Europe Can Regain Its Productivity Edge by Scaling Up
IMF Blog, March 12, 2026
Source details
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- Europe Can Regain Its Productivity Edge by Scaling Up
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Bibliographic details
- Authors: Diego Cerdeiro, Stephan Danninger, Morgan Maneely
- Published: March 12, 2026
Overview
- Title: Europe Can Regain Its Productivity Edge by Scaling Up
- Authors: Diego Cerdeiro, Stephan Danninger, Morgan Maneely
- Date: March 12, 2026
- Context: Chart of the Week on Productivity
Major findings
- Europe once led the world in productivity growth but now lags the United States; the gap has widened significantly in recent years.
- A key driver of the shortfall is the difficulty European firms face in scaling up.
- European firms tend to be small, old, and low-growth compared with US firms.
- Europe’s labor productivity levels are about 20 percent below those of the United States.
Key statistics
- Stock market valuation of young firms (under the age of 50) in the United States: $42.9 trillion.
- Stock market valuation of young firms (under the age of 50) in the European Union: $5 trillion.
- Average European firm that has been in business for 25 years or more employs about 10 workers.
- A comparable US company employs 70 people.
Drivers of the scaling-up problem
- Fragmented capital flows along national lines despite the European single market.
- Labor market frictions: opportunities for workers are hampered by regulations that limit mobility and access to opportunity.
- Barriers to selling across borders: difficulties in marketing products across national boundaries, constraining consumer market size for firms.
Policy implications and recommendations
- Integrate capital markets to allow more funding to flow to risky new businesses and support scaling-up.
- Integrate labor markets to allow people to move to opportunity and for firms to access needed talent.
- Integrate consumer markets so companies can sell to bigger markets and achieve greater scale.
- These integration changes are actionable: the blog emphasizes that Europe can bring about these reforms to close the productivity gap.
Tone and remit
- The piece is presented as an IMFBlog entry offering IMF staff views on economic and policy issues.
- The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.
Source: IMFBlog — Europe Can Regain Its Productivity Edge by Scaling Up (March 12, 2026).