The Great Divide: productivity dynamics in the United States and the euro area after the pandemic

Luisa Carpinelli (), Rosalia Greco, Stefania Romano (), Luca Rossi and Eliana Viviano ()
Additional contact information
Luisa Carpinelli: Bank of Italy
Stefania Romano: Bank of Italy
Eliana Viviano: Bank of Italy

No 924, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: US and euro-area (EA) productivity trends diverged from the mid-1990s to the late 2000s. The US experienced rapid growth driven by information and communication technology (ICT) advancements, while the EA, particularly Italy, lagged. After the Great Financial Crisis, the gap narrowed as US productivity slowed. However, the pandemic renewed this divergence, with US productivity-driven GDP growth far exceeding that of the EA. The divide stems from multiple factors. First, the energy crisis disproportionately affected intermediate goods prices in the EA, dampening productivity. Second, ICT played a much larger role in US productivity growth, despite its small economic weight. Third, the US outpaced the EA in both Total Factor Productivity (TFP) and capital intensity, especially in ICT investments. Contrary to some views, business dynamism alone does not explain the US acceleration. Additionally, Europe's short-term work schemes, while aiding labor market recovery, may hinder structural reallocation, though their overall impact on Italy's low productivity remains limited. Ultimately, longstanding structural differences continue to drive the transatlantic productivity gap.

Keywords: labor market; productivity (search for similar items in EconPapers)
JEL-codes: E24 J01 J08 (search for similar items in EconPapers)
Date: 2025-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/qef/2025-0924/QEF_924_25.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_924_25

Access Statistics for this paper

More papers in Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().