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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(484 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
ISBN: 978-92-79-14399-1
ISSN: 1725-3187

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JEL classification: C51, E21, E22, E52

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