Impact of a structural total factor productivity slowdown on European Economic growth. Secular stagnation in the EU-15 countries and possible policy measures

Table of Contents

1 Introduction

2 Theoretical framework of European secular stagnation

2.1 Importance of growth

2.2 Growth accounting

2.3 The Importance of productivity and TFP

2.4 Definition of secular stagnation

3 Secular stagnation, productivity and their causes in Europe

3.1 Literature concerning secular stagnation and productivity

3.2 Determinants of productivity in the EU-15 area

3.2.1 European values

3.2.2 Education and human capital

3.2.3 Energy prices and use of energy per capita

3.2.4 Sectoral composition

3.2.5 European cooperation, economies of scale, resource allocation

3.2.6 Trade, Investment Share, FDI

4 Methodology

4.1 Introduction to the data set

4.2 Considered variables

4.3 TFP-Slumps

4.4 T-Tests

4.5 The TFP-slump environment

5 Regression Analysis

5.1 Logit panel data analysis

5.2 Analysis of the criteria

5.2.1 GDP per capita

5.2.2 Education and human capital

5.2.3 European values

5.2.4 Europe-wide cooperation, economies of scale, resource allocation

5.2.5 Energy prices / use of energy per capita

5.2.6 Sectoral composition

6 Policy

6.1 Monetary policy

6.2 Fiscal policy

6.3 Structural reforms

7 Conclusions and Implications

Research Objectives and Key Topics

The primary aim of this thesis is to empirically identify the background and determinants of stagnating economic growth within the EU-15 countries to determine if the region has entered a state of secular stagnation. The study examines the impact of a structural total factor productivity (TFP) slowdown using a logit panel regression model covering the period from 1950 to 2017.

• The relationship between structural TFP slowdowns and economic growth in the EU-15.
• Determinants of productivity including human capital, education, and institutional factors.
• The impact of sectoral composition and intra-European cooperation on long-term growth.
• Policy implications concerning structural reforms, monetary, and fiscal strategy to mitigate secular stagnation.

Excerpt from the Book

Summary of Chapters

1 Introduction: This chapter introduces the concept of secular stagnation and justifies the empirical analysis of the EU-15 countries' stagnating economic growth.

2 Theoretical framework of European secular stagnation: This chapter defines the theoretical foundations of growth accounting, the role of total factor productivity (TFP), and the model of secular stagnation.

3 Secular stagnation, productivity and their causes in Europe: This chapter synthesizes literature on secular stagnation and identifies key determinants of productivity, such as education, human capital, and sectoral composition, specific to the European context.

4 Methodology: This chapter outlines the data set, the variables used, and the construction of TFP-slump criteria to prepare for the empirical regression analysis.

5 Regression Analysis: This chapter conducts a logit panel data analysis to investigate the impact of various factors on the probability of experiencing TFP slumps in the EU-15.

6 Policy: This chapter discusses potential political measures, including monetary and fiscal strategies, to combat the stagnation of economic growth.

7 Conclusions and Implications: This chapter summarizes the empirical findings and discusses the implications for long-term European economic prosperity.

Key Words

Secular stagnation, Total factor productivity, EU-15, Economic growth, Logit panel regression, Human capital, Structural reforms, Sectoral composition, Technological change, Productivity slowdown, Macroeconomics, Monetary policy, Fiscal policy, European integration, Innovation.

Frequently Asked Questions

What is the core focus of this research?

The research focuses on analyzing the causes of stagnant economic growth in the EU-15 member states and evaluating whether these countries are experiencing a secular stagnation dynamic.

What are the primary thematic fields addressed?

The study covers the theoretical framework of secular stagnation, empirical analysis of total factor productivity (TFP), human capital, institutional quality, and the influence of sectoral shifts on economic performance.

What is the central research question?

The primary question is whether the decline in total factor productivity constitutes a structural trend indicating secular stagnation and how policy interventions can address this slowdown.

Which scientific methodology is employed?

The thesis utilizes a logit panel regression model, supplemented by t-tests and structural break tests, analyzing data from the Penn World Table and other sources covering the period 1950–2017.

What does the main body explore?

The main body examines the history of TFP growth, determinants such as education, energy, and European integration, and performs a rigorous empirical assessment of factors that trigger TFP slumps.

Which keywords characterize this work?

The work is characterized by terms like secular stagnation, total factor productivity, EU-15 economic growth, structural reforms, and logit panel regression.

Why are the EU-15 countries specifically selected for this analysis?

They are selected because they represent the most advanced European economies with a high share of total EU economic output and have experienced heterogeneous development, allowing for a focused and meaningful empirical analysis of structural factors.

What role does the "structural break" of 1971 play in the study?

The structural break in 1971 marks the point where TFP growth began to decline in the EU-15, justifying the division of the analysis into distinct periods to achieve more accurate regression results.

Does the study suggest that education always boosts growth?

The study argues that while human capital is vital, the qualitative component of education—rather than the mere quantity of years spent in schooling—is the critical factor in preventing TFP slumps.

What is the author's ultimate conclusion regarding future economic growth in the EU-15?

The author concludes that the EU-15 is likely moving into or is already in a state of secular stagnation, and that long-term structural reforms, particularly in manufacturing and human capital, are necessary to revitalize growth.