growth and productivity in the european union presentation for the euklems workshop, 13-14 september...
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Growth and Productivity in the European Union
Presentation for the EUKLEMS workshop, 13-14 September 2006, Vienna
Marcel Timmer, Groningen Growth of Development Centre,
University of Groningen
This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".
EU 15 as % of US, Breakpoints
GDP, GDP per capita and labour productivity, EU-15 as % of US
40%
60%
80%
100%
120%
140%
1960 1965 1970 1975 1980 1985 1990 1995 2000
EU
-15
as %
of
the
U.S
.
GDP
GDP per hour
GDP per capita
End of European catch-up process
GDP per hour growth, 1980-2004
0.0
1.0
2.0
3.0
4.0
AT BE DE DK ES FI FR GR IT NL PT SE UK US
% p
er y
ear
1980-1995 1995-2004
End of European Catch-up Process in 1990s: Why?
US perspective:ICT-revolution (lagging vs. structural)
ICT-productionICT-investmentApplication of ICT in services
European perspective:Depletion: end of catch-up in “old” technologiesChanges in labour markets: employment –
productivity trade-off
Market services industries are key to aggregate labour productivity growth
Industry contributions to market sector labour productivity growth EU-15, Japan and U.S., 1987-2003
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1987-1995 1995-2000 2000-2003 1987-1995 1995-2000 2000-2003
EU-15 United States
ICT production* Production industries**
Market services** Reallocation
* Includes ICT manufacturing, telecom and software services** Excludes ICT producing industries*** Contribution to aggregate economy
Source: pre-EU KLEMS data, GGDC
Much variation between service industries
Difference in labour productivity contribution in market services, U.S.-EU-15, 1995-2003
-0.1 0.0 0.1 0.2 0.3 0.4
Construction
Insurance
Water transport
Inland transport
Communications
Social & personal services
R&D
Renting of mach. & eq.
Computer services
Transport services
Air transport
Hotels & catering
Professional services
Motor vehicle trade
Other business services
Banking
Retail trade
Securities trade
Wholesale trade
Productivity effect Share effectSource: pre-EU KLEMS data, GGDC
Low TFP contribution from market services
Industry contributions to market economy TFP growth, 1987-2003
-0.5
0.0
0.5
1.0
1.519
87-1
995
1995
-200
3
1987
-199
5
1995
-200
3
1987
-199
5
1995
-200
3
1987
-199
5
1995
-200
3
1987
-199
5
1995
-200
3
1987
-199
5
1995
-200
3
1987
-199
5
1995
-200
3
Australia Canada UnitedKingdom
United States
France Germany Netherlands
ICT production TFP Goods-producing TFP Market services TFP
Post-2000 growth even stronger
Contribution of market services TFP growth, 1995-2003
-1.0
-0.5
0.0
0.5
1.0
1.5
2.019
95-2
000
2000
-200
3
1995
-200
0
2000
-200
3
1995
-200
0
2000
-200
3
1995
-200
0
2000
-200
3
1995
-200
0
2000
-200
3
1995
-200
0
2000
-200
3
1995
-200
0
2000
-200
3
Australia Canada UnitedKingdom
United States
France Germany Netherlands
Goods- and services TFP levels, 1997
0.6
0.7
0.8
0.9
1.0
1.1
1.2
NLD FRA DEU UK CAN AUS NLD FRA DEU UK CAN AUS
Goods-producing industries Market services
U.S.=1
U.S. most ICT intensive; Non-ICT capital intensity in Europe still larger
Industry average capital input per unit of output, 1997, US=1.0
Source: pre-EU KLEMS data, GGDC
0
0.5
1
1.5
2
2.5
AU
S
CA
N
FR
A
GE
R
NLD U
K
AU
S
CA
N
FR
A
GE
R
NLD U
K
AU
S
CA
N
FR
A
GE
R
NLD U
K
AU
S
CA
N
FR
A
GE
R
NLD U
K
ICT capital Non-ICT capital ICT capital Non-ICT capital
market services manufacturing
European countries least energy and services-intensive but more materials-intensive
Industry average intermediate input use per unit of output, 1997, US=1.0
Source: pre-EU KLEMS data, GGDC
0
0.5
1
1.5
2
2.5
AU
SC
AN
FR
AG
ER
NLD U
KA
US
CA
NF
RA
GE
RN
LD UK
AU
SC
AN
FR
AG
ER
NLD U
K
AU
SC
AN
FR
AG
ER
NLD U
KA
US
CA
NF
RA
GE
RN
LD UK
AU
SC
AN
FR
AG
ER
NLD U
K
Energy input Material input Services input Energy input Material input Services input
Market services Manufacturing
Europe’s productivity is stagnating, but at high levels
• European productivity levels are on par with U.S. in mid 1990s
• Strong labour productivity growth after 1995 in Anglo-Saxon countries (not just U.S.), much slower growth in Continental Europe
• Small differences in size ICT-producing sector,
• ICT-capital levels clearly lagging.
• Decline in non-ICT capital intensity.
• But TFP growth differences most important factor, especially in market services