IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2004-200.html
   My bibliography  Save this paper

Why is Productivity Growth in the Euro Area so Sluggish?

Author

Listed:
  • Mr. Marcello M. Estevão

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.

Suggested Citation

  • Mr. Marcello M. Estevão, 2004. "Why is Productivity Growth in the Euro Area so Sluggish?," IMF Working Papers 2004/200, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/200
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17757
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
    2. Paul Schreyer, 2000. "The Contribution of Information and Communication Technology to Output Growth: A Study of the G7 Countries," OECD Science, Technology and Industry Working Papers 2000/2, OECD Publishing.
    3. Mr. Marcello M. Estevão & Ms. Nigar Nargis, 2002. "Wage Moderation in France," IMF Working Papers 2002/151, International Monetary Fund.
    4. Peter Sutherland, 2003. "The Outlook for World Trade," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 4(3), pages 27-34, July.
    5. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    6. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    7. 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.
    8. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    9. Mr. Marcello M. Estevão, 2003. "Do Active Labor Market Policies Increase Employment?," IMF Working Papers 2003/234, International Monetary Fund.
    10. Dale W. Jorgenson, 2007. "Information Technology and the G7 Economies," NBER Chapters, in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 325-350, National Bureau of Economic Research, Inc.
    11. repec:fth:prinin:343 is not listed on IDEAS
    12. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matteo Deleidi & Walter Paternesi Meloni & Antonella Stirati, 2018. "Structural change, labour productivity and the Kaldor-Verdoorn law: evidence from European countries," Departmental Working Papers of Economics - University 'Roma Tre' 0239, Department of Economics - University Roma Tre.
    2. Klaus Weyerstrass & Johannes Jaenicke, 2011. "Is more competition conducive to the macroeconomic performance in the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 351-380, July.
    3. Pierre-Alain Muet, 2006. "Impacts économiques de la révolution numérique," Revue économique, Presses de Sciences-Po, vol. 57(3), pages 347-375.
    4. Andrea Brasili & Loredana Federico, 2008. "Recent Developments in Productivity and the Role of Entrepreneurship in Italy: An Industry View," Rivista di Politica Economica, SIPI Spa, vol. 98(2), pages 179-214, March-Apr.
    5. Repkine, Alexandre, 2009. "Telecommunications Capital Intensity and Aggregate Production Efficiency: a Meta-Frontier Analysis," MPRA Paper 13059, University Library of Munich, Germany.
    6. Linehan, Suzanne & McQuinn, Kieran, 2008. "A Sectoral Analysis of the Average Work Week in Euro Area Countries," Quarterly Bulletin Articles, Central Bank of Ireland, pages 68-88, October.
    7. Rosella Nicolini, 2011. "Labour productivity in Spain: 1977-2002," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 465-485.
    8. Lionel Artige & Rosella Nicolini, 2006. "Labor Productivity in Europe: Evidence from a Sample of Regions," Working Papers 285, Barcelona School of Economics.
    9. Marcello M. Estevão, 2007. "Structural changes and labor productivity slowdown in the Euro Area," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(53), pages 336-367, January.
    10. Enrico Saltari & Giuseppe Travaglini, 2009. "The Productivity Slowdown Puzzle. Technological and Non-technological Shocks in the Labor Market," International Economic Journal, Taylor & Francis Journals, vol. 23(4), pages 483-509.
    11. Giorgio Calcagnini & Germana Giombini & Enrico Saltari, 2009. "Firms? Investment in the Presence of Labor and Financial Market Imperfections," Working Papers 0901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.
    12. Lionel Artige & Rosela Nicolini, 2007. "Evidence on Determinants of Foreign Investments: the Case of Three European Regions. A revised Version," CREPP Working Papers 0706, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    13. Ms. Silvia Sgherri, 2005. "Long-Run Productivity Shifts and Cyclical Fluctuations: Evidence for Italy," IMF Working Papers 2005/228, International Monetary Fund.
    14. Camilleri, Silvio John & Falzon, Joseph, 2013. "The Challenges of Productivity Growth in the Small Island States of Europe: A Critical Look of Malta and Cyprus," MPRA Paper 62489, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mr. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 2005/191, International Monetary Fund.
    2. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    3. Patrick A. Puhani, 2000. "On the Identification of Relative Wage Rigidity Dynamics," William Davidson Institute Working Papers Series 343, William Davidson Institute at the University of Michigan.
    4. Brücker, Herbert & Hauptmann, Andreas & Jahn, Elke J. & Upward, Richard, 2014. "Migration and imperfect labor markets: Theory and cross-country evidence from Denmark, Germany and the UK," European Economic Review, Elsevier, vol. 66(C), pages 205-225.
    5. Wouter Vermeulen & J. van Ommeren, 2006. "Compensation of regional unemployment in housing markets," CPB Discussion Paper 57, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Ramos, Raul & Duque, Juan C. & Surinach, Jordi, 2010. "Is the wage curve formal or informal? Evidence for Colombia," Economics Letters, Elsevier, vol. 109(2), pages 63-65, November.
    7. Ammermueller, Andreas & Kuckulenz, Anja & Zwick, Thomas, 2009. "Aggregate unemployment decreases individual returns to education," Economics of Education Review, Elsevier, vol. 28(2), pages 217-226, April.
    8. Puhani, Patrick A., 2001. "Wage rigidities in Western Germany? Microeconometric evidence from the 1990s," ZEW Discussion Papers 01-36, ZEW - Leibniz Centre for European Economic Research.
    9. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, June.
    10. Iara, Anna & Traistaru, Iulia, 2004. "How flexible are wages in EU accession countries?," Labour Economics, Elsevier, vol. 11(4), pages 431-450, August.
    11. Sergio Destefanis & Giovanni Pica, 2010. "It’s wages, it’s hours, it’s the Italian wage curve," CSEF Working Papers 247, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    12. Hynninen, Sanna-Mari, 2009. "Is there a wage curve for the highly educated?," ISER Working Paper Series 2009-17, Institute for Social and Economic Research.
    13. Kåre Johansen, 2002. "Regional Wage Curves Empirical Evidence from Norway," Working Paper Series 0302, Department of Economics, Norwegian University of Science and Technology.
    14. PUHANI Patrick A., 2000. "On the Identification of Relative Wage Rigidity Dynamics A Proposal for a Methodology on Cross-Section Data and Empirical Evidence for Poland in Transition," IRISS Working Paper Series 2000-11, IRISS at CEPS/INSTEAD.
    15. Marcello M. Estevão, 2007. "Structural changes and labor productivity slowdown in the Euro Area," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(53), pages 336-367, January.
    16. Buscher, Herbert S., 2003. "Gibt es eine Lohnkurve in den neuen Bundesländern? (Is there a wage curve in eastern German?)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 461-475.
    17. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    18. Giorgio Fagiolo & Giovanni Dosi & Roberto Gabriele, 2005. "Towards an evolutionary interpretation of aggregate labor market regularities," Springer Books, in: Uwe Cantner & Elias Dinopoulos & Robert F. Lanzillotti (ed.), Entrepreneurships, the New Economy and Public Policy, pages 223-252, Springer.
    19. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    20. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2004/200. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.