Is Slow Economic Growth the 'New Normal' for Europe?

This paper considers future European growth prospects in the light of a new productivity paradox, namely, the co-existence of a productivity slowdown and exciting new technologies. Several potential explanations are reviewed. It is argued that while some are unpersuasive it is too soon to be sure which carry the most weight. This has the implication that while the slowdown is real, it is not necessarily permanent. A key, hotly disputed issue is the future economic impact of technological progress on which forecasts differ dramatically. Supply-side reform could have a strong positive effect, but this is not likely to happen. Keywords Growth projections * Productivity paradox * Supply-side policy * Technological progress JEL E24 * N14 * 047
Introduction At the turn of the century, in the excitement of the so-called 'new economy', optimism abounded about the prospects for future economic growth. Alan Greenspan (2000) said in a [...]