Following the dispute with Zinsmeister, I thought I’d go back to a piece in the Economist (subscription only) I bookmarked a while ago. After pointing out a range of issues with productivity measures, the article says

Julian Callow at CSFB calculates that in the five years to 2001 productivity, measured by NDP per hour, rose by 1.8% a year in America and by 1.4% in the euro area-a much narrower gap [than on the most commonly-cited measures]

Whichever figures one uses, though, labour-productivity growth has risen over the past decade in America, but fallen in Europe (see chart). One reason is that American firms invested more heavily in IT equipment than European firms in the 1990s, boosting the capital stock per worker. This is why many economists prefer to focus on multifactor productivity, the increase in the efficiency with which firms use both capital and labour. But that is even harder to compare sensibly across countries.
On the flip-side

One explanation for why productivity growth in Europe has slowed is that reforms to make labour markets more flexible have deliberately made GDP growth more job-intensive. More flexible workplace arrangements, such as part-time jobs and fixed-term contracts, have allowed firms to get around job-protection laws and so encouraged more hiring; cuts in social-security contributions for the low-paid have priced some of the jobless back into the labour market. The flip-side is lower average productivity growth, as more unskilled and inexperienced workers enter the workforce.

Labour-market reforms in the euro area have been more successful than is often appreciated. Participation rates have risen, and unemployment has fallen. As a share of the population of working age, employment has risen from 59% in 1996 to 63% last year. Over the past five years, employment has increased at an annual rate of 1.4%, even faster than America’s 0.8% rate of expansion and a huge improvement over the previous five years, when jobs declined by 0.1% a year.

For completeness, it’s worth amplifying the Economist’s point that strong growth in employment and hours worked is often associated with weak growth in output per hour. The converse was observed in the early 90s, when Europe had lousy (in fact, negative) employment growth, but outperformed the US in terms of growth in output per hour worked (2.1 per cent vs 1.6 per cent by my reading of the Economist’s graph).

For readers who may not be familiar with it, The Economist is an English weekly, founded in the 19th century, which takes a broadly free-market line and is critical of many aspects of the EU.