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Solving the European Productivity Puzzle

Press release

05.04.2018

Intereconomics - Volume 53, March/April 2018

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Featured Topic

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, 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?

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Additional Highlights from the Current Issue

Trade and Labour Market Adjustments: What Role for the European Globalisation Adjustment Fund?

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.

Implications of the US Tax Reform for Transatlantic FDI

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.

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.

 

From the Next Issue

Forum: Towards a New Economic Paradigm

with articles by Simon Tilford, Marcel Fratzscher, Xavier Ragot and more

Power or Economic Law? Reflections on ECB Policy

by Carl-Ludwig Holtfrerich

Low Interest Rates and Household Portfolio Behaviour

by Manuel Rupprecht

 

Quote of the Month

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