Catching up or getting stuck? Europe's troubles to exploit ICT's productivity potential
AbstractIn this paper we extend our previous analysis of the comparative productivity performance of Europe and the U.S. to 2004, thereby covering the latest full business cycle. Our main finding is that the slower contribution of ICT to productivity growth in the EU compared to the U.S. has persisted into the early part of the 21st century. The growth differential even increased since 2000, as the U.S. shows strong labour productivity advances in market services. This may be related to a more productive use of ICT in the U.S.. However, at industry level we find no support for significant TFP (total factor productivity) spillovers from ICT investment, neither in the U.S. nor in European countries. In the 1980s we even find that ICT investment and TFP growth are negatively related, with at best normal returns in the 1970s and 1990s. We speculate that this U-shaped pattern is driven by ?hard savings? from ICT investment that first lead to earning normal returns, followed by a period of experimentation during which ICT and TFP growth are negatively related. Ultimately, ?soft savings? lead to productivity gains from ICT in line with the marginal cost of ICT. We argue that the realization of productivity effects from soft savings is highly dependent on the competitive process that stimulates complementary innovations and weeds out inefficient users of ICT technology. Europe risks getting stuck in an environment where the productivity gains from soft savings from ICT remain unrealized.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Groningen Growth and Development Centre, University of Groningen in its series GGDC Research Memorandum with number GD-79.
Date of creation: 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-29 (All new papers)
- NEP-EEC-2006-01-29 (European Economics)
- NEP-EFF-2006-01-29 (Efficiency & Productivity)
- NEP-ICT-2006-01-29 (Information & Communication Technologies)
- NEP-INO-2006-01-29 (Innovation)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stephen D. Oliner & Daniel E. Sichel & Kevin J. Stiroh, 2007.
"Explaining a Productive Decade,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 38(1), pages 81-152.
- Theo Eicher & Oliver Röhn, 2007. "Sources of the German Productivity Demise – Tracing the Effects of Industry-Level ICT Investment," CESifo Working Paper Series 1896, CESifo Group Munich.
- Inklaar, Robert & Timmer, Marcel & van Ark, Bart, 2006.
"Mind the gap! International Comparisons of Productivity in Services and Goods Production,"
GGDC Research Memorandum
GD-89, Groningen Growth and Development Centre, University of Groningen.
- Robert Inklaar & Marcel P. Timmer & Bart van Ark, 2007. "Mind the Gap! International Comparisons of Productivity in Services and Goods Production," German Economic Review, Verein für Socialpolitik, vol. 8, pages 281-307, 05.
- Robert Inklaar & Marcel P. Timmer & Bart van Ark, 2006. "Mind the gap! International comparisons of productivity in services and goods production," Hi-Stat Discussion Paper Series d06-175, Institute of Economic Research, Hitotsubashi University.
- Theo S. Eicher & Oliver Roehn, 2007. "Sources of the German Productivity Demise: Tracing the Effects of Industry-Level Information and Communication Technology Investment," German Economic Review, Verein für Socialpolitik, vol. 8, pages 211-236, 05.
- Robert J. Gordon & Ian Dew-Becker, 2005. "Why did Europe’s productivity catch-up sputter out? a tale of tigers and tortoises," Proceedings, Federal Reserve Bank of San Francisco.
- Ester Gomes da Silva, 2011. "Portugal and Spain: catching up and falling behind. A comparative analysis of productivity trends and their causes, 1980-2007," FEP Working Papers 409, Universidade do Porto, Faculdade de Economia do Porto.
- Bruno Caprettini, 2008. "Finance and the Diffusion of Digital Technologies," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 79-122, November-.
- Antipa, P. & Cette, G. & Frey, L. & Lecat, R. & Vigna, O., 2008. "Recent trends in productivity: structural acceleration in the euro area and deceleration in the United States?," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 11, pages 33-50, Spring.
- Antipa, P., 2008. "Productivity decomposition and sectoral dynamics," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 11, pages 51-64, Spring.
- Pamfili Antipa & Marie-Elisabeth de la Serve, 2010. "International Comparisons of Industry-based Productivity Levels in the Financial and Business Service Sectors," International Productivity Monitor, Centre for the Study of Living Standards, vol. 19, pages 66-81, Spring.
- Florentino Felgueroso & Sergi Jiménez Martín, 2009. "The "New Growth Model". How and with Whom?," Working Papers 2009-39, FEDEA.
- Rafael Fernández & Enrique Palazuelos, 2009. "Labor productivity: a comparative analysis of the European Union and United States, for the period 1994-2007," Working Papers wp208, Political Economy Research Institute, University of Massachusetts at Amherst.
- Theo S. Eicher & Thomas Strobel, 2008. "Germany’s Continued Productivity Slump: An Industry Analysis," Ifo Working Paper Series Ifo Working Paper No. 58, Ifo Institute for Economic Research at the University of Munich.
- Wilhelm Kohler, 2006. "The “Lisbon Goal” of the EU: Rhetoric or Substance?," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 85-113, June.
- Kevin Stiroh & Matthew Botsch, 2007. "Information Technology and Productivity Growth in the 2000s," German Economic Review, Verein für Socialpolitik, vol. 8, pages 255-280, 05.
- Mirko Draca & Raffaella Sadun & John Van Reenen, 2006. "Productivity and ICT: A Review of the Evidence," CEP Discussion Papers dp0749, Centre for Economic Performance, LSE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joke Bulthuis).
If references are entirely missing, you can add them using this form.