Productivity in Europe: Trends and drivers in a service-based economy

High levels of labour productivity growth are a key element to maintaining high standards of living in the long run in Europe. However, the EU has been experiencing a significant slowdown in labour productivity and total factor productivity growth, a phenomenon which has even exacerbated over the last decade, contrary to what would be expected in the recovery from the financial crisis. The trends and driving forces of the current sluggish productivity growth in Europe are analysed in this report with a special emphasis on services. After reviewing the literature in the field, the report zooms in on the role played by factors such as structural change, intangible investments, firm size distribution, firm demography, labour dynamics, zombie firms, business cycle dynamics and public expenditure and assesses their impact on productivity growth based on a variety of data sources and methodologies. The report focusses on the main results at EU level and includes some cross-country and cross-sectoral comparisons wherever possible.