Report
The US-euro zone “match”
We start with the fact that potential GDP depends on the labour force, the capital stock and total factor productivity. The “match” between the United States and the euro zone therefore concerns trends in: The labour force (participation rate); The capital stock; Total factor productivity (technological progress). We then see that: The participation rate has fallen markedly in the United States relative to the euro zone; The capital stock has increased significantly more in the United States than in the euro zone; Total factor productivity has increased in a similar manner in the United States and the euro zone. The US-euro zone “match” therefore ends in a draw, even though potential GDP has increased faster in the United States than in the euro zone due to the very large gap between changes in the stock of capital and between investment rates.
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Natixis
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Patrick Artus
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