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CEP Policy Analysis
Boosting Innovation and Productivity Growth in Europe: The hope and the realities of the EU's 'Lisbon agenda'

October 2006
Paper No' CEPPA007:
Full Paper (pdf)

• The United States has significantly higher productivity than the European average. US GDP per hour is over 15% higher than Europe’s; and US GDP per capita is over 30% higher. • From the end of the Second World War until the mid-1990s, Europe was catching up with US levels of productivity. But since then, US productivity growth has been faster than in Europe. • In 2000, the European Union (EU) launched the ‘Lisbon agenda’. This had the aim of making Europe ‘the most dynamic and competitive knowledge-based economy in the world, capable of sustainable economic growth, with more and better jobs, greater social cohesion and respect for the environment’. • Stimulating innovation was seen as a major route to reaching this goal. In particular, the EU set the ‘Barcelona target’ of increasing research and development (R&D) to 3% of GDP by 2010.

• The Lisbon agenda has not realised its objectives. A major reason for this is the failure of EU members to liberalise their product and labour markets. • Although the numerical target for R&D makes little economic sense, the emphasis on innovation as a route to growth is sensible. • The cost of patenting in Europe is about five times the cost of patenting in the United States. The suggested introduction of a ‘Community patent’ would lower this cost and make it easier for European firms to patent their innovations. • The ‘brain drain’ from the EU to the United States – because of better research opportunities and higher wages – is still a significant phenomenon. The Lisbon agenda’s aim of reversing this trend has not materialised.