From 2018 through 2025, real output per person rose much faster in the United States than in several large European economies. Measured as real GDP per capita at purchasing-power parity, the United States gained about 13.6%, versus 4.9% in France, 1.9% in the United Kingdom and 0.5% in Germany. (analysis snapshot, research source)
That comparison does not prove a single policy caused the divergence. Americans work more, Europe absorbed a much harsher energy shock after 2021, and the United States used unusually large pandemic-era fiscal support. But once those objections are kept in frame, the evidence still points toward a deeper difference in productivity, firm scaling, capital formation and the ability to attract technical and entrepreneurial talent. (research source, research source, research source, research source, research source, research source, research source, research source)
The gap is real, but GDP per person is not a complete welfare measure
The country comparison uses World Bank GDP per capita at purchasing-power parity in constant 2021 international dollars. That adjusts for inflation and cross-country price levels, which makes it more useful than a simple dollar-exchange-rate comparison. It still measures output per person, not household disposable income, leisure, equality or happiness. (research source)
The post-2018 divergence is striking. US real PPP GDP per capita rose about 13.6% through 2025. France rose 4.9%, the United Kingdom 1.9% and Germany 0.5%. The result is not that every American household became richer by the same amount. It is that the aggregate productive base per person expanded much faster in the United States over this period. (analysis snapshot, research source)
Working more explains part of the difference, not most of it
A serious counterargument is that Americans simply spend more time at work. OECD data for 2025 put average annual hours at about 1,800 per US worker, versus 1,533 in the United Kingdom, 1,498 in France and 1,332 in Germany. Europeans may reasonably prefer more leisure, so a higher output number should not automatically be treated as a better social outcome. (research source, research source)
Hours do not appear to explain most of the income gap. The IMF estimated that nearly 70% of the broad EU-US gap in income per person reflects lower European productivity, with smaller capital stock and labor input accounting for roughly one third. The IMF says the conclusion also holds when aggregate hours worked are used. (research source)
Firm-level evidence points in the same direction. An IMF study covering roughly two decades found annualized productivity growth of 2.6% at listed US non-tech firms versus 0.9% in Europe. In technology, the figures were 1.5% in the United States and negative 0.3% in Europe. The same study reports much higher R&D intensity among listed US technology firms. (research source)
Europe's problem looks more like scaling than invention
The evidence does not support a simple story in which Europe lacks smart people, good universities or startups. The European Commission itself points to more than 35,000 early-stage startups and a large technology workforce. The harder problem is what happens after a promising company has been created. (research source)
IMF research identifies smaller effective markets and limited market-based financing as bottlenecks for frontier European firms, while skill shortages and insufficient risk capital constrain young high-growth companies. OECD work comparing innovative EU and US startups similarly emphasizes commercialization timing, late-stage financing, managerial capabilities, acquisitions and market expansion rather than inventive capacity alone. (research source, research source)
The European Commission's own diagnosis is unusually direct: financial, regulatory and administrative obstacles can slow startup growth and encourage relocation. A continent can generate plenty of promising companies and still produce fewer global winners if crossing borders, raising late-stage capital, hiring and expanding remain harder than they are in a more unified market. (research source, research source, research source, research source, research source, research source)
Capital formation makes the institutional difference visible
From the fourth quarter of 2021 through the fourth quarter of 2024, US business investment rose 15.4%, compared with 6.8% in the euro area. The ECB says intangible investment contributed most to the difference. That matters because modern productivity growth increasingly depends on software, intellectual property, data, organizational capital and other assets that do not look like a traditional factory. (research source)
The digital gap is even wider. The ECB estimates digital investment represented about 24.3% of total US investment in 2024, compared with 12.4% in the euro area. When the AI boom accelerated, the capital concentration became more visible: OECD data show US-based firms captured about 75% of global AI venture-capital deal value in 2025, versus about 6% for EU27 firms. (research source, research source)
Those figures do not prove that one regulation created one data center or that venture-capital shares will remain fixed. They show that the United States entered the AI cycle with an unusually deep system for mobilizing risk capital around new technology. AI is therefore better understood as an accelerator and transmission mechanism than as the complete explanation for the transatlantic growth gap. (research source, research source, research source, research source)
Taxes and regulation belong in the incentive environment, not a one-variable verdict
The free-market argument becomes more concrete when it is tied to specific frictions. OECD research associates less restrictive, competition-friendly product-market regulation with stronger productivity, investment and employment, while administrative burdens can discourage new-firm entry. That is a broad empirical relationship, not a causal decomposition of this particular US-Europe gap. (research source)
Labor taxation also differs substantially. For a single average worker without children in 2025, the OECD total tax wedge was 49.3% in Germany and 47.2% in France, compared with 32.4% in the United Kingdom and 30.0% in the United States. Britain is a useful reminder that Europe is not one policy regime. (research source)
Those numbers do not establish that lower taxes caused the growth divergence. They do show that workers and firms operate inside materially different incentive systems. Hiring, entry, investment and expansion all respond at the margin to the rewards and frictions created by those systems. (research source, research source, research source, research source, research source, research source, research source)
America's talent advantage is partly imported
The US model also depends heavily on immigration. In 2023, foreign-born workers made up 46% of US science-and-engineering workers with doctoral degrees, 57% of doctoral-level computer and mathematical scientists and 58% of doctoral-level engineers. (research source)
NBER research reports that immigrants account for about one-quarter of new US employer businesses and that immigrant-founded firms show greater patenting and innovation. Separate NBER work estimates that immigrants are 16% of US inventors but authored 23% of patents, with a model attributing 32% of aggregate US innovation to immigrants once spillovers to US-born collaborators are included. (research source, research source)
A large market and deep capital pool become more powerful when talented people from around the world want to build inside them. That does not make immigration the only explanation for American innovation, but it makes talent attraction an important part of any serious comparison of the two economic systems. (research source, research source, research source, research source, research source, research source, research source)
The strongest objections still matter
The last several years were not a clean experiment in market policy. Europe absorbed a much more severe energy shock after Russia's invasion of Ukraine. The European Commission says EU industrial gas and electricity prices remained roughly two to four times those of major trading partners after the 2021-23 energy crisis, while the ECB identifies the energy and terms-of-trade shock as a significant drag on the euro-area recovery. (research source, research source)
US fiscal policy was also extraordinarily supportive after the pandemic. The ECB points to stronger US private consumption supported by direct income support and a larger drawdown of excess savings, while the IMF estimates the cumulative increase in US federal spending in 2020-21 at about 19% of GDP. Recent US outperformance cannot honestly be presented as a pure test of fiscal restraint. (research source, research source)
And Europeans work fewer hours. Some of that difference may represent a deliberate preference for leisure rather than an economic failure. GDP per person is useful for measuring productive output, but it cannot settle questions about the full quality of life. (research source, research source)
Technology explains how the gap widened; institutions help explain why
After giving those objections real weight, the deeper pattern still looks institutional. The United States combines a huge effective market, deeper risk and equity capital, stronger scale-up dynamics, lower labor taxation than major continental European comparators and an exceptional ability to absorb entrepreneurial and technical talent. (research source, research source, research source, research source, research source, research source)
That combination does not guarantee that every American company wins or that Europe stops innovating. It changes the odds that a promising company can finance growth, recruit talent, commercialize technology and expand until it becomes a frontier firm. Small differences in those probabilities can compound over many companies and many years. (research source, research source, research source, research source, research source, research source, research source)
The most defensible conclusion is therefore narrower than "AI made America richer" and broader than "Europe regulates too much." Technology and AI are the visible mechanisms through which the recent divergence accelerated. Scale, capital formation, commercialization, incentives and talent help explain why so much of the upside accrued in the United States. Europe still invents. America has been better at turning invention into giant productive businesses. (research source, research source, research source, research source, research source, research source, research source, research source, research source)
Sources and methodology
This article is compiled from the reviewed Grizzly Bulls research package that supports the claims above.
The measured figures are a historical snapshot as of October 7, 2026; they should not be read as a claim that the underlying coverage is unchanged today.
- United States versus Germany, France and United Kingdom real GDP per capita divergence — Grizzly Bulls analysis, as of October 7, 2026.
- GDP per capita, PPP (constant 2021 international $) — World Bank.
- GDP per capita, PPP (constant 2021) in United States — Statizoid, drawing on World Bank / International Comparison Program, as of October 1, 2026.
- GDP per capita, PPP (constant 2021) in Germany — Statizoid, drawing on World Bank / International Comparison Program, as of October 1, 2026.
- GDP per capita, PPP (constant 2021) in France — Statizoid, drawing on World Bank / International Comparison Program, as of October 1, 2026.
- GDP per capita, PPP (constant 2021) in United Kingdom — Statizoid, drawing on World Bank / International Comparison Program, as of October 1, 2026.
- Europe: Turning the Recovery into Enduring Growth — International Monetary Fund, as of May 14, 2024.
- Europe's Productivity Weakness: Firm-Level Roots and Remedies — International Monetary Fund, as of February 14, 2025.
- Which start-ups achieve scale? Evidence from innovative start-ups in the EU and the US — OECD, as of August 7, 2026.
- EU Startup and Scaleup Strategy — Staff Working Document — European Commission, as of May 28, 2025.
- Product market regulation — OECD, as of September 1, 2026.
- Taxing Wages 2026 — Overview — OECD, as of April 1, 2026.
- Business investment: why is the euro area lagging behind the United States? — European Central Bank, as of March 1, 2025.
- AI and the euro area economy — European Central Bank, as of March 23, 2026.
- Venture capital investments in artificial intelligence through 2025 — OECD, as of February 17, 2026.
- The Contribution of High-Skilled Immigrants to Innovation in the United States — National Bureau of Economic Research, as of August 1, 2025.
- Immigrant Entrepreneurship: New Estimates and a Research Agenda — National Bureau of Economic Research, as of May 1, 2024.
- The State of U.S. Science and Engineering 2026 — National Center for Science and Engineering Statistics / National Science Foundation, as of May 4, 2026.
- Average annual hours actually worked per worker — OECD Data Explorer, as of December 31, 2025.
- Energy prices and costs in Europe — European Commission, as of February 1, 2025.
- The post-pandemic recovery — why is the euro area growing more slowly than the United States? — European Central Bank, as of June 1, 2024.
- United States: 2024 Article IV Consultation — International Monetary Fund, as of July 18, 2024.