eu from 1995 and 2019, hovering around 15 per cent. in contrast, this share has increased over time in the us to around 35 percent as of 2019. [ 9 ] in summary, the us invests a lot more in innovation and adoption of new technologies than the eu, although i am reminded of robert solow ’ s comment that “ you can see the computer age everywhere but in the productivity statistics ” [ 10 ]. the third fact to highlight is that there has been a notable decline in various measures of business dynamism in both the us and eu. firm entry rates and the share of young firms in economic activity have declined, industry concentration and mark - ups have increased, resource misallocation has risen, the gap between frontier productivity firms and laggards has increased, and job reallocation has declined. [ 11 ] all of this suggests that the economic forces of creative destruction, which are so important to aggregate productivity, are declining. a notable difference between the us and eu however is that the growth of so - called ‘ superstar firms ’ in the us, ( as coined by david autor and others ), which has led to an increase in industry concentration, has not been as pronounced in the eu. so these are some of the main proximate drivers of the growing productivity gap between the eu and us. i am now going to turn to some of the deeper structural drivers that could be contributing to these patterns, focusing in particular on the extent of integration in product markets, financial markets, and labour markets. drivers of the productivity gap product markets let ’ s start with product market integration. the eu single market has lowered trade barriers and harmonized many rules and regulations. despite these significant achievements, the eu remains a more heterogeneous block than the us. language differences can act as a barrier to trade, notwithstanding the dominance of english [ 13 ], cultural differences manifest as differences in consumer tastes and preferences, and there remain scope to remove regulatory barriers and deepen the single market. as a result, high - productivity firms in europe have a harder time scaling up to be as large as their us counterparts. this limits resource reallocation across eu industries and countries relative to the us experience, lowering aggregate productivity. it also reduces the incentives of european firms to invest in r & d and innovate, which can lead to persistently lower productivity growth, and therefore a widening productivity gap. technological developments in it, such as cloud computing and machine learning,

efforts range from the building of new advanced distribution centers, expansion of home - delivery service and online shopping, to active openings of new convenience stores and shopping malls. there also have been active moves to strengthen the economy ’ s growth potential by capturing local demand overseas, such as development of overseas business in the retail, wholesale, and service industries as well as acquisition of firms. labor and employment conditions have also continued to improve as a trend. on the back of proceeding with their positive efforts, firms are increasing their demand for labor and their stance on employment is becoming active ( chart 8 ). looking back on the past year, a sense of labor shortage among nonmanufacturing firms has heightened further, and labor supply and demand conditions at manufacturing firms have also tightened, recently turning to a state of labor shortage. in terms of the quality of employment, firms have gradually been making a shift to hiring part - time workers as full - time, regular workers, mainly based on the need to secure competent human resources ( chart 9 ). as for wage developments, the year - on - year rate of change in scheduled cash earnings has turned positive due to a rise in base pay at many firms, and special cash earnings have also steadily increased, due mainly to a rise in summer bonus payments. as a result, employee income – that is, wages per employee multiplied by the number of employees – has been increasing by about 2 percent year on year ( chart 10 ). with regard to labor supply conditions, the labor force participation rate that had been on a declining trend, mainly due to the demographic situation, bottomed out in 2012 and is moving bis central bankers ’ speeches toward a pick - up ( chart 11 ). breaking down the labor force participation rate by gender and age, the rising trend in the participation rate of women is particularly prominent, and an increasing trend is also becoming evident in recent years for men, especially in the age category of 65 – 74 years ( chart 12 ). this seems to reflect initiatives taken by firms amid a general sense of labor shortage to encourage the participation of female workers by introducing flexible working systems such as shorter working hours, and also to promote the employment of the elderly in order to pass on their skills and knowledge to younger workers. however, it will be necessary to wait for data to accumulate for some time before making a judgment on whether such improvements in the labor force participation rate are mainly temporary and cyclical ones, brought about by the economic recovery, or due to sustainable and