Chasing the Dream: Industry-Level Productivity Developments in Europe
IMF Working Papers, December 20, 2024
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Bibliographic details
- Authors: Serhan Cevik, Sadhna Naik, Keyra Primus
- Published: December 20, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400294464.001
Study scope and data
- Examines total factor productivity (TFP) growth across 28 countries in Europe over the period 1995–2020.
- Publication: IMF Working Paper No. 2024/258; Pages: 24; Issue: 258; Volume: 2024.
- Authors: Serhan Cevik, Sadhna Naik, Keyra Primus. Date: December 20, 2024.
- DOI: https://doi.org/10.5089/9798400294464.001
- Subjects: Capital spending, Expenditure, Human capital, Labor, Production, Productivity, Total factor productivity.
- Keywords: Capital spending, core finding, developments in Europe, Europe, Global, human capital, innovation, Productivity, productivity development, R&D, technology, TFP difference, TFP slowdown, Total factor productivity.
- ISBN: 9798400294464; ISSN: 1018-5941; Stock No: WPIEA2024258.
Core empirical findings
- Four main empirical results drive the study’s conclusions:
- (i) TFP growth is driven largely by the extent to which countries are involved in scientific and technological innovation as the leader country or benefiting from stronger knowledge spillovers.
- (ii) The technological gap is associated with TFP growth as countries move towards the technological frontier by adopting new innovations and technologies.
- (iii) Increased investment in information and communications technology (ICT) capital and research and development (R&D) contributes significantly to higher TFP growth.
- (iv) The impact of human capital tends to be stronger when a country is closer to the technological frontier.
- Broad assessment: European countries are lagging behind in productivity growth, with significant productivity gaps across industries.
Policy implications and recommendations
- Promote innovation:
- Strengthen national roles in scientific and technological innovation to act as leader countries where feasible.
- Enhance conditions for stronger knowledge spillovers across firms and borders.
- Facilitate technology diffusion:
- Implement measures to accelerate adoption of new innovations and technologies to narrow technological gaps and help countries move toward the technological frontier.
- Increase investment in innovation inputs:
- Scale up investment in ICT capital.
- Raise research and development (R&D) spending targeted at industries with large productivity shortfalls.
- Strengthen human capital conditional on frontier proximity:
- Design human capital policies recognizing that the returns to human capital are larger when countries are closer to the technological frontier; prioritize skills and education aligned with frontier technologies.
- Undertake structural reforms:
- Implement structural reforms that remove barriers to the diffusion of new and existing technologies across Europe.
Summary conclusion
- The study’s core findings call for policy measures and structural reforms to promote innovation and facilitate the diffusion of new and existing technologies across Europe to address lagging productivity growth and industry-level productivity gaps.
Source: Chasing the Dream: Industry-Level Productivity Developments in Europe, Serhan Cevik, Sadhna Naik, Keyra Primus, IMF Working Paper No. 2024/258 (December 20, 2024).
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