| Abstract |
This paper analyses the contributions of IT-capital deepening
and total factor productivity growth (TFP) in IT-production on aggregate labour
productivity growth patterns within the European Union in comparison with the
US. We find that differences in the direct effects of IT almost fully explain
the US lead in labour productivity growth over the EU aggregate over the period
1995-2001. However differences in the direct effects of IT are by no means the
sole determinants of the widening of the "Atlantic Divide", neither the main
cause of divergent labour productivity growth patterns within Europe. Non-IT
capital deepening and non-IT TFP growth were major contributors to continued
or even accelerating growth in small economies such as Austria, Finland,
Greece, Ireland, Portugal and Sweden. In Finland, Sweden and especially Ireland
this was augmented by high contributions from IT, which were even higher than
in the US. At the same time, decelerating labour productivity growth in major
European countries such as France, Germany, Italy and the UK was mainly due to
declining contributions of non-IT capital deepening and non-IT TFP growth
compared to the period 1980-1995.
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