European productivity has experienced a marked deceleration since the 1970s, with the productivity gap between the Euro area and the United States widening significantly since 1995, a trend further intensified by the COVID-19 pandemic. This slowdown is particularly concerning given the backdrop of rapid technological change, global warming, and population aging. This paper provides a long-run perspective on these issues, placing the current situation in the context of historical experiences faced by European countries. We first examine the factors that have influenced productivity fluctuations, with a focus on the post-World War II economic boom and subsequent periods of stagnation. We then consider the structural and conjunctural reasons behind the slowdown since 1995. Finally, looking ahead, we evaluate the potential of Artificial Intelligence and climate-related innovations to rejuvenate productivity.
Antonin Bergeaud
14 October 2024 Paper Number POIDWP103
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