'Changing Gear' - Productivity, ICT and Services Industries: Europe and the United States

This paper examines cross-country and cross-industry differences in labor productivity performance and their association with ICT. It broadens earlier work with coverage of 52 industries in 16 OECD countries. The analysis suggests that ICT diffusion in Europe is following similar industry patterns to those observed in the U.S., but at a considerably slower pace. The key differences between Europe and the U.S. are in the intensive ICT-using services, with U.S. productivity growth showing a strong acceleration during the second half of the decade, whereas growth stalled in the EU. More specifically, the U.S. showed rapid productivity expansion in retail and wholesale trade and securities, which account for much of the overall U.S.-EU gap in productivity growth since 1995. In the ICT-producing sector, computers and communication equipment showed strong productivity growth and acceleration in virtually all countries, but differences are much bigger across countries for ICT-producing services, such as telecom services.