THE FUTURE OF PRODUCTIVITY - IFS
Transcript of THE FUTURE OF PRODUCTIVITY - IFS
THE FUTURE OF PRODUCTIVITY
Chiara Criscuolo
Directorate for Science, Technology and Innovation OECD
Understanding the Great recession: from micro to macro Bank of England London | 24 September 2015
… productivity isn't everything, but in the long run it is almost everything. Paul Krugman, 1994
1. Productivity: now more than ever
2. Thinking about productivity: frontier firms and
diffusion
3. How to revive productivity growth
4. Policy messages and issues for future research
Outline
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Cross-country gaps in GDP per capita mainly reflects productivity shortfalls
Source: OECD (2015), Economic Policy Reforms: Going for Growth
-80
-60
-40
-20
0
20
40
60M
EX TUR
CHL
HUN
POL
EST
GRC SV
K
PRT
SVN
CZE
ISR
KOR
ESP
NZL
ITA
JPN EU
OEC
D
GBR FR
A
FIN
BEL
ISL
CAN
DEU
DNK
SWE
AUS
AUT
IRL
NLD
NOR
USA
CHE
LUX³
A. Percentage GDP per capita difference compared with the upper half of OECD countries¹
45-80
-60
-40
-20
0
20
40
60
MEX TU
R
CHL
HUN
POL
EST
GRC SV
K
PRT
SVN
CZE
ISR
KOR
ESP
NZL
ITA
JPN EU
OEC
D
GBR FR
A
FIN
BEL
ISL
CAN
DEU
DNK
SWE
AUS
AUT
IRL
NLD
NOR
USA
CHE
LUX³
B. Percentage difference in labour resource utilisation and labour productivity²
Labour productivity Labour resource utilisation
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Note: GDP/Population=(GDP/Employment) * (Employment/Population)
Productivity growth slowed across the
OECD, even before the crisis Labour productivity growth since 1990
GDP per hour worked (China and India refer to GDP per worker)
Source: OECD calculations based on the Conference Board Total Economy Database. 5
Growth without MFP?
Source: Conference Board Total Economy Database
Contribution of production factors to GDP growth 1990-2013 (%pts)
-4
-2
0
2
4
6
8
10
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
7
07-1
3
90-0
0
00-0
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07-1
3
90-0
0
00-0
7
07-1
3
UnitedStates
Canada NewZealand
Australia Europe-5 UnitedKingdom
Nordics France Italy
Labour composition MFP Capital intensity Labour quantity
Why the slow-down? Taking a granular approach:
A) Is it because the productivity frontier is slowing ?
B) Is it because of misallocation and declining business dynamism?
C) …or something else?
• Role of policies?
Productivity will be the key driver of
future growth but uncertain outlook
7
Techno-pessimists
vs
techno-optimists
…
The debate is not settled
Economic odd couple Robert Gordon, left, and Joel Mokyr encapsulate the debate on the future of innovation. ROB HART FOR THE WALL STREET JOURNAL “”Economists Debate: Has All the Important Stuff Already Been Invented? By Timothy Aeppel, June 15, 2014 10:38 p.m. ET
1. Widespread heterogeneity: very high MFP and very low
MFP firms coincide within narrowly-defined industries.
2. Adoption lags for new technologies across countries have
fallen, but long-run penetration rates once technologies are
adopted have diverged (Comin & Mestieri, 2013).
3. MFP growth of laggard firms is more closely related to
productivity developments at the national frontier (NF), as
opposed to the global frontier (GF) (Bartelsman, Haskel &
Martin, 2008)
Analytical framework
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Analytical framework Global
frontier
National
Frontier
Laggards
Adoption convergence
Penetration divergence
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The Increasing gap between firms
at the frontier and the others Solid growth at the global productivity frontier but growth of the rest disappointed
Labour productivity; index 2001=0
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD countries”, OECD Mimeo.
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1. Technological diffusion slowed down
2. “Winner takes it all”
3. Replication and diffusion of the magic “bundle” is becoming more difficult
Robustness to methodology
– Productivity measure (MFP, LP)
– Frontier definition (Top 5%, top 100)
• Not driven only by stronger selection at the top
– Long-time frontier firms also pull away
• No difference by ICT usage
• National frontier are also pulling away
Possible explanations and robustness
The globally most productive firms –
who are they?
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD countries”, OECD Mimeo.
Mean Std Dev Number Mean Std Dev Number
Productivity 4.06 1.04 3657 2.51 0.91 294031 1.5 ***
Employment 309 3770 3657 229 4119 294031 81
Capital stock (€m) 31 355 3657 19 343 294031 12 **
Turnover (€m) 250 1731 3657 59 754 294031 191 ***
Profit rate 0.57 0.33 3657 0.13 6.33 294031 0.45 ***
Age 21.5 20.3 3657 23.2 18.6 294031 -1.7 ***
MNE status*
Probability 0.47 0.50 3450 0.28 0.45 310765 0.19 ***
Patenting status
Depreciated patent stock 3.71 45.15 3657 0.90 56.17 294031 2.8 ***
Multi Factor Productivity (Solow)
Selected OECD Countries, 2005 (unless otherwise noted)
Global Frontier Firms Non-Frontier FirmsDifference
in means
Mean firm characteristics: frontier firms and non-frontier firms
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Firms at the global productivity frontier
have become larger Average of log employment for global frontier firms and the rest
Based on top 5% of MFP; index, 2001=0
Manufacturing Services
-0.05
0
0.05
0.1
0.15
0.2
0.25
2001 2002 2003 2004 2005 2006 2007 2008 2009
Laggard Frontier
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD countries”, OECD Mimeo.
Firms at the global productivity frontier
have become older Average age (years) of firms in the frontier and non-frontier groups
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD countries”, OECD Mimeo.
Manufacturing Services
TFPnace2Solow W4_Services
Notes: Frontier is measured by the top 100 firms in each 2-digit industry and each year, based on Solow residual-based MFP.
15
20
25
30
Non-frontier Frontier
15
20
25
30
Non-frontier Frontier
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… consistent the broader decline in
business dynamism Declining start-up rates across OECD countries
Source: C. Criscuolo, P. N. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New Evidence from 18 Countries”, OECD Science, Technology and Industry Policy Papers, No. 14.
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Three areas for policy:
1. Pushing out the global frontier
– More and more efficient public investment in basic research.
• Role for international co-operation?
– Enabling experimentation of firms with new technologies and business models.
2. More efficient resource allocation
– Reduce barriers to firm entry and exit to enable high productivity firms to grow
and low productivity firms to exit.
– “Resolving” Skill mismatch and upscaling a double whammy for both growth
and equity
3. Reviving the diffusion machine
– From global to national frontier and from national frontier to laggards
• through exposure to best practice (trade and GVC participation, FDI, mobility of
skilled workers) resource (e.g. skill) allocation and absorptive capacity (e.g. R&D;
University collaboration)
How to revive productivity growth?
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Aggregate gains from the frontier
magnified by efficient reallocation How much higher would be the overall manufacturing sector
labor productivity if NF firms were as productive and large as GF firms?
NF firms in Italy have productivity levels close to the GF but they are relatively small
… but up-scaling can be difficult
Post-entry growth - average size of young and old firms
Source: C. Criscuolo, P. N. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New Evidence from 18 Countries”, OECD Science, Technology and Industry Policy Papers, No. 14.
Manufacturing Services
0
10
20
30
40
50
60
70
80
Startups (0-2) Old (>10)Employees
0
10
20
30
40
50
60
70
80
Startups (0-2) Old (>10)Employees
The crisis: cleansing or scaring? The
jury is still out… Average employment growth across the firm MFP distribution
Deviation from 2002-10 average; selected European countries – business sector
Notes: Authors calculations based on production survey data from ESSLait. Unweighted average of 11 countries: AT, DE, DK, FI, FR, IT, NO, NL, PO, SE, UK. A common (European) industrial structure is employed to aggregate industries.
But comparison with past recessions is difficult
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The crisis: cleansing or scaring? The
jury is still out… Net growth rate in differences from the 2001-11 average
Note: Average across all available countries. Net growth rates are calculated as net job creation over total average employment in the biennium. Source: OECD, Dynemp Express database 22
The crisis: most jobs were destroyed by the downsizing of old incumbents
Contributions to aggregate net job creation by entrants, young/old exitors, and
young/old incumbents.
-8
-6
-4
-2
0
2
4
6
8
Cont
ribut
ion
to a
ggre
gate
net
job
crea
tion
Young (entry) Young (exit) Young (incumbents)
Old (exits) Old (incumbents) Total%
Source: C. Criscuolo, P. N. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New Evidence from 18 Countries”, OECD Science, Technology and Industry Policy Papers, No. 14.
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Framework policies
1. Pro-competition product market reforms, esp. in services
2. Exit matters: bankruptcy legislation that does not excessively
penalise failure
3. Policies that do not inhibit labour mobility
Innovation policies
1. Public investment in basic research
2. Collaboration between firms and universities
3. R&D fiscal incentives and IPRs but design is crucial
Policies to revive productivity growth
• Analysis on new harmonized and representative data to study the micro drivers of
aggregate productivity.
– creative destruction process across countries and its contribution to productivity
growth;
– Within-sector productivity dispersion and efficient allocation of resources.
– Frontier growth; winner-takes-all and diffusion
• New questions:role of finance; link between productivity and wage inequality
and their trends
• Develop better policy indicators:
– Bankruptcy legislation;
– IP systems.
• Political economy of productivity policy: e.g. productivity commissions in New
Zealand; Norway; Denmark etc.
Research agenda
References and More information…
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http://www.oecd.org/eco/the-future-of-productivity.htm
http://www.oecd.org/sti/dynemp.htm
• OECD (2015), “The Future of Productivity”. OECD, Paris
• Andrews, D., C. Criscuolo and P. Gal (2015), “Frontier Firms, Technology Diffusion
and Public Policy: Micro Evidence from OECD Countries”, OECD Mimeo,
forthcoming.
• Calvino, F., C. Criscuolo and C. Menon (2015), “Cross-country Evidence of Start-Up
Dynamics”, OECD Science, Technology and Industry Working Paper.
• Criscuolo, C., P. Gal and C. Menon (2014), “The Dynamics of Employment Growth:
New Evidence from 18 Countries”, OECD Science, Technology and Industry Policy
Papers, No. 14.