Austria has one of the higher GDP per capita levels in Europe, but owes this position to a strong pace of convergence until the early 1990s. Over the past decade and a half, it has lost some ground vis-à-vis the best-performing OECD countries. While aggregate productivity growth has picked up in recent years, the employment rate has remained below potential. The most globally-oriented parts of the business sector have intensified their innovation efforts and achieved greater productivity gains. In contrast, the more sheltered services have displayed less dynamism and the participation rate of the low-skilled remains unsatisfactory. Further structural reforms in product and labour markets would help boost potential output, trend growth and average per capita income levels, and reinforce social cohesion. This chapter suggests that there is room for stimulating competition, innovation and investment in services and for labour market reforms to foster the employment of low-skilled workers.