Working paper no. 18/2006


The US as a benchmark for EU15 productivity: lessons?

Measured productivity growth rates have picked up in the US since 1995 while slowing down in EU15 as a whole, leading to some concerns about the effectiveness of EU innovation and growth policies. This paper argues that the underlying productivity performance in the EU is substantially better than its reputation: Once corrections are made for differences in statistical methods, industrial composition, the absolute and relative improvement of EU15 labour market performance, as well as other factors, it is uncertain whether the US in this period has indeed been better at improving the efficient use of pro-duction factors. This is not to say that benchmarking is unproductive as a source for improving policy making: but to be useful it needs to be very careful – and more gains may be had from studying per-formance in specific sectors than from comparing country averages. In so doing, benchmark analyses need to take a hard look at data quality and be cautious in equating differences in (growth in) produc-tivity with differences in (growth in) welfare.

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