IMF Working Papers

Chasing the Dream: Industry-Level Productivity Developments in Europe

By Serhan Cevik, Sadhna Naik, Keyra Primus

December 20, 2024

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Format: Chicago

Serhan Cevik, Sadhna Naik, and Keyra Primus. "Chasing the Dream: Industry-Level Productivity Developments in Europe", IMF Working Papers 2024, 258 (2024), accessed December 22, 2024, https://doi.org/10.5089/9798400294464.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

European countries are lagging behind in productivity growth, with significant productivity gaps across industries. In this study, we use comparable industry-level data to explore the patterns and sources of total factor productivity (TFP) growth across 28 countries in Europe over the period 1995–2020. Our empirical results highlight four main points: (i) TFP growth is driven largely by the extent to which countries are involved in scientific and technological innovation as the leader country or benefiting from stronger knowledge spillovers; (ii) the technological gap is associated with TFP growth as countries move towards the technological frontier by adopting new innovations and technologies; (iii) increased investment in information and communications technology (ICT) capital and research and development (R&D) contributes significantly to higher TFP growth; and (iv)the impact of human capital tends to be stronger when a country is closer to the technological frontier. The core findings of this study call for policy measures and structural reforms to promote innovation and facilitate the diffusion of new and existing technologies across Europe.

Subject: Capital spending, Expenditure, Production, Productivity, Total factor productivity

Keywords: Capital spending, Europe, Human capital, Human capital, Innovation, Productivity, R&D, Technology, Total factor productivity, Total factor productivity

Publication Details

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