The EU-US Total Factor Productivity Gap: An Industry-Level Perspective

35 Pages Posted: 7 Apr 2009

See all articles by Kieran Mc Morrow

Kieran Mc Morrow

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Werner Roeger

European Commission, DGECFIN

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Date Written: March 2009

Abstract

The EU-US total factor productivity (TFP) growth gap since the mid-1990's is concentrated in a handful of market service industries (most notably retail trade) and in ICT-producing manufacturing, whilst the EU exhibits a stronger performance in a number of the network utilities. This paper explores the industry-specific determinants of the EU-US TFP growth gap using the EU KLEMS database. As found in previous analyses (e.g., Nicoletti and Scarpetta (2003); Griffith, Redding, and Van Reenen (2004); Inklaar, Timmer and Van Ark (2008)), TFP growth appears to be driven by catching-up phenomena associated with the gradual adoption of new-vintage technologies. Compared with previous analyses, TFP growth is also significantly driven by developments taking place at the technological frontier, increasingly so since the mid-1990's. Industries with higher R&D expenditures and higher adoption rates for ICT-intensive technologies appear to exhibit higher TFP growth rates, whilst human capital has mostly a significant effect across countries. Regarding industry specific determinants, ICT producing industries appear to benefit from R&D in terms of stronger spillovers from TFP gains at the frontier; network utilities are strongly affected by improvements associated with reduced product market regulations; whilst the retail trade industry is significantly influenced by consumption dynamics which permit a better exploitation of scale economies.

Keywords: European Union, growth determinants, total factor productivity

JEL Classification: D24, O47, O52

Suggested Citation

Mc Morrow, Kieran and Roeger, Werner and Turrini, Alessandro, The EU-US Total Factor Productivity Gap: An Industry-Level Perspective (March 2009). CEPR Discussion Paper No. DP7237, Available at SSRN: https://ssrn.com/abstract=1372557

Kieran Mc Morrow

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

Bruxelles 1170
Belgium

Werner Roeger

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

Alessandro Turrini (Contact Author)

European Commission ( email )

Office BU-10/113
B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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