Innovation and productivity growth in the EU services sector

Research and development; innovation; neoclassical growth model; endogeneous growth; services

Economic growth in the US and the EU: A sectoral decomposition

Drawing on the OECD's structural analysis (STAN) database, this paper contributes to the understanding of European economic growth through a decomposition into employment and productivity, across sectors, and across different time periods and countries. The US productivity surge from the mid-1990s continued for years after the bursting of the dot-com bubble. In the meantime, the EU-15's relative productivity stagnation continued. The sectoral perspective helps us better understand this divergence. While manufacturing remains disproportionally important for aggregate productivity growth, the market services sector, given its size, accounts for the bulk of differences across countries, also within the EU. Market services differ from manufacturing in terms of the nature of innovation and other drivers of growth. This calls for sector-specific analysis when designing growth policy in Europe

Wonders will never cease: Prospects for a new economy in Europe

The late 1990s saw one of the most rapid diffusions of a new technology seen in history. Within the space of 5 years the number of Internet users reached 50 million. This compares with the 13 years required by TV to reach the same number of users in the 1950s and 1960s, and the 40 years that radio took in the first half of the 20th century. Coupled with the rapid spread of Internet came a speculative bubble in high-tech companies. Throughout the last five years of the 1990s, some USD 150 billion were raised by US Internetrelated companies via venture capital injections and IPOs. It has now become the common view that much of this was a transfer of wealth from foolish investors to the staff of 'dot-coms', and the customers and advisors of these companies, rather than investment properly said. However, at the time it seemed that a new industrial revolution was underway

Financing infrastructure

A review of the 2010 EIB Conference in Economics and Financeinfrastructure; public investment; corporate investment; investment funds

The internationalisation of production: Moving plants, products, and people

Introducing this volume of the EIB Papers and linking the various contributions, this paper emphasises that the internationalisation of production in Europe, which creates cross-border production networks, is an increasingly important element of globalisation, has been spreading to new EU members, and brings benefits very similar to those of globalisation in general. Popular fears that the geographical reorganisation of production comes at the expense of countries that see some of their activities moving to other countries are largely unfounded. In particular, 'races to the bottom' in wages, tax revenues, and environmental standards do not seem to take place. On the contrary, the move appears to be up rather than down. That said, like any structural change, the internationalisation of production brings distributional challenges that need to be dealt with

Determinants and growth effects of foreign direct investment

Focussing on Europe, this paper starts with reviewing the main determinants of foreign direct investment (FDI); a key observation is that economic policies and non-policy factors contribute equally to the direction of FDI flows. The paper then examines the growth-FDI nexus: while a strong positive correlation between inward FDI and economic growth exists, at least in the more advanced EU-15 economies it is not clear whether the causality runs from FDI to growth or vice versa; in the countries of Central and Eastern Europe (CEE) there is stronger evidence that FDI has boosted growth during the transition period, partly by augmenting domestic investment; that said, evidence of technology spillovers (a potentially important channel for FDI to boost growth) is harder to find in CEE than in developed economies. The paper finally argues that growth-enhancing policies in general are more promising than specific support for FDI

Financing infrastructure: A review of the 2010 EIB Conference in Economics and Finance

This overview discusses some key findings of the papers presented at the conference and draws some policy conclusions from them in the context of the broader literature. The papers and the wider academic discussion are sorted into three areas. First, how do the economics of infrastructure influence the way it would be optimally financed? Second, how are infrastructure assets perceived by private institutional investors such as pension funds? Third, is it possible to increase the share of privately financed infrastructure and still be able to address key public policy issues such as climate change and economic development

Further integration with the EU: Just one ingredient in the reform process

This paper provides a broad survey of the economic situation in nine Mediterranean Partner Countries, and assesses the impact of the Euro-Mediterranean association agreements. The starting point of the analysis is the observation that overall economic performance of the region has been relatively poor when measured as growth of income per capita. Several factors are likely to have contributed to this. Investment in physical and human capital has both been lower and less efficient than in more successful developing economies. In addition, inward-looking development strategies have been combined with extensive state ownership and overall involvement in the economies to produce a high degree of protection. This has hampered competition and limited the gains from trade, leading to low productivity growth. In light of this experience, it is argued that the Euro-Mediterranean trade agreements are a necessary but not a sufficient element in bringing the region onto a more promising path of economic development. The freeing-up of trade with the EU needs to be accompanied by domestic economic reforms on a broad scale to facilitate needed structural transformation and to reduce the fiscal dependency on tariffs. Similarly, the Mediterranean countries need to remove trade barriers also between each other, so as to create a sufficiently large regional market to attract the foreign direct investment necessary to modernise their economies

Innovation and economic growth

The literature on economic growth has identified knowledge expansion as a key propellant. Early research derived this conclusion from the residual that remained after the growth contributions from capital and labour had been accounted for. Later modifications expanded the concept of fixed capital to include intangible capital. The underlying drivers of innovation have, meanwhile, been explored by the endogenous growth literature. Together, these efforts have reconfirmed the role of knowledge and innovation in growth. But they also point to the importance of competition and firm entry and exit as key motivators for firms to innovate. Policies aiming to boost growth must therefore look beyond the amounts invested in R&D and also provide for wellfunctioning labour, product and financial markets.Research and development; innovation; neoclassical growth model; endogenous growth