Beyond the Equity-Efficiency Trade-Off: Practical Ideas for Inclusive Growth and Competitiveness in Europe

The report argues that Europe must move beyond the perceived trade-off between equity and efficiency by targeting 'win-win' initiatives that boost productivity while increasing social mobility. It identifies innovation and entrepreneurship as the primary drivers of this growth, supported by enablers such as integrated markets, human capital, and access to finance. The document highlights the risks of the Fourth Industrial Revolution, particularly the polarization of the labor market and the decline of medium-skilled jobs, and provides a series of practical examples—from smart grids in the Netherlands to broadband in Cornwall—to illustrate how to scale inclusive growth across the EU.

• Europe is experiencing a significant decline in productivity growth, falling from over 5% in 1975 to under 0.7% in 2015, alongside stagnating real wages and high youth unemployment, which averages nearly 20% for the EU28.
• The Fourth Industrial Revolution is driving labor market polarization in Europe, where medium-skilled jobs have declined by more than 10% in countries like Italy and Spain between 1995 and 2015, while high- and low-skilled occupations have seen moderate growth.
• The report proposes a framework for inclusive growth based on two key drivers—innovation and business dynamism/entrepreneurship—and three key enablers: integrated markets for goods and services, the labour market and human capital, and access to finance.
• There is a significant intra-industry productivity gap in Europe between 'frontier' and 'follower' firms, with only 44% of European firms reporting that their machinery and equipment is state of the art.
• European business dynamism is lower than in the United States, characterized by a higher share of static firms and a lower share of fast-growing firms, which limits the allocation of resources to the most productive organizations.
• European innovative firms, particularly young, small, and innovative firms (YSIs), face severe financing constraints due to a heavy reliance on bank lending and a lack of tangible collateral, with 24% of YSIs reporting difficulties in accessing finance compared to 15% of other SMEs.
• The EU's equity markets are structurally underdeveloped compared to the US, representing only about 64% of GDP versus 127% in the US, which hinders the ability of European start-ups to scale up and access exit markets.
• Early childhood education is identified as one of the most effective interventions for simultaneously increasing both social inclusion and economic competitiveness by shaping cognitive abilities between birth and age five.

APA

World Economic Forum (2017). Beyond the Equity-Efficiency Trade-Off: Practical Ideas for Inclusive Growth and Competitiveness in Europe. http://www3.weforum.org/docs/WEF_EUROPE-LAB.pdf

Chicago

World Economic Forum. Beyond the Equity-Efficiency Trade-Off: Practical Ideas for Inclusive Growth and Competitiveness in Europe. 2017. http://www3.weforum.org/docs/WEF_EUROPE-LAB.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Beyond the Equity-Efficiency Trade-Off: Practical Ideas for Inclusive Growth and Competitiveness in Europe |date=March 2017 |url=http://www3.weforum.org/docs/WEF_EUROPE-LAB.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2017beyond, author = {{World Economic Forum}}, title = {{Beyond the Equity-Efficiency Trade-Off: Practical Ideas for Inclusive Growth and Competitiveness in Europe}}, institution = {World Economic Forum}, year = {2017}, month = mar, url = {http://www3.weforum.org/docs/WEF_EUROPE-LAB.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }