Labour Productivity: the End of Convergence?

Between 1950 and 1973, labour productivity was visibly converging between the United States, seen as the world technological leader, and western Europe and Japan. But the convergence gradually lost momentum and has ceased altogether since 1995. Our study seeks to explain the reasons for the interruption. We use the econometric tests developed by Bai and Perron to determine the trend-break dates. Labour productivity growth quickened in the U.S. from 1992, but slowed in most European countries. Technological progress driven by the expansion of information and communication technologies (ICTs) partly explains the revival of labour productivity in the U.S., but is inconsistent with the slowdown in labour productivity growth in Europe. While Europe's ICT investment rate was lower than that of the U.S., it did rise significantly. A key explanation lies in the intensity of the job content of growth. The latter has declined sharply in the U.S. but grown substantially in Europe, reducing mass unemployment. The latest data, for 2008, confirm the non-convergence of labour productivity trends.