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Solving the European Productivity Puzzle

In recent years, advanced economies around the globe have experienced a pronounced slowdown in productivity growth. There is no consensus on the reasons for this slowdown, but most economists agree that stagnant productivity is a concern, given that productivity growth is the main driver of economic growth. This Forum with articles by Bart van Ark, Klaas de Vries, Kirsten Jäger, Cecilia Jona-Lasinio, Valentina Meliciani, Nicholas Oulton, Gustav A. Horn, Alexander Herzog-Stein, Davide Castellani, Mariacristina Piva, Torben Schubert and Marco Vivarelli takes a closer look at the factors behind the slowdown in productivity growth observed after the Great Recession. What can be done to improve productivity in Europe? What do the improved productivity growth estimates for 2017 and 2018 in the euro area mean for its long-term trend?

Figure of the Month

Productivity Growth

This figure from Bart van Ark, Klaas de Vries and Kirsten Jäger's article Is Europe’s Productivity Glass Half Full or Half Empty? shows that today's productivity growth rates are still only about half of the labour productivity growth rates in the two decades before the financial crisis, and only a third of the growth rates in the 1970s and 1980s. Click on the figure for further information.


How Should the EU Position Itself in a Global Trade War?

The challenge that the current US administration presents to the global trading system far exceeds steel and aluminium tariffs. The real question is whether the US can force the EU to join it and become an ally opposing China. Guntram B. Wolff writes that it will be difficult for the EU to maintain a middle course between the US, its primary market and second-largest supplier, and China, its primary supplier and second-largest market.

Editor's Choice

Does the EU Suffer from a Democratic Deficit?

This 2008 Forum explored the EU's widely perceived democratic deficit. Is the perception true? If so, what can policymakers do to close the deficit? All of the contributions in the Forum are interesting, but Andrew Moravcsik's article, The Myth of Europe’s “Democratic Deficit", is particularly compelling.


Productivity Growth and International Competitiveness: Does Intangible Capital Matter?

The shift to a knowledge-based economy requires a deeper understanding of the role of intangible investments, not only for economic growth but also for international competitiveness. Cecilia Jona-Lasinio and Valentina Meliciani show that intangible capital is as important as fixed/tangible capital in many advanced countries, and that its importance is growing over time.

Quote of the Month

Why Is Productivity Weak?

"The fall in TFP growth since 2007 is far too large to be explained by an exogenous decline in the rate of innovation and technical progress. Instead, it is more likely to reflect the damage done by the recession itself."

from Nicholas Oulton's Forum article Productivity and the Great Recession

Letter from America

The Lingering Wage Gap from Rosie the Riveter to #MeToo

Caroline Fredrickson describes the negative impact of 75 years of pay discrimination based on gender in the US. Beyond the effects of direct discrimination, sexual harassment in the workplace also leads to missed working hours and lost wages. Several potential solutions are put forward to remedy the situation, since equal wages for women benefit us all.


Is Europe’s Productivity Glass Half Full or Half Empty?

A recent uptick in European productivity growth is promising, but Bart van Ark et al. argue that it is too early to call victory over the EU's slow productivity trend of the past decade. Nonetheless, rising labour shortages could prompt companies to accelerate their digitalisation efforts and focus more strongly on raising productivity.