AbstractThis paper gives a survey on the causes of the divergence in productivity growth rates between the U.S. and Europe in the last 15 years. It is shown that Europe’s lag in productivity growth can be traced to relative lower productivity growth in the service sector. This is due to over-regulated goods, capital, land, and labor markets. Although there is a consensus that in the long run no relationship exists between productivity growth and labor market performance, in terms of policy, well-specified labor market reforms are recommended to increase productivity growth in Europe. For labor market reforms are a necessary complement for productivity-enhancing product market reforms.
Labor Market Reforms in Europe: Towards More Flexicure Labor Markets?