Transcript Productivity growth in the medium to long run: An outline

The future of Productivity
… productivity isn't everything, but in the long run it is
almost everything.
Paul Krugman, 1994
Catherine L. Mann
OECD Chief Economist
Road Map
• Productivity: Why does it matter?
• Productivity: What is wrong?
• Policies to revive productivity growth
• Productivity challenges for UAE
2
Productivity:
What is it, Why it Matters
Productivity is about:
• Working smarter, not working harder
• More output by better combining inputs, via:
• new ideas
• technological innovations
• new business models
• more efficient resource allocation.
Labour productivity (drives income/capita)
slowed 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.
TFP declined pre-crisis
Capital deepening weakened post-crisis
Contributions to trend labour productivity growth in percentage points
Capital per worker
TFP
2
1.5
1
0.5
0
2000
2002
2004
2006
2008
2010
2012
2014
All together, declining potential output:
implications for promises
Contributions to potential per capita growth (OECD average)
Source: OECD Economic Outlook n. 98.
TFP growth also declined in the UAE
Source: OECD calculations based on Conference Board Total Economy Database.
7
Productivity: What is Wrong?
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
8
Declining business dynamism
Share of start-up firms in total
Per cent; average over the periods
9
Declining KBC investment
Investment in Knowledge Based Capital
Annual average growth
10
KBC and TFP growth go together
but with wide variation
Selected OECD Countries; 1995-2007
Source: Andrews,D. and C. Criscuolo (2013), "Knowledge-Based Capital, Innovation and Resource Allocation: A Going for Growth Report", OECD Economic Policy Papers, No. 4.
11
Policies to Revive Productivity Growth
Innovation vs. Diffusion
The breakdown of the diffusion machine
Solid growth at the global productivity frontier but spillovers disappointed
Labour productivity; index 2001=0
Services Sector
Manufacturing Sector
0.5
0.5
Frontier firms
(5.0% per annum)
0.4
0.4
0.3
0.3
Frontier firms
(3.5% per annum)
All firms
(1.7% per annum)
0.2
All firm s
(0.3% per annum)
0.2
0.1
0.1
0.0
Non-frontier firms
(0.5% per annum)
Non-frontier firms
(-0.1% per annum)
0.0
-0.1
2001
2002
2003
2004
2005
2006
2007
2008
2009
2001
2002
2003
2004
2005
2006
2007
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro
evidence from OECD countries”, OECD Productivity Working Paper No. 2.
2008
2009
13
Keep the innovation engine running
Average across selected OECD countries
Index 1992=100
Est. frontier spillover (% p.a.)
associated with 2% point
increase in MFP growth at the
frontier
14
Policies to promote entry, exit, growth
Estimated frontier spillover (% p.a.) associated with a 2% point increase in MFP growth at the global productivity frontier
Source: Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From the Global Productivity Frontier:
Industry Level Evidence”, OECD Economics Department Working Papers, No. 1238.
15
Policies to promote diffusion
Estimated frontier spillover (% pa) associated with a 2% point increase in MFP growth at the global productivity frontier
Global connections
Reallocation
Knowledge-Based Capital
Source: Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From the Global Productivity Frontier:
Industry Level Evidence”, OECD Economics Department Working Papers, No. 1238.
16
Promote efficient services
to support productivity benefits of globalisation
A: Value added share of domestic services in
gross exports has been rising
B: Resource misallocation in services
is a problem
Source: Panel A OECD TiVA Database. Panel B: Andrews, D. and F. Cingano (2014), “Public Policy and Resource Allocation:
Evidence from Firms in OECD Countries”, Economic Policy, 29(78), pp. 253-296.
Promote skill matching
win-win that raises productivity and wages too
Source: Adalet McGowan, M and D. Andrews (2015), “Labour market mismatch and labour productivity: evidence
from PIAAC data ” OECD Economics Department Working Paper, No. 1209.
18
Policies to promote skill matching
the same as to promote diffusion
The probability of skill mismatch and public policies
Entry and Exit
Labour mobility
Education
19
UAE challenge: Export diversification
progress but room to improve
7
6
Index of concentration of the export structure
A lower value denotes higher diversification
5
4
3
2
1
0
1962
2010
Source: IMF.
20
UAE challenge: Human capital
room to improve and to diffuse
Source: OECD, PISA.
21
UAE challenge: broaden labour force including participation
of women
Source: World Bank.
22
UAE challenge: Declining natural resources
challenge to GDP growth, example copper
Source: Brandt, N., P Schreyer and V. Zipperer (2013), “Productivity Measurement with Natural Capital”, OECD Economics Department Working Papers 1092.
UAE challenge: Finance and growth
a key ingredient of growth, with limits
The estimated link with a growth of 10% of increase in GDP
Source: Cournède, B. and O. Denk (2015), “Finance and economic growth in OECD and G20 countries”, OECD Economics Department Working Papers, No. 1223.
Type of finance matters
bank lending vs other types of debt
Estimated link with economic growth, in percentage points, of an:
0.4
Increase in bank lending
by 10% of GDP
Increase in other debt
by 10% of GDP
0.2
0
-0.2
-0.4
-0.6
-0.8
The error bars show 90% confidence intervals.
25
Use of credit matters
Earns rate of return or price appreciation
Estimated link with economic growth, in percentage points, of an:
0.4
0.2
Increase in credit to
households by 10% of GDP
Increase in credit to
businesses by 10% of GDP
0
-0.2
-0.4
-0.6
-0.8
-1
The error bars show 90% confidence intervals.
26
UAE challenge: Construction
prone to boom/bust cycles
Countries with boom/bust
Countries without booms/busts
Real GDP, index, 2009Q1=100
Source: OECD, Economic Outlook Database.
Summary
• Productivity: What is wrong?
•
•
Broken diffusion machine
Stuck and misallocated resources
• Productivity challenges for UAE
• Skill matching
• Diversification: exports, domestic drivers
• Stable growth path
• Policies for Productivity
• Market competition (entry, exit growth policies)
• Labour quality and flexibility (skills, benefits policies)
• Financial intermediation (supervision, functioning polices)
28
Delivering on promises depends on productivity
Contribution to growth in GDP per capita, 2000-2060 (annual average)
Source: Braconier, H. G. Nicoletti and B. Westmore (2013), “Policy Challenges for the Next 50 Years” .
What are the objectives of the GFP?
1. Foster international co-operation between public bodies with responsibility for promoting
productivity-enhancing policies.
2. Facilitate research synergies and sharing of lessons on the promotion of higher productivity growth.
3. Create a network of stakeholders (people and institutions interested in productivity)
How to achieve them?
Creating a platform on which participants:
1. Convene to exchange information and data
2. Discuss best practices and research findings
3. Undertake joint productivity analysis that is complementary to the OECD’s regular work programme.
Members
OECD countries, non-OECD countries (Colombia, Costa Rica, Latvia, Russian Federation, Brazil, Kazakhstan,
Romania, Vietnam) and EU.
• OECD PRODUCTIVITY WORKING PAPER SERIES
• Conference in Mexico in July 2015
• Conference in Portugal in July 2016
• Productivity slowdown
• Agglomeration effects on productivity
• Global value chains and productivity
• Public sector productivity
• Institutional settings to promote productivity
• Come join us!
The OECD report
Available at:
http://www.oecd.org/economy/th
e-future-of-productivity.htm
Book + 5 page policy note +
technical papers + videos and ppt
Authors:
Müge Adalet McGowan
Dan Andrews
Chiara Criscuolo
Giuseppe Nicoletti
Detailed research on productivity
• OECD (2015), “The Future of Productivity”. OECD, Paris
• Adalet McGowan, M. and D. Andrews (2015a), “Labour Market Mismatch and
Labour Productivity: Evidence from PIAAC Data”, OECD Economics Department
Working Papers, No. 1209.
• Adalet McGowan, M. and D. Andrews (2015b), “Skill Mismatch and Public Policy
in OECD Countries”, OECD Economics Department Working Papers, No. 1210.
• 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 StartUp 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.
• Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From
the Global Productivity Frontier: Industry Level Evidence”, OECD Economics
Department Working Papers, No. 1238.
Detailed research on finance
• Cournède, B., O. Denk and P. Hoeller (2015), “Finance and Inclusive Growth”,
OECD Economic Policy Papers, No. 14.
• Cournède, B. and O. Denk (2015), “Finance and Economic Growth in OECD and
G20 Countries”, OECD Economics Department Working Papers, No. 1223.
• Denk, O. (2015), “Financial-Sector Pay and Income Inequality: Evidence from
Europe”, OECD Economics Department Working Papers, No. 1225.
• Denk, O. and A. Cazenave-Lacroutz (2015), “Household Finance and Income
Inequality in the Euro Area”, OECD Economics Department Working Papers, No.
1224.
• Denk, O. and B. Cournède (2015), “Finance and Income Inequality in OECD
Countries”, OECD Economics Department Working Papers, No. 1226.
• Denk, O., S. Schich and B. Cournède (2015), “Why Do Implicit Bank Debt
Guarantees Matter? Some Empirical Evidence”, OECD Journal: Financial Market
Trends, Vol. 107.
34