Are Productivity Levels Higher in Some European Countries than in the United States

Estimates produced by the OECD indicate that labour productivity levels are higher in a number of European countries than in the United States, implying that Europe and not the United States is the world technological leader. The author argues that a structural measure of labour productivity, closer to a measure of technical efficiency, would take into account the much lower employment rates and hours of work in Europe. Low employment rates reflect the exclusion of certain low-porductivity groups such as the young and older workers from the labour force. Shorter average hours of work mean that workers experience less fatigue and are more focused when on the job. Consequently, the author argues that there are diminshing returns to the employment rate and hours of work in terms of productivity and that once these effects are taken into account, the United States reemerges as the world technology leader as manifested by labour productivity levels.