Europes growth slowed in the 1990s, reinforcing the overall impression of a need to catch up with the US regarding standards of living. In reaction, EU leaders adopted the famous Lisbon Agenda in 2000. The Agenda is now under review, the aim being to determine why progress on its pro-growth goals has been unsatisfactory and what can be done about it. The first crucial step in this process is to understand the true sources of the European growth slowdown. Sources-of-growth calculations have always been imprecise, but evidence from the US suggests that quality upgrading especially in capital goods has substantially worsened the precision problem since the 1990s. Unfortunately, quality adjusted sources-of-growth calculations, however, have not performed satisfactorily for Europe, so Europes leaders are working with potentially misleading accounts of Europes growth slowdown. Redressing this omission is the goal of this paper.
Failure to account properly for capital quality improvements leads to two mistakes. First, overall GDP is underestimated. Our calculations, for example, show that euro area GDP growth was underestimated on average by 0.7 percentage points annually in the late 1990s. However, similar quality-adjustment figures raise US growth figures in the same period by even more, so quality-adjusting suggests that the USEU growth gap was even more pronounced than previously believed. Secondly, the sources-of-growth calculations used to prioritize Europes pro-growth policies are skewed. Our calculations show that the contribution of the slowdown in disembodied technical progress to the overall slowdown is more pronounced after quality adjustment.
Our findings point to the need for adoption of microeconomic measures aimed at enhancing overall efficiency and boosting innovation activity. Such measures would aim at a better business environment, e.g. by easing regulatory and administrative burden and liberalizing energy and telecommunications markets.
Philippa Sumner | EurekAlert!
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
For the first time ever, a cloud of ultra-cold atoms has been successfully created in space on board of a sounding rocket. The MAIUS mission demonstrates that quantum optical sensors can be operated even in harsh environments like space – a prerequi-site for finding answers to the most challenging questions of fundamental physics and an important innovation driver for everyday applications.
According to Albert Einstein's Equivalence Principle, all bodies are accelerated at the same rate by the Earth's gravity, regardless of their properties. This...
An important step towards a completely new experimental access to quantum physics has been made at University of Konstanz. The team of scientists headed by...
Yersiniae cause severe intestinal infections. Studies using Yersinia pseudotuberculosis as a model organism aim to elucidate the infection mechanisms of these...
Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.
While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...
Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales
Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...
19.01.2017 | Event News
10.01.2017 | Event News
09.01.2017 | Event News
23.01.2017 | Health and Medicine
23.01.2017 | Physics and Astronomy
23.01.2017 | Process Engineering