Lessons for Europe from the US growth resurgence

CESifo Economic Studies is an English language relaunch of the formerly German language ifo Studien. Vol.49, No.1, 2003 is the first issue with the new title. CESifo Economic Studies aims to bridge the gap between specialised research in economics and the interest of non-specialists. The journal combines theory and empirical research with a strong emphasis on policy issues. CESifo Economic Studies publishes contributed papers by top level academic economists which are written in a style accessible to all economists regardless of their specialisation. The primary focus of the journal is on policy problems, but it also publishes high quality, non-technical articles which are of general interest to economists.

Article abstract:

This paper analyses the sources of U.S. labour productivity growth in the late 1990s and presents projections for both output and labour productivity growth. We show that investment in information technology (IT) played a substantial role in the U.S. productivity revival and that similar trends are evident in data for other leading OECD countries. We then outline a methodology for projecting trend output and productivity growth for the broadly defined U.S. economy. Our base-case projection puts trend productivity growth at 1.78 percent per year over the next decade with a range of 1.14 to 2.38 percent, reflecting fundamental uncertainties about the rate of technical progress in IT-production and investment in IT-equipment and software. Our central projection is below the average growth rate of 2.07 percent during 1995 -2000. Similar
projections for Europe must await more complete information. (JEL J2)