Structural Changes and New Economy in the EU and the US

In the 90s we have witnessed a remarkable boom in the US economy. Growth in the second half of the 90s has returned to levels prevailing on average before the 1973 break. Also TFP growth has accelerated and returned to rates known from the 60’s. One possible explanation for the US experience is the rapid adoption of new information and communication technologies (ICT) by US companies. While in the US the nominal ICT investment to GDP ratio has almost doubled, it only increased slightly in Europe. Unfortunately a direct comparison between Europe and the US is difficult because, data availability and quality is inferior in Europe. Various attempts have been made so far to look at the impact of ICT in Europe. SCHREYER (2000) and DAVERI (2000) have analysed the growth impact of ICT investment on growth within a growth accounting framework. Also Van ARK (2000) looks at investment and production, however, he uses a methodology which is not directly comparable to existing US studies. All these studies conclude that there is a growth contribution from ICT investment and production in Europe. Based on this evidence the paper explores the growth and employment effects of ICT investment and production in Europe and the US.