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, featuring articles by Bart van Ark, Cecilia Jona-Lasinio, Nicholas Oulton, Gustav Horn and more, 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?
Trade agreements are increasingly being viewed with suspicion. Although the overall results of trade liberalisation are positive, some sectors may be adversely affected, leading to job losses and adjustment costs. In 2006 the European Commission established the European Globalisation Adjustment Fund to help workers who have lost their jobs due to globalisation. Despite the relevance of the fund as a trade-adjustment mechanism, its use is still limited compared to its potential. Lucian Cernat and Federica Mustilli review some of the constraining factors and suggest several avenues for further improvement.
The Tax Cuts and Jobs Act that was signed into law in December is the most significant amendment of the US corporate tax code since 1986. Besides the reduction of the corporate income tax rate from 35% to 21%, the legislation entails features like a switch from worldwide income taxation to territorial taxation. This leads to a substantial improvement for the US in global tax competition. Friedrich Heinemann et al. analyse the effects of the US tax reform on FDI flows between Europe and the US and show that European high-tax countries in particular will suffer from a net outflow of FDI.
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.
Forum: Towards a New Economic Paradigm
with articles by Simon Tilford, Marcel Fratzscher, Xavier Ragot and more
by Carl-Ludwig Holtfrerich
by Manuel Rupprecht
from Nicholas Oulton’s Forum article Productivity and the Great Recession
About Intereconomics – Review of European Economic Policy
Intereconomics is jointly produced by ZBW – Leibniz Information Centre for Economics and the Centre for European Policy Studies (CEPS). The journal appears bimonthly and features papers by economists that deal with economic and social policy issues and trends in Europe or affecting Europe. To submit a paper for publication, please visit the Submissions section of our website for relevant information.
Intereconomics is published by Springer-Verlag Berlin Heidelberg.
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