EconomicsfocusChasingtheLeader - Economics focus Chasing...

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Economics focus Chasing the leader Feb 6th 2003 From The Economist print edition Are Europeans really so much worse off than Americans? AMERICA has been the world's economic leader for over a century. Economic theory suggests that western Europe should be catching up. Yet average GDP per head in the European Union, measured at purchasing-power parity, is only three-quarters of that in the United States. A popular explanation is that European firms are less productive because they are hampered by labour- and product-market regulation. But European productivity, measured by output per hour worked, has in fact almost caught up with America's. If Europeans are so productive, though, why are they apparently so much poorer than Americans? America's much-trumpeted “productivity miracle” in the late 1990s created the misleading impression that Europe significantly lags America in the productivity league. It is true that, since 1995, American GDP per hour worked has risen by an annual average of 1.9%, compared with only 1.3% in the European Union. However, over any longer period, up to half a century, Europe's productivity growth has outpaced America's. Since 1990 American productivity has risen by 1.6% a year; the EU 's has risen by 1.8%. Since 1950 America's productivity growth has averaged 2%, Europe's 3.3%. According to figures from the Conference Board, an American business group, Belgium, France, Germany, Ireland and the Netherlands all now boast higher output per hour than the United States. Average productivity in the EU is still 7% less, largely because of lower productivity in Britain, Spain, Greece and
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EconomicsfocusChasingtheLeader - Economics focus Chasing...

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