Why is Productivity Growth in the Euro Area so Sluggish?

October 1, 2004

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Format: Chicago

Marcello M. Estevão Why is Productivity Growth in the Euro Area so Sluggish?, (USA: International Monetary Fund, 2004) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Slow productivity growth has plagued the euro area since the mid-1990s. That is particularly striking in view of the large productivity gains in the United States during the same period. This paper shows that the deceleration in labor productivity in the euro area was caused by structural changes in wage formation that have affected the relative price of labor, increased the labor intensity of growth and, thus, reduced the rate of capital deepening. Technological shocks seem to have played a minor role in explaining slower productivity growth in the euro area. In addition, a surge in capital deepening and, mainly, TFP growth in key service industries in the United States explain a large part of the productivity growth gap between the two regions in the second half of the 1990s.

Subject: Capital productivity, Labor, Labor productivity, Production, Productivity, Total factor productivity

Keywords: Acceleration in ICT-producing industry, Capital deepening, Capital productivity, Europe, ICT capital deepening, Labor productivity, Labor productivity acceleration in ICT-producing industry, Labor productivity deceleration, Labor productivity growth gap, Labor quality, Productivity, Productivity acceleration, Productivity database, Productivity deceleration, Productivity growth, Quality change, Quality growth, Structural change, Total factor productivity, Wage moderation, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/200
Stock No:

WPIEA2002004
ISBN:

9781451860191
ISSN:

1018-5941

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