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April 23, 2026Journal of International EconomicsOpen Access

Europe falling behind: Structural transformation and labor productivity growth differences between Europe and the U.S.

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Authors

CBCesare BuiattiJDJoão B. DuarteLSLuis Felipe Sáenz

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Overview

This analysis demonstrates labor productivity divergence in Europe compared to the U.S., suggesting implications for future growth.

Key Points

  • The research aims to understand the differences in labor productivity growth between the U.S. and Europe and the underlying structural changes.
  • Used a quantitative general equilibrium framework to model productivity changes.
  • Calibrated the model to U.S. data and tested it against European data from 1970 to 2019.
  • Conducted numerical experiments examining the effects of labor reallocation and international trade on productivity.
  • European labor productivity converged with that of the U.S. until 1995, then began to diverge.
  • Divergence is primarily due to widening gaps in productivity within business and financial services.
  • The model reveals that labor shifts to less productive sectors hinder overall productivity growth.

Cite This Study

Buiatti et al. (2026) studied this question.

synapsesocial.com/papers/69e9b62685696592c86ead98https://doi.org/10.1016/j.jinteco.2026.104262
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