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Structural Changes And Labor Productivity Slowdownin The Euro Area





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 la-bor, increased the labor intensity of growth, and, thus, reduced the rate of capital deepening. Techno-logical shocks seem to have played a minor role in explaining this deceleration. This is a general eco-nomic effect that may surface in other countries as they fi ght to lower unemployment rates.

Suggested Citation

  • Marcello M. Estevão, 2007. "Structural Changes And Labor Productivity Slowdownin The Euro Area," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 25(53), pages 336-367, January.
  • Handle: RePEc:col:000107:004638

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    References listed on IDEAS

    1. Stephen D. Oliner & Daniel E. Sichel, 2000. "The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 3-22, Fall.
    2. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 05/191, International Monetary Fund.
    3. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    4. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    5. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    6. Kevin J. Stiroh & Dale W. Jorgenson, 1999. "Information Technology and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 109-115, May.
    7. Marcello M. Estevão, 2004. "Why is Productivity Growth in the Euro Area so Sluggish?," IMF Working Papers 04/200, International Monetary Fund.
    8. Sanz de Galdeano, Anna & Turunen, Jarkko, 2005. "Real wages and local unemployment in the euro area," Working Paper Series 471, European Central Bank.
    9. Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-1043, September.
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    More about this item


    productivity growth; structural change; wage bargaining; employment creation.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand


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