? 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.

---

October 2006     Paper Number CEPPA007

Download PDF - Boosting Innovation and Productivity Growth in Europe: The hope and the realities of the EU's 'Lisbon agenda'