Productivity & Innovation Competencies in the Midst of the Digital Transformation Age: A EU-US Comparison

Bart van Ark (), Klaas de Vries and Abdul Azeez Erumban

No 119, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper reviews the latest evidence on productivity growth by industry and innovation competencies by occupation to observe whether, beneath the productivity slowdown of the past decade in both the European Union and the United States, signs can be detected of structural performance improvements due to digital transformation. We find that in the United States, the digital-producing sector has continued to contribute strongly to aggregate productivity in recent years. While labour productivity growth in the US was only 0.6 percent from 2013-2017, as much as 0.5 percentage point (or 86 percent) was coming from digital-producing industries representing only 8.2 percent of US GDP. Other industries, which account for the remaining 92 percent of the US economy, including some of the most digital intensive-using industries, have seen a dramatic decline in their contribution to productivity growth. In the European Union, the digital-producing sector has seen a strong decline in its contribution to productivity growth, which by 2013-2017 was only one third of the US contribution at 0.15 percentage points. However, the most digital intensive-using industries contributed 4 times as much to labor productivity as in the United States, driving overall labour productivity growth from 2013-2017 up to 0.9 percentage point – 0.3 percentage points higher than in the US. A positive factor, both in the EU and in the US, is that total factor productivity (TFP) growth in the most intensive digital-producing industries, notably trade and business services has improved. Digital intensiveusing manufacturing industries generally contribute less to productivity than digital intensive-using services, partly because of slower productivity growth and partly because of their smaller size. A novel measure of innovation competencies by occupation shows that, when applied to industries, those industries with the highest competencies, also show positive productivity contributions, and the most intensive digital-using industries are strongly represented in this category. Overall, while the evidence is still thin due to time lags in the data, there are signs of positive contributions to productivity growth related to digital transformation even though those effects are still not widespread observable across the economy.

JEL-codes: O30 O40 O47 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-10
New Economics Papers: this item is included in nep-eff, nep-eur, nep-pay and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:119

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