Delayed IT Usage: Is It Really the Drag on Europe’s Productivity

Abstract: This paper explores the quantitative plausibility of three candidate explanations for the European productivity slowdown with respect to the US. The empirical plausibility of the common wisdom on the topic (the 'IT usage' hypothesis) is found to crucially depend on how IT-using industries are defined. If a narrow definition is chosen, the IT usage hypothesis no longer explains the whole of the EU productivity slowdown but just about 55 percent of it, with the remaining part to be attributed to other factors than IT, as argued in the 'IT irrelevance' view. No room is left for IT-producing industries as another potential vehicle for the US-EU productivity growth gap instead.