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399- How to close the productivity gap between the US and Europe: A quantitative assessment using a semi-endogenous growth model

Werner Roeger, Janos Varga and Jan in 't Veld - European Commission

How to close the productivity gap between the US and Europe: A quantitative assessment using a semi-endogenous growth modelpdf(495 kB) Choose translations of the previous link 

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This paper uses a semi-endogenous growth model to identify possible sources for three interrelated stylised differences between the EU and the US, namely a higher level of productivity and knowledge investment and larger skill premia in the US compared to the EU. The model allows us to explain these differences in terms of differences in subsidies to R and D, mark ups, administrative entry barriers and financial frictions.

The paper provides a ranking about the relative importance of these factors. Goods market competition and both administrative and financial entry barriers are the most important explanatory factors for lower productivity in the EU, while entry barriers explain the bulk of the knowledge investment gap and high skilled wage premia.

(European Economy. Economic Papers. 399. January 2010. Brussels. PDF. 45pp. Free.)

KC-AI-09-399-EN-N (online)
ISBN 978-92-79-14399-1 (online)
ISSN 1725-3187

JEL classification: C51, E21, E22, E52

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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