. experience, though smaller economies like Ireland and Finland offer partial models.

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