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Throughout the postwar era until 1995 labor productivity grew faster in Europe than in the United States. Since 1995, productivity growth in the EU-15 has slowed while that in the United States has accelerated. But Europe's productivity growth slowdown was largely offset by faster growth in employment per capita, leaving little difference in growth of output per capita between the EU and US going back to 1980. This paper is about the strong negative tradeoff between productivity and employment growth within Europe. The authors document this tradeoff in the raw data, in regressions that control for the two-way causation between productivity and employment growth, and they show that there is a robust negative correlation between productivity and employment growth across countries and time.
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