Growth in Chains: EU Value Chain Productivity and its Slowdown

Tero Kuusi and Sakari Lähdemäki

No 146, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract We study Europe’s post-2008 productivity slowdown using novel total factor productivity (TFP) measures that follow production beyond individual industries in global value chains (GVCs). We collect a newset of stylized facts: (1) the slowdown is broad-based, with productivity growth weakening both in final-producer industries and in upstream industries; (2) the staggered entry into force of bilateral investment treaties with China is followed by higher value-chain TFP and greater business-intangible investment; while (3) the gains associated with technology intangibles are weak. We use these facts to discipline a stylized two-region general-equilibrium model with business capabilities, technology-related knowledge, and cross-border knowledge spillovers. The calibration supports a two-stage interpretation of Europe’s experience: (1) sizeable initial integration gains because accumulated business capabilities convert market access into productivity, and (2) later losses when technology improvements are converted into productivity more effectively elsewhere.

Keywords: Global value chains; Intangibles; Productivity; Globalization (search for similar items in EconPapers)
JEL-codes: E22 F60 L16 O14 O47 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2026-09-04
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