The Employment Effects of the `New Economy'. A Comparison of the European Union and the United States

This paper provides an analysis of the trends in labour productivity and employment growth at industry level in the European Union and the United States during the 1990s. We analyse relationships for groups of industries, i.e. industries that produce ICT products and services, those that invest strongly in ICT, and those that make less intensive use of ICT. The main findings are that the inverse relationship between employment and productivity growth has been much more prominent in manufacturing industries than in services industries. Secondly, during the 1990s, this relationship has turned positive in many industries, in particular in ICT-producing industries and in ICT-using industries in the service sector. Finally, the employment-reducing effects of productivity growth have remained considerably stronger in Europe than in the US.