The productivity riddle: Supporting long-term economic growth in the EU
Productivity has a key role to play in the EU's long-term economic growth. The recent economic recovery has reversed the negative trend but concerns remain about long-term prospects. Productivity varies across the EU, with newer Member States reaching only about half the level of the older ones (EU-15) when measured in terms of gross domestic product (GDP) per hour worked, but showing a higher growth dynamic. The recent poor productivity growth in the EU raises a number of important policy questions. First, there is no consensus on the reasons behind it or the best ways to remedy it. There are also conflicting views regarding how long this situation will continue. Most economists believe the current weak growth trend may be explained by a combination of cyclical and structural economic weaknesses that need to be addressed by a mix of shorter and longer-term measures. Remedies for low productivity include increasing labour market participation, strengthening product market competition, encouraging demand, investment and lending to companies, as well as restructuring inefficient markets, disseminating technology and generalising digitalisation. In the EU context, particularly important factors conducive to productivity growth include creating a genuine single market for services, boosting digitalisation across economic sectors and addressing long-term challenges, such as the ageing society and rising income inequalities, as well as implementing long-awaited structural reforms in the Member States.
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Policy area
Keyword
- accounting
- BUSINESS AND COMPETITION
- demography and population
- economic analysis
- economic conditions
- economic growth
- economic infrastructure
- economic policy
- ECONOMICS
- EU policy
- euro area
- European construction
- EUROPEAN UNION
- FINANCE
- financing and investment
- health
- health care
- long-term forecast
- monetary relations
- population ageing
- private investment
- PRODUCTION, TECHNOLOGY AND RESEARCH
- productivity
- public investment
- research and development
- research and intellectual property
- SOCIAL QUESTIONS