significantly higher in the United States than in
the EU, mainly reflecting the stronger
performance of both the high-technology
manufacturing sectors and the wholesale and
retail sectors. However, the EU has enjoyed
higher rates of productivity growth in network
industries than the United States. In general,
differences in productivity performance
between the EU and the United States may be
partly related to methodological problems,
which are beyond the scope of this report.
These problems include finding a comparable
definition of output (i.e., for example, the
treatment of IT goods as input or output) and
inputs (i.e., for example, hours worked or
persons), problems of deflation (in particular of
goods with rapid changes in quality), and
difficulties in choosing the appropriate
exchange rate or purchasing power parity38.
Looking at the speed of structural adjustments
as shown in Chart 7, it appears that - compared
with the end of the 1980s and compared with the
EU - the speed of sectoral re-allocation in the
United States slowed significantly at the end of
the 1990s, both for the aggregate economy as
well as for the utilities and business sector
services. However, over the entire period the
speed of structural adjustments within the
manufacturing sector remained remarkably
higher in the United States than in the EU.
2.5 CONCLUSION
The EU and the euro area are characterised by
cross-country heterogeneity as regards the
degree of sectoral specialisation. However, in
comparison with other economic areas of
similar size - such as for instance the United
States - the degree of sectoral specialisation of
the EU/euro area remains limited. In addition,
changes in sectoral specialisation have been
rather slow. Nevertheless, there was a trend
towards more pronounced sectoral
specialisation towards the end of the 1990s.
The results for the speed of structural
adjustments as measured by the Lilien indicator
seem to indicate significant sectoral re-
allocations in some countries in the first half of
the 1990s.
As a general trend, sectoral re-allocation has
taken place towards business sector services
and - at least in some EU countries - towards a
specialisation in relatively high-technology
industries as measured by the Krugman index.
Across the EU, business sector services such as
hotels and restaurants and financial
intermediation but also - in some countries -
construction, became more spatially
concentrated, partly reflecting country
characteristics.
The analysis of labour productivity
developments indicates that both sectoral re-
allocation and developments within individual
sectors have been important in shaping
aggregate labour productivity growth, with the
bulk of labour productivity increases coming
from intra-sector developments. In comparison
with the United States, the EU and the euro area
have not systematically under-performed over
the last two decades; however, the gap did
widen at the end of the 1990s. This growing
difference in aggregate productivity
developments between the United States and the
EU/euro area in the second half of the 1990s is
partly explained by stronger labour productivity
performance in the wholesale and retail trade
and financial intermediation. Moreover, the
divergence may be partly related to
methodological problems, such as finding a
comparable definition of output, problems of
deflation of goods with rapid changes in
quality, and difficulties in choosing the
appropriate exchange rate or purchasing power
parity. The available data indicate that, in
38 See, for instance, the discussion in F. Vijselaar and R. Albers
(2002), “New technologies and productivity growth in the euro
area”, ECB Working Paper, no 122; D. Jorgenson (2003),
“Information technology and the G7 economies”, http://
post.economics.harvard.edu/faculty/jorgenson/papers/hand-
book_extract_3.pdf; R. J. Gordon (2002), “Two centuries of
economic growth: Europe chasing the American frontier”, http:/
/faculty-web.at.northwestern.edu/ economics/gordon/355.pdf;
Deutsche Bundesbank (2000), “Problems of international
comparisons of growth”, Monthly Bulletin, August, p. 8 and the
references therein.
2 SECTORAL
SPECIALISATION:
CURRENT SITUATION
AND EVOLUTION
ECB
Occasional Paper No. 19
July 2004