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Why is Productivity Growth in the Euro Area so Sluggish?
Author:
Mr. Marcello M. Estevãonull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 200
Language:
English
Publication Date:
01 Oct 2004
DOI:
https://doi.org/10.5089/9781451860191.001
ISBN:
9781451860191
ISSN:
1018-5941
Pages:
36
Keywords:
WP; productivity growth; structural change; capital deepening; wage moderation; ICT capital deepening; quality change; quality growth; productivity acceleration; labor productivity deceleration; labor quality; productivity database; acceleration in ICT-producing industry; productivity deceleration; labor productivity growth gap; labor productivity acceleration in ICT-producing industry; Labor productivity; Productivity; Capital productivity; Total factor productivity; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2004: Issue 200