1 Catching-Up or Getting Stuck? Europe’s Troubles to Exploit ICT’s Productivity Potential Bart van Ark & Robert Inklaar University of Groningen and The Conference Board Presentation for EU KLEMS Public Session on ”The Determinants of Europe’s Productivity Revival” 13 May 2005 Bank of Finland Helsinki 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".
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1 Catching-Up or Getting Stuck? Europes Troubles to Exploit ICTs Productivity Potential Bart van Ark & Robert Inklaar University of Groningen and The Conference.
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1
Catching-Up or Getting Stuck? Europe’s Troubles to Exploit ICT’s Productivity
Potential
Bart van Ark & Robert InklaarUniversity of Groningen
and The Conference Board
Presentation for EU KLEMS Public Session on”The Determinants of Europe’s Productivity Revival”
13 May 2005Bank of Finland
Helsinki
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".
U.S. shows acceleration of TFP growth in business services, but no further acceleration elsewhere
5-year moving average of U.S. TFP growth
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Wholesale trade Retail trade Financial intermediation Business services
In Europe TFP growth in market services is slower and shows no acceleration
5-year moving average of EU-4 TFP growth
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Wholesale trade Retail trade Financial intermediation Business services
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Have things changed since 2000?
ICT capital deepening has slowed almost everywhere to pre-1995 levels
U.S. shows strong acceleration in TFP growth, with a slowdown in most European countries
There is some suggestive evidence that spillovers from ICT use are impacting TFP growth …
We need to look in services: European communication sector remains strong on TFP U.S. and UK retail are clearly ahead of rest of Europe Business services is taking off in U.S.
There are no signs that Europe is catching up on U.S. in ICT use and related productivity
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Policy Questions
Is slow TFP the result of inadequate management of intangible capital or inflexible product and labour markets?
Are innovation policies of much help to drive innovation and productivity in many services?
Are reform & competition policies sufficiently focused on services?
Is Europe sufficiently exploiting comparative advantages across borders?
Are issues concerning reform management in Europe properly managed?
Should we focus on the TFP slowdown or also on causes for lack of capital deepening in non-ICT?