EU Could Close One-Third Productivity Gap with US by Emulating Large Company Model

The European Central Bank (ECB) has found that if Europe had as many large companies as the United States, it could close one-third of its productivity gap with America. The EU's economic underperformance relative to the US is a pressing issue for policymakers, who are trying to tackle the problem.

Academic studies have shown that EU workers produce 20% less output per hour than their US counterparts. In fact, in 1995, EU and US workers were almost on an even keel in terms of productivity. However, since then, the gap has widened significantly.

The ECB's research found that large firms are significantly more productive than smaller ones. Companies with at least 250 employees generate an average of €86,800 in value added per worker annually, while firms with fewer than 10 employees produce less than half that amount.

The central bank has backed the proposed 'EU Inc' framework, which aims to reduce barriers to cross-border business activity by creating a single legal structure operating across the bloc. This would bypass a patchwork of 27 national company law systems and dozens of corporate forms.