IMF: cross-border problems widen wealth gap between Europe, US
As a study by the International Monetary Fund has shown, cross-border problems are widening the gap between the productivity of Europeans and Americans who have been moving forward since the 1990s, Reuters reports
"Seventy percent of that gap is explained by lower productivity growth," Alfred Kammer, the head of the IMF's European department, said. According to him, labour productivity in Europe grew more slowly than in the United States, although both markets are comparable in size, but the European market is highly fragmented, and there are trade barriers between the EU’s 27 countries that do not exist in the United States.
"Therefore, firms are targeting national markets rather than the larger European market. They are not actually exploring the scale of having that large market available and scale matters," Mr. Kammer added.
The second setback is the lack of a unified market for capital flows, which put EU companies at a disadvantage compared to American firms when seeking financing through equity issuance, as a result of which they had to rely on bank loans.
The third factor holding back productivity growth in the EU is that workers moving around its 27 countries face much greater obstacles than American workers moving from state to state, as well as a shortage of housing to buy or rent.
