Delayed IT Usage: Is It Really the Drag on Europe's Productivity?

Abstract

This paper explores the quantitative plausibility of three candidate explanations for the European productivity slowdown with respect to the US. The empirical plausibility of the common wisdom on the topic (the hypothesis) is found to crucially depend on how IT-using industries are defined. If a narrow definition is chosen, the IT usage hypothesis no longer explains the whole of the EU productivity slowdown but just about 55 percent of it, with the remaining part to be attributed to other factors than IT, as argued in the irrelevance view. No room is left for IT-producing industries as another potential vehicle for the US-EU productivity growth gap, instead. (JEL O4, O47, O52)