The Information Technology and Innovation Foundation released a [report] today examining European productivity growth.  After a long period over which Europe was catching up to the United States in productivity, this trend has reversed.  Indeed, in the last decade productivity growth in the United States has accelerated, from an average of 1.6 percent per year from 1980 to 1994 to 2.7 percent since then.  In contrast, productivity growth in Europe has gone in the other direction, declining from 2.3 percent per year to 1.4 percent.  

This ITIF report examines this reversal of trends and finds that a key driver appears to be in the lower levels and use of information and communications technology (ICT) in Europe.  Lower levels of investment in ICT and less effective use of existing ICT explain a significant share of the lower rates of productivity growth in the European Union over the last decade when compared to the United States. 

The report argues that regaining robust productivity growth will be critical for EU nations over the next several decades as they struggle with a myriad of challenges, including an aging population.  To do this, the report recommends that the EU and individual European nations focus on raising productivity across the board, particularly through greater use of ICT;  use tax incentives and tariff reductions to spur ICT investment; actively encourage digital innovation and transformation of economic sectors; and avoid laws and regulations that limit organizations’ ability or incentives to employ ICT to raise productivity.