📉
52%
EU Follower vs EU Frontier
Productivity of followers as % of frontier (GVA per person)
2019: 52% · 2024: 52% · Convergence halted
Stalled since 2019Back to publications
Research PaperFebruary 4, 2026
EU's Past and Present Productivity
A sectoral view of EU productivity dynamics — analysing the productivity frontier and diffusion across 27 EU member states over 1995–2024, based on 64 sectors of Eurostat National Accounts data.
By Ella Kállai, Co-founder · Consilium Policy Advisors Group · office@cpag.ro · www.cpag.ro
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+48%
EU Frontier vs EU Average
EU frontier productivity premium over EU average (2024)
Frontier reached EUR 87K average in 2024
Frontier strengthening⚡
+0.2pp
Diffusion Gap Collapsed
Follower CAGR advantage over frontier (2020–2024)
Was +0.6pp in 1995–2019 · Gap nearly closed
Sharp slowdown🏭
EUR 148K
Industry Productivity (Frontier)
GVA per employed person · EU frontier · 2024
CAGR 3.0% after 2019 · vs 1.7% before 2019
Productivity leader🔬
2.7x
EU Frontier vs CEE
CEE includes Romania, Czechia, Hungary and Poland
2024 · Substantial productivity gap remains
CEE = 37% of frontierReport Sections
Ten sections · 27 EU countries · 64 sectors · 1995–2024 · GVA in 2019 prices per employed person · Source: Eurostat National Accounts
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Section 01
Main Findings
Key insights from the productivity analysis
After 2019 productivity convergence halted. EU follower was 52% of EU frontier in both 2019 and 2024. The main cause: industry and agriculture. In both sectors EU follower lagged far behind EU frontier CAGR after 2019.
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Section 02
EU Productivity Frontier
Analysis of the top-performing EU member states
Frontier = average of 3 EU countries with highest productivity (excluding outliers) in each year. Frontier advanced slightly faster after 2019 (0.8% CAGR) vs before (0.6%), but did not elicit faster follower growth. In 2024 the frontier was 48% above EU average and 2.7× above CEE.
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Section 03
Industry Analysis
Productivity dynamics within industrial sectors
Manufacturing productivity leader (CAGR 3.6% after 2019). Energy declined sharply (−4.6% after 2019 vs +2.1% before). Basic pharma most productive sector at EUR 425K. Wood (−9.9%) and furniture (−4.7%) largest decliners after 2019.
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Section 04
Commercial Services
IT, Financial Activities, Trade, and Transport
Productivity continued to advance after 2019 with higher rate than before in commercial services — both in EU frontier (CAGR 1.3% in 2020–2024 vs 0.8%) and EU follower (CAGR 1.5% vs 1%). Productivity in commercial services in EU follower was 53% of EU frontier in 2024.
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Section 05
EU Followers Analysis
Productivity diffusion and convergence dynamics
EU follower productivity was 46% of frontier in 1999, rose to 53% by 2019, and stayed at 53% in 2024. No sectors in EU follower achieved productivity gains vis-à-vis EU frontier after 2019. In industry a loss in productivity compared to EU frontier occurred.
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Section 06
Structural Changes in GVA
Income breakdown analysis and technology adoption
The delay in adopting new technology was the reason EU followers could not keep pace. EU frontier increased the share of consumption of fixed assets (new technology investment). EU followers increased the share of compensation of employees — indicating labour-intensive growth rather than technology adoption.
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Section 07
Services Sector Changes
GVA structure evolution in service activities
GVA structure in all kinds of service activities converged between EU frontier and EU followers — their GVA structure became more similar in 2020–2022 than in 1995–1999. EU frontier used both labour complementary and labour substituting technologies across service sectors.
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Section 08
Manufacturing GVA Structure
Summary of changes in GVA structure
EU frontier: most manufacturing sectors invested in new technology substituting labor. EU followers: most manufacturing sectors became less capital intensive and less labour intensive. The lower share of fixed assets and compensation in GVA extended net operating surplus — meaning EU followers have financial means for future capital investment.
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Section 09
R&D Sector Analysis
Research and Development productivity dynamics
R&D productivity accelerated after 2019 in EU frontier (CAGR 2.8% in 2020–2022 vs 0.8% before). EU follower R&D grew at the same rate as before 2019 (CAGR 0.8%). EU follower R&D productivity was 43% of EU frontier — the sector being more capital and more labour intensive than in EU frontier.
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Section 10
Conclusions
Summary and policy implications
Productivity diffusion has slowed. Main causes: industry and agriculture lagged; delay in new technology adoption in EU followers; asymmetric diffusion in manufacturing. Positive signs: commercial services advancing; GVA structure converging; EU followers have accumulated financial means for future investment.
Main Findings
Ten key insights from the productivity analysis
1
Productivity convergence halted after 2019
The EU single market with free movement of labour, capital and products was supposed to contribute to the diffusion process and the productivity convergence between EU frontier and EU followers. But after 2019 the productivity convergence halted. The productivity in EU follower was 52% of the EU frontier in 2024 as it was in 2019.
2
Diffusion process slowed sharply
Although the force of the EU frontier strengthened after 2019, the productivity diffusion process among EU followers slowed down. During 2020–2024 the CAGR of productivity in EU follower was 1%, just 0.2pp higher than the CAGR in EU frontier — in sharp contrast with 1995–2019 when the CAGR of EU follower at 1.2% was double of the EU frontier (0.6%).
3
Industry and agriculture drove the slowdown
The main cause of the productivity slowdown in EU follower after 2019 was industry and agriculture. In agriculture: EU frontier CAGR was 3.6% annually, while EU followers 1.3%. In industry: EU frontier advanced 3% annually, while EU follower stayed unchanged.
4
Manufacturing traction undermined in EU frontier
In manufacturing, changes in both EU frontier and EU follower could explain the slowdown. The traction of EU frontier was undermined by two main evolutions: 1/ just a subset of manufacturing sectors grew and 2/ the size of only two sectors with increasing productivity expanded (basic pharma, textile and food).
5
The "closeness paradox" in EU followers
It seems that in EU follower the closeness to the EU frontier determines the productivity growth as though the average productivity gap of the economy vis-à-vis the EU frontier constrains the speed of the productivity diffusion in the sectors. After 2019 in EU followers the sectors closer to the EU frontier in 2019 lost productivity and sectors farther from the EU frontier gained productivity.
6
Technology adoption delay explains the gap
The changes in the income breakdown of GVA give evidence that the delay in penetration rate of new technology was the reason why EU follower could not keep the pace with productivity growth in EU frontier.
7
Capital substitution in EU frontier — not in EU followers
After 2019 in EU frontier both industry and agriculture used more capital substituting labour (the share of consumption of fixed capital increased and the share of compensation of employees declined) than before 2019. In the same period, in EU follower, industry used the same capital with less labour and agriculture used more capital with more labour. In 2020–2024 both agriculture and industry were more capital intensive in EU frontier than in EU follower.
8
Commercial services: bright spot for followers
Productivity continued to advance after 2019 with higher rate than before 2019 in commercial services both in EU frontier (CAGR 1.3% in 2020–2024 vs 0.8% in 1995–2019) and EU follower (CAGR 1.5% in 2020–2024 vs 1% in 1995–2019). The productivity in commercial services in EU follower was 53% of EU frontier in 2024.
9
GVA composition in commercial services stable
The composition of GVA in commercial services was relatively stable over time in both EU frontier and EU follower. In 2020–2024 the commercial services in EU follower were less capital and less labour intensive than in EU frontier.
10
R&D: EU frontier accelerating, followers stagnant
Productivity in R&D accelerated after 2019 in EU frontier (CAGR 2.8% in 2020–2022 vs 0.8% in 1995–2019) and grew at the same rate as before 2019 in EU follower (CAGR 0.8%). After 2019 productivity in R&D in EU follower was 43% of EU frontier, the sector being more capital and more labour intensive than in EU frontier.
EU Frontier Sectoral Productivity Growth
CAGR before and after 2019 · GVA per employed person · 2019 prices
🌾 Agriculture
EUR 60K
CAGR before 2019—
CAGR after 20193.6%
EU follower CAGR after 20191.3%
Growth leader after 2019 · Smallest absolute productivity level
🏭 Industry
EUR 148K
CAGR before 20191.7%
CAGR after 20193.0%
EU follower CAGR after 2019stayed unchanged
Productivity leader in EU frontier · Followers: productivity stayed unchanged
🏬 Commercial Services
EUR 98K
CAGR before 20190.8%
CAGR after 20191.3%
EU follower CAGR after 20191.5%
EU follower 53% of EU frontier in 2024 · Followers slightly ahead
🏗️ Construction
Declining
CAGR before 2019−0.5%
CAGR after 2019−2.4%
Contraction rate strengthened after 2019 (vs −0.5% before 2019)
🏛️ Public Services
Declining
CAGR before 2019−0.6%
CAGR after 2019−0.2%
Contraction rate diminished after 2019 (vs −0.6% before 2019)
🔬 R&D
43% of Frontier
EU frontier CAGR before 20190.8%
EU frontier CAGR 2020–20222.8%
EU follower CAGR 2020–20220.8%
Followers more capital and more labour intensive than EU frontier
Productivity Growth Comparison
CAGR of 5-year average productivity · EU frontier vs EU followers · Two periods
| Period | EU Frontier CAGR | EU Follower CAGR | Gap |
|---|---|---|---|
| 1995–2019 | 0.6% | 1.2% | +0.6pp |
| 2020–2024 | 0.8% | 1.0% | +0.2pp |
Technology Adoption: The Core Divide
Income breakdown of GVA before and after 2019 · EU frontier vs EU followers
EU Frontier · Main Change
Increase in share of consumption of fixed assets
In 2020–2023 compared to 1995–1999: indicates investment in new technology after 2019. Both industry and agriculture used more capital substituting labour — the share of consumption of fixed capital increased and the share of compensation of employees declined. In all industrial subsectors the labour intensity declined, and the consumption of fixed assets increased in manufacturing and energy in EU frontier.
EU Followers · Main Change
Increase in share of compensation of employees
In 2020–2023 compared to 1995–1999: indicates labour-intensive growth rather than technology adoption. Industry used the same capital with less labour and agriculture used more capital with more labour. In EU followers labour intensity declined and consumption of fixed assets increased in mining and energy, while the structure of GVA was unchanged in manufacturing and water supply.
Manufacturing Sector Performance (EU Frontier · After 2019)
CAGR of 5-year average productivity · 2019–2022 data
Manufacturing Leaders (After 2019)
Basic Pharma
6.0%EUR 425K · Most productive
Machinery & Equipment
3.1%
Paper
2.6%
Rubber & Plastic
2.2%
These sectors had the best productivity growth even before 2019.
Manufacturing Decliners (After 2019)
Wood
−9.9%
Furniture
−4.7%
Computer & Electronics
decliningStill EUR 218K
Motor Vehicles
−0.4%
Conclusions
Summary and policy implications
Main Causes of Slowdown
- — Industry and agriculture productivity in EU followers lagged significantly behind EU frontier
- — Delay in new technology adoption in EU followers
- — EU frontier invested in capital-intensive, labour-substituting technologies
- — Asymmetric diffusion patterns in manufacturing
Positive Signs
- — Commercial services productivity continued to advance in both frontier and followers
- — GVA structure in services converging between frontier and followers
- — EU followers have accumulated financial means (net operating surplus) for future capital investment
- — R&D showing potential in both regions
Policy Implications
- — Need for accelerated technology diffusion mechanisms within the EU single market
- — Focus on reducing barriers to capital investment in EU follower countries
- — Targeted support for manufacturing sectors showing asymmetric diffusion patterns
- — R&D efficiency improvements needed in EU follower countries
- — Leverage the financial surplus in EU followers for technology investments
The productivity slowdown in the EU is well documented. However, what it is less clear is why this is happening. This analysis explores the 'whys'. The OECD (2015) concluded that the future growth will largely depend on the revival of the diffusion machine, both within and across countries. The EU single market with free movement of labour, capital and products was supposed to contribute to the diffusion process and the productivity convergence between EU frontier and EU followers. But after 2019 the productivity convergence halted.
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