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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
140%
GDP
EU-15 as % of the U.S.
120%
100%
GDP per hour
80%
GDP per capita
60%
40%
1960
1965
1970
1975
1980
1985
1990
1995
2000
End of European catch-up
process
GDP per hour growth, 1980-2004
4.0
% per year
3.0
2.0
1.0
0.0
AT
BE DE DK ES
FI
FR GR
1980-1995
IT
NL
1995-2004
PT
SE UK US
End of European Catch-up Process in
1990s: Why?
US perspective:
ICT-revolution (lagging vs. structural)
ICT-production
ICT-investment
Application of ICT in services
European perspective:
Depletion: end of catch-up in “old” technologies
Changes 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
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
1987-1995
1995-2000
2000-2003
EU-15
ICT production*
Market services**
1987-1995
1995-2000
2000-2003
United States
Production industries**
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
Wholesale trade
Securities trade
Retail trade
Banking
Other business services
Motor vehicle trade
Professional services
Hotels & catering
Air transport
Transport services
Computer services
Renting of mach. & eq.
R&D
Social & personal services
Communications
Inland transport
Water transport
Insurance
Construction
-0.1
0.0
Source: pre-EU KLEMS data, GGDC
0.1
Productivity effect
0.2
Share effect
0.3
0.4
Low TFP contribution from market services
Industry contributions to market economy TFP growth, 1987-2003
1.5
1.0
0.5
0.0
Australia
Canada
United
Kingdom
ICT production TFP
United
States
Goods-producing TFP
France
Germany
Market services TFP
1995-2003
1987-1995
1995-2003
1987-1995
1995-2003
1987-1995
1995-2003
1987-1995
1995-2003
1987-1995
1995-2003
1987-1995
1995-2003
1987-1995
-0.5
Netherlands
Post-2000 growth even stronger
Contribution of market services TFP growth, 1995-2003
2.0
1.5
1.0
0.5
0.0
-0.5
Australia
Canada
United
Kingdom
United
States
France
Germany
2000-2003
1995-2000
2000-2003
1995-2000
2000-2003
1995-2000
2000-2003
1995-2000
2000-2003
1995-2000
2000-2003
1995-2000
2000-2003
1995-2000
-1.0
Netherlands
Goods- and services TFP levels, 1997
1.2
1.1
U.S.=1
1.0
0.9
0.8
0.7
0.6
NLD
FRA
DEU
UK
CAN
Goods-producing industries
AUS
NLD
FRA
DEU
UK
Market services
CAN
AUS
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
2.5
2
1.5
1
0.5
ICT capital
Non-ICT capital
market services
ICT capital
UK
NLD
GER
FRA
CAN
AUS
UK
NLD
GER
FRA
CAN
AUS
UK
NLD
GER
FRA
CAN
AUS
UK
NLD
GER
FRA
CAN
AUS
0
Non-ICT capital
manufacturing
Source: pre-EU KLEMS data, GGDC
European countries least energy and servicesintensive but more materials-intensive
Industry average intermediate input use per unit of output, 1997, US=1.0
2.5
2
1.5
1
0.5
Energy input
Material input
Market services
Services input
AUS
CAN
FRA
GER
NLD
UK
AUS
CAN
FRA
GER
NLD
UK
AUS
CAN
FRA
GER
NLD
UK
AUS
CAN
FRA
GER
NLD
UK
AUS
CAN
FRA
GER
NLD
UK
AUS
CAN
FRA
GER
NLD
UK
0
Energy input
Material input
Services input
Manufacturing
Source: pre-EU KLEMS data, GGDC
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