Global Trends of Productivity Growth: Evidence from the Malmquist Index

Abstract

This paper examines the trend of productivity growth in OECD countries by applying the Malmquist index. Our findings indicate that total factor productivity (TFP) growth in OECD countries was much more sluggish in the 1990s than in the 1980s. The nature of productivity growth also differed between the two decades. During the 1980s, a wave of innovation in production technology is found to have improved productivity in most countries considerably, but at the same time widened the efficiency gap between a small group of technically efficient economies and other nations. However, we find that most countries managed to narrow their gap with technically efficient economies over the following decade although they experienced technological regress during that time. The trend of slow productivity growth continued well into the post-2000 period with the average TFP growth for our sample countries actually being negative over 2001-2006. We note that this deterioration in productivity was largely driven by technological regress while the trend of efficiency convergence prevalent in the 1990s all but disappeared during the period.