The International Monetary Fund published research arguing that Europe’s widening productivity gap with the United States is driven largely by the difficulty European firms face in scaling up, reflecting remaining imperfections in European integration. The analysis points to fragmentation in capital markets, constraints on cross-border labour mobility, and barriers to selling products across borders as key impediments to firm growth. As evidence, the IMF highlights that the stock market valuation of young firms (under 50 years old) totals USD 42.9 trillion in the United States compared with USD 5 trillion in the European Union. It also notes that an average European firm operating for 25 years or more employs about 10 workers, versus 70 for a comparable US firm, alongside labour productivity levels around 20 percent below the US. The research concludes that deeper integration of capital, labour and consumer markets would help channel financing to riskier new businesses, enable workers to move to opportunity, and expand the addressable market for companies.
International Monetary Fund 2026-03-12
International Monetary Fund research links Europe’s productivity gap to barriers that prevent firms scaling and calls for deeper market integration
The IMF attributes Europe's widening productivity gap with the U.S. to challenges in scaling up European firms due to imperfect integration. Key impediments include fragmented capital markets, limited cross-border labour mobility, and barriers to cross-border product sales. The IMF suggests deeper integration of capital, labour, and consumer markets could enhance firm growth and productivity.