Philipp M Hildebrand: Where is productivity growth in Europe?
Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss
National Bank, to the Vereinigung Basler Ökonomen, Basel, 28 October 2004.
The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch).
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Since 1996 the E.U. is lagging behind the U.S. in terms of productivity growth. This phenomenon has
become more pronounced since 2001. The growth of GDP per work hour in the E.U. between the
periods 1990-1995 and 1995-2002 is lower by two percentage points per year. This difference
amounts to 2,8 percentage points per year if one compares the periods 1990-1995 and 2000-2005.
Differences in GDP measurement account for roughly 0,5 up to a maximum of 1 percentage point of
the productivity growth differential. The remaining difference is caused by two factors. On the one
hand, total factor productivity growth has accelerated in the U.S. This was made possible by a
wideranging restructuring of the U.S. economy which provided an optimal backdrop for the new information
and communication technologies. On the other hand, capital deepening in Europe was lessened by
employment growth. The productivity of this additional labour input has to be increased through strong
educational efforts, open markets and additional investment. Labour market reforms remain
indispensable in order to enhance the productivity of all workers. Product market reforms will be
crucial in order to unleash the full productivity potential of the new technologies. Increasing productivity
is the key to securing our welfare and the stability of our social security systems.