Recent Trends and Structural Breaks in US and EU15 Labour Productivity Growth

This paper examines shifts in labour productivity growth in the United States and in Europe between 1970and 2007 based on econometric tests of structural breaks. Additionally, it makes use of time-series-basedprojected labour productivity growth up to 2009 in order to detect any recent break according to a centralscenario as well as high and low scenarios, both derived from a 95% confidence interval. The identificationof structural breaks in US labour productivity growth is far from obvious. A statistically significant breakdate is found in the late 1990s only if the upper scenario materialises in the future, which means thatdespite a clear pick-up in productivity growth in the second half of the 1990s, the size of the hump is notstill large enough compared with past variation to make this change a statistically significant break.However, a significant breakpoint is detected in the mid-1990s for the difference in labour productivitygrowth between the United States and the EU15 based on observed data, which seems to be due to both theinitial catch-up of Europe and the halt of the convergence process in the mid-1990s. Finally, EuropeanICT-intensive countries are shown to have structurally performed better in terms of productivity growththan non-ICT-intensive countries.