Understanding the Debate on the US-Europe Paradox

Chen Yeh
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Chen Yeh: https://www.richmondfed.org/research/people/yeh

Richmond Fed Economic Brief, 2026, vol. 26, issue 30

Abstract: European countries' gross domestic products (GDPs) relative to the U.S. at current purchasing power parity (PPP) have stayed fairly constant since 2001. However, U.S. real GDP at national constant prices has grown much faster than its European counterparts. This apparent paradox can be explained by the U.S. IT boom. While these facts are not being disputed, there is a debate between economists on what this implies for European welfare. From these facts alone, it is not straightforward to conclude whether Europe is in decline or not. Statements on Europe's welfare will strongly depend on the assumptions one is willing to make on how the gains of the U.S. IT boom are dispersed across countries.

Keywords: Economic Growth; trade and international economics (search for similar items in EconPapers)
Date: 2026
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