This paper examines if endogenous growth theory can explain the productivity divergence that have taken place between Europe and the United States since the mid- 1990s. To answer this question, two regressions, one testing endogenous growth theory globally and one applying it on the Euro-American case, are conducted.

From the tests I find that two different logics seems to apply for productivity growth in advanced economies near the technical frontier and in developing economies further from the frontier. Internationally, stock market capitalisation and inflow of capital have limited or negative effect on productivity, while in the EU/US case it has a considerable effect. Economic freedom and investment in R&D exhibit the opposite characteristics, being relevant on a global level but not in the Euro-American case. Apart from endogenous factors, old-age dependency ratio, an exogenous control factor in the EU/US regression, shows strong explanatory power in the divergence.

The conclusion from this study is that endogenous growth theory only partially can explain the productivity divergence with the United States. Like many studies before, the theory shows mixed results when applied to different contexts.