The average marginal tax rate on labour in the euro area is high and hovers around 15 percent points above the rate in the US 6 . Labour regulations such as employment protection legislation hinder job-to-job mobility in Europe.
Indeed, the same sharp rise in potential rates of return on new American investments that has been driving capital accumulation and accelerating productivity in the United States has also been inducing foreigners to expand their portfolios of American securities and direct investment.