The Productivity Gap between the United States and the Euro Zone Continues to Widen

Abstract

From 1950 to 1970, labor productivity levels converged between the United States – considered to be the global technological leader – Western European countries and Japan. But thereafter this process gradually became less marked before disappearing completely since the mid-1990s: while in the United States, labor productivity growth accelerated, it slowed down in the majority of European countries and Japan. Technological progress, associated with the development of information and communication technologies (ICT), goes some way towards explaining the revival of productivity in the USA, before the dotcom bubble burst. However, it does not tally with the decline seen in Europe because, although the level of investment in ICTs in Europe falls some way behind that of the USA, it has nonetheless grown significantly. A fundamental explanation for the divergence relates to a change in intensity of the employment component of growth. While it fell sharply in the United States, there was a significant rise in Europe where, prior to the crisis of 2007-2008, mass unemployment fell as a result. The most recent data for 2009 confirm the existence of diverging productivity trends.

Keywords: labor producitivity, OECD countries, unemployement