Different characteristic features regarding the productivity increase in the US and the EU in the 1990s

Abstract

In the 1990´s the productivity growth in the USA and in the EU changed in opposite sense: until it was decelerating in Europe, till it was accelerating significantly in the USA. In this essay I am going to search for the explanation of these opposite tendencies studying the sectoral differences and analysing structure of the investments, capital formation and the marginal productivity of capital. The sectoral differences in productivity growth highlight the major differences in terms of the growth experienced in the two regions. This is evidence for the structural rigidity of the European economy, which is much less flexible in comparison with its American counterpart. I reveal that the fixed capital stock in the USA expanded in a structure and to a degree that promotes growth to a much higher extent. The data analysed below convincingly show how much less of an impact the ICT revolution had on the economy and society of the EU than in USA, and how much less capable these leaps and bounds in technological dev elopment were to transform and dynamize the European Union than the United States.