Does information and communication technology drive EU-US productivity growth differentials?

This paper compares the effects of information and communication technology (ICT) on aggregate labour productivity growth in the European Union and the United States. It focuses on two transmission channels, namely (i) ICT-capital deepening and (ii) total factor productivity (TFP) growth originating from ICT-goods production. We find that together these two effects almost fully explain the US lead in labour productivity growth over the EU during the period 1995-2001. We also argue that, within the EU, non-ICT related sources of growth are the main drivers of productivity differentials between member countries.