CAUSES OF PRODUCTIVITY SLOWDOWN IN THE EUROPEAN UNION

Abstract. In this study we have analyzed the evolution of the EU-15 labour productivity in the last years to identify the structural problems of the European economy. According to statistical data, the productivity per hour has decreased from 2 % in 1981-1995 to 1.6 % in the 1995-2000 period and then to only 1.3 % in 2000-2006. The main causes of the productivity slowdown refer to lower investment, which caused a smaller increase of the capital stock and to smaller growth rate of total factor productivity. In the last thirteen years, labour productivity growth in Europe was below the level from United States, which leads to larger gap between the two economies. Key words: Hodrick-Prescott filter, potential growth, ICT capital, total factor productivity. The term “productivity ” describes labour productivity, measured by real GDP per worker or by GDP per hour worked. According to Cobb Douglass production function form, labour productivity growth is influenced by capital stock accumulation, by stock of capital per employed person, and by total factor productivity (TFP). Among these three factors, capital deepening and total factor productivity change after a long time after investment or technological process, while employment is a variable production factor on short term. Otherwise, the employment may be more easily measured, while the other two factors are measured by more complex methodologies. Fo