Mcquinn, Kieran and Whelan, Karl (2006): Prospects for Growth in the Euro Area.
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We review the recent performance of the Euro area economy, focusing in detail on the separate roles played by labour input, capital input, and total factor productivity (TFP). After a long period of catching up with US levels of labour productivity, Euro area productivity growth has, since the mid-1990s, fallen significantly behind. We show that this recent divergence has accelerated since 2000, and that this is mainly due to the poor rate of Euro area TFP growth. Based on prevailing trends, we estimate that potential output growth in the Euro area currently may be running as low as 1.5 percent per year. In addition, if TFP growth stays at recent levels, the output growth rate will decline further due to weaker capital deepening. To consider future Euro area prospects for growth, we examine a set of alternative scenarios, each of which posits a potential increase in a determinant of output growth. One of these scenarios focuses on the potential effects of greater labour market deregulation.
|Item Type:||MPRA Paper|
|Original Title:||Prospects for Growth in the Euro Area|
|Keywords:||Growth, Euro Area, TFP|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O52 - Europe
|Depositing User:||Karl Whelan|
|Date Deposited:||23. Nov 2007 03:53|
|Last Modified:||12. Feb 2013 04:10|
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