The Lack of European Productivity Growth: Causes and Lessons for the U.S.

Abstract

This paper draws lessons from post-World War II Western European economic performance for the current U.S. economy. We document that much of Western Europe grew very quickly from the end of World War II up to the mid-1970s, reflecting policies that incentivized technology adoption and investment in physical and human capital. But since then, European policies have changed considerably, with higher tax rates and increased regulatory barriers that have reduced competition and new business formation. We discuss how the U.S. has shown signs of becoming like Europe over the last decade, and argue why policy reforms are key to restoring U.S. growth.

Keywords: Productivity growth, Europe's economic performance, economic policy

JEL Classification: E02, E30, E60