Productivity vs hours Productivity vs hours growth growth
Presentation based on: Presentation based on: F.Daveri, “Labor productivity growth in Europe: an update”, background F.Daveri, “Labor productivity growth in Europe: an update”, background
paper for the Seventh CEPS Macroeconomic Policy Group Reportpaper for the Seventh CEPS Macroeconomic Policy Group Report
Francesco DaveriFrancesco DaveriUniversità di ParmaUniversità di Parma
OutlineOutline
Question: is there a trade-off between Question: is there a trade-off between productivity and hours?productivity and hours?
My contribution: provide some aggregate My contribution: provide some aggregate and industry evidenceand industry evidence
EU vs US - aggregateEU vs US - aggregate EU countries - aggregateEU countries - aggregate Italy – industry dataItaly – industry data
Labor productivity growth, EU vs. USLabor productivity growth, EU vs. US
Is there a EU productivity drift? YesIs there a EU productivity drift? Yes It has been there for a long while nowIt has been there for a long while now It got worse in the early 2000sIt got worse in the early 2000s Mis-measurement and cyclical adjustment does not change much Mis-measurement and cyclical adjustment does not change much
the picturethe picture
0
1
2
3
4
1970-1980
1980-1995
1995-2003
1995-2000
2000-2003
USA
EU11
Figure 2: Total hours w orked, US vs EU11
EU11=EU15-(Aut,Gre,Lux,Por)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
1970-80 1980-95 1995-2003 1995-2000 2000-03
US EU-11
EU vs. US – summing upEU vs. US – summing up
Evidence of LONG-RUN NEGATIVE Evidence of LONG-RUN NEGATIVE CORRELATION between growth of hours CORRELATION between growth of hours and growth of labor productivityand growth of labor productivity
When hours growth is high (US in the When hours growth is high (US in the 1970s and the1980s and EU in 1995-03), 1970s and the1980s and EU in 1995-03), labor productivity growth is lowlabor productivity growth is low
When productivity growth is high (US in When productivity growth is high (US in 1995-03 and the EU in the 1970s and the 1995-03 and the EU in the 1970s and the 1980s), growth of hours is low1980s), growth of hours is low
Productivity and employment growth Productivity and employment growth in the EU and the US (1995-2002)in the EU and the US (1995-2002)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
0.00 1.00 2.00 3.00 4.00 5.00 6.00
Employment growth, 1995-2002
Pro
duct
ivity g
row
th, 1
99
5-2
002
US
Greece
Finland
Ireland
Spain
Netherlands
Germany
DenmarkAustria
EU-15
Italy
UK
Sweden/Portugal
Belgium/Norway/France
Switzerland
Source: Daveri (2004), Is there a European productivity problem?, CEPS WD 205, July 2004
EU – summing upEU – summing up
Trade-off between hours and productivity not ubiquitousTrade-off between hours and productivity not ubiquitous Ireland, the UK and Finland: trade-off not thereIreland, the UK and Finland: trade-off not there Germany as well (everything was just bad)Germany as well (everything was just bad) In the other fast growing countries, usually low growth of In the other fast growing countries, usually low growth of
hourshours Rich: Sweden, Austria, Denmark. Also France, to some extent.Rich: Sweden, Austria, Denmark. Also France, to some extent. Poor: Formerly socialist countries, Greece, PortugalPoor: Formerly socialist countries, Greece, Portugal
Slow growing countries successful in creating jobsSlow growing countries successful in creating jobs Italy, Spain, NetherlandsItaly, Spain, Netherlands
Hence: trade-off often but not always there. Not just in the EU Hence: trade-off often but not always there. Not just in the EU
TOTAL HOURS Growth rates, % pointsISIC Rev.3
1993-2003
1993-1998
1998-2003
AGRICULTURE, HUNTING AND FORESTRY 01-02 -3.92 -4.57 -3.26
MINING AND QUARRYING 10-14 -2.08 -1.96 -2.21
Total manufacturing 15-37 -0.08 0.03 -0.20
Non-durable manufacturing 15-28 -0.19 0.00 -0.38
Durable manufacturing 29-37 0.14 0.09 0.20
ELECTRICITY, GAS AND WATER SUPPLY 40-41 -3.03 -3.01 -3.06
CONSTRUCTION 45 0.91 -0.55 2.40
TOTAL SERVICES 50-99 1.16 0.86 1.46
BUSINESS SECTOR SERVICES 50-74 1.47 1.02 1.92
WHOLESALE AND RETAIL TRADE; REPAIRS 50-52 0.13 -0.32 0.58
HOTELS AND RESTAURANTS 55 2.10 1.63 2.56
TRANSPORT AND STORAGE AND COMMUNICATION 60-64 0.66 -0.24 1.56
FINANCIAL INTERMEDIATION 65-67 0.09 0.38 -0.19
REAL ESTATE, RENTING AND BUSINESS ACTIVITIES 70-74 4.53 4.54 4.52
NON-AGRICULTURE BUSINESS SECTOR s10-74 0.37 -0.10 0.84
Total 01-99 0.42 0.06 0.79
ItalyItaly
VALUE ADDED PER HOUR WORKED Growth rates, %ISIC Rev.3
1993-2003
1993-1998
1998-2003
AGRICULTURE, HUNTING AND FORESTRY 01-02 3.92 6.13 1.76
MINING AND QUARRYING 10-14 1.43 3.63 -0.73
Total manufacturing 15-37 1.41 2.75 0.10
Non-durable manufacturing 15-28 1.24 2.15 0.34
Durable manufacturing 29-37 1.84 4.16 -0.43
ELECTRICITY, GAS AND WATER SUPPLY 40-41 6.10 5.40 6.81
CONSTRUCTION 45 0.17 0.21 0.14
TOTAL SERVICES 50-99 0.80 1.04 0.57
BUSINESS SECTOR SERVICES 50-74 0.84 1.29 0.38
WHOLESALE AND RETAIL TRADE; REPAIRS 50-52 1.74 2.95 0.54
HOTELS AND RESTAURANTS 55 -0.02 0.45 -0.48
TRANSPORT AND STORAGE AND COMMUNICATION 60-64 2.28 2.79 1.77
FINANCIAL INTERMEDIATION 65-67 1.51 2.32 0.71
REAL ESTATE, RENTING AND BUSINESS ACTIVITIES 70-74 -1.78 -2.51 -1.05
NON-AGRICULTURE BUSINESS SECTOR (diversa da def OECD) s10-74 1.52 2.32 0.72
Total 01-99 1.31 1.90 0.72
ItalyItaly
Italy – summing upItaly – summing up
Negative correlation between employment and labor Negative correlation between employment and labor productivity growth. Less so over the 1990s.productivity growth. Less so over the 1990s.
1993-03: -0.631993-03: -0.63
1993-98: -0.751993-98: -0.75
1998-2003: -0.291998-2003: -0.29
Two comments Two comments very high negative correlation possibly sign of very high negative correlation possibly sign of
fast technical change and parallel mismatch of fast technical change and parallel mismatch of old abilitiesold abilities
When correlation is low at times of declining When correlation is low at times of declining productivity growth, simply very bad newsproductivity growth, simply very bad news
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