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Why is Productivity Growth in the Euro Area So Sluggish?

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Author Info
Marcello M. Estevão

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Abstract

Slow productivity growth has plagued the euro area since the mid-1990s. That is particularly striking in view of the large productivity gains in the United States during the same period. This paper shows that the deceleration in labor productivity in the euro area was caused by structural changes in wage formation that have affected the relative price of labor, increased the labor intensity of growth and, thus, reduced the rate of capital deepening. Technological shocks seem to have played a minor role in explaining slower productivity growth in the euro area. In addition, a surge in capital deepening and, mainly, TFP growth in key service industries in the United States explain a large part of the productivity growth gap between the two regions in the second half of the 1990s.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/200.

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Length: 35 pages
Date of creation: 01 Nov 2004
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Handle: RePEc:imf:imfwpa:04/200

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Keywords: Economic growth Euro Area Productivity Labor markets

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. Marcello M. Estevão, 2003. "Do Active Labor Market Policies Increase Employment?," IMF Working Papers 03/234, International Monetary Fund. [Downloadable!]
  5. repec:fth:prinin:343 is not listed on IDEAS
  6. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June. [Downloadable!] (restricted)
  7. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Blackwell Publishing, vol. 92(2), pages 215-35.
    Other versions:
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
    • David G. Blanchflower & Andrew J. Oswald, 1990. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Andrew J. Oswald & David G. Blanchflower, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  8. Dale W. Jorgenson, 2003. "Information Technology and the G7 Economies," World Economics, World Economics, NTC Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 4(4), pages 139-169, October. [Downloadable!]
  9. Marcello M. Estevão & Nigar Nargis, 2002. "Wage Moderation in France," IMF Working Papers 02/151, International Monetary Fund. [Downloadable!]
  10. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June. [Downloadable!] (restricted)
  11. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  1. Lionel Artige & Rosella Nicolini, 2006. "Labor productivity in Europe: Evidence from a sample of regions," CREPP Working Papers 0608, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège. [Downloadable!]
    Other versions:
  2. Rosella Nicolini, 2007. "Labor Productivity in Spain: 1977-2002," UFAE and IAE Working Papers 719.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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