Economists Split on EU-US Growth Gap as EU Per Capita Reaches 74% of US
Updated
Updated · Financial Times · May 28
Economists Split on EU-US Growth Gap as EU Per Capita Reaches 74% of US
2 articles · Updated · Financial Times · May 28
Ackerman’s analysis has sharpened a debate over whether Europe is truly falling behind the US, showing the answer changes with the metric used rather than with new underlying data.
In constant 2021 prices, western Europe and the EU look weaker against the US; in current purchasing-power-parity terms, the picture is far less bleak, with EU GDP per capita rising from 60% of the US level around 2000 to 74% today.
Paul Krugman argues the current-PPP approach better captures relative prosperity because cheaper US tech lowers prices and boosts welfare, while Luis Garicano says constant-price measures better reflect America’s stronger expansion in productive capacity.
The newsletter’s conclusion is that both sides capture part of the truth: Europe may have broadly held its relative living standard even as the US pulled ahead in key sectors such as technology.
That leaves a broader warning for policymakers: cross-country GDP and productivity comparisons depend heavily on price choices, so claims of long-term European decline do not rest on a single uncontested measure.
Is Europe's economic 'decline' a statistical illusion created by US tech?
How can the US and European economies diverge and converge simultaneously?
If Europe’s economy is strong, why do its leaders call for urgent reforms?
US vs. EU GDP per Capita 2026: Understanding the Growing Economic Divide and Its Implications
Overview
In 2026, the United States remains the world's largest economy with a nominal GDP of nearly $32.4 trillion, far ahead of China and other major economies. The U.S. also leads in GDP per capita at $94,430, while the European Union stands at $49,879, highlighting a significant gap. However, this difference narrows when adjusting for purchasing power, showing that living standards are closer than nominal figures suggest. The report explains that technology leadership, especially in high-productivity sectors, drives the U.S. advantage, while exchange rates and calculation methods can exaggerate the gap in media and public perception.