Average Labour Productivity Growth Research Articles

Is the IT revolution over? An asset pricing view

I develop a method that structures financial market data to forecast economic outcomes. I use it to study the IT sector’s transition to its long-run share in the US economy. The method uses a model which links economy-wide growth with IT’s market valuation to match transition data on macroeconomic quantities, the sector’s life cycle patterns, and, importantly, market valuation ratios. My central estimates indicate that the revolution ends between 2028 and 2034 and that future average labor productivity growth will fall to 1.7 percent from the 2.7 recorded over 1974–2015. I show empirically the IT sector’s price-dividend ratio univariately explains over half of the variation in future productivity growth.

Wages, Productivity and Labour's Declining Income Share in Post‐Apartheid South Africa

AbstractThe Marikana incident in 2012, as well as the protracted strikes by platinum miners, metal and postal workers in 2014 suggest that not all is well in the South African labour market. Even though those in employment are better off than the unemployed poor, macroeconomic data indicate that labour's share in gross value added has declined significantly during the first two decades following the first democratic election in 1994. A falling share of labour in income also means, by definition, that average labour productivity growth outstrips real wages growth. Data for South Africa suggest that productivity has indeed increased faster than wages in South Africa. This article argues that financialisation and more aggressive returns‐oriented investment strategies applied by for instance large investment institutions translated into higher required rates of return on capital, which in turn caused an increased implementation of capital‐augmenting labour‐saving technology that reduces labour's share in income.

THE PHILLIPS CURVE IN ITALY

The estimation of the Phillips curve in Italy, using the wage inflation rate as a dependent variable, based on annual data from the period 1961-2012, using the Johansen Method, allows us to conclude two things. Firstly, in the long term, there are two long-term relationships: the wage inflation rate relates positively to the inflation rate, negatively to the unemployment rate and positively to the average labour productivity growth index, as was expected; the inflation rate relates positively to the wage inflation rate, negatively to the unemployment rate and positively to the average labour productivity growth index, as was expected. Secondly, in the short term, the variation of the wage inflation rate relates positively and significantly to the error correction mechanism of the first long-term relationship; therefore, there is a significant response to the equilibrium error between the wage inflation rate and its determinants (inflation rate, unemployment rate, labour productivity growth index). Besides this adjustment, the variation of wage inflation rate responds significantly and negatively to the variation in unemployment rate and significantly and positively to the average labour productivity growth.

THE PHILLIPS CURVE IN PORTUGAL

This paper estimates the Phillips curve in Portugal using the Johansen Method, with the wage inflation rate as a dependent variable, based on annual data from the period 1954-1995. The main conclusions are as follows. Firstly, in the long term, the wage inflation rate relates positively to the inflation rate and negatively to the unemployment rate, as expected. There is also a positive relationship between the wage inflation rate and the average labour productivity growth index. Secondly, in the short term, the variation of the wage inflation rate relates negatively and significantly to the error correction mechanism with a negative unitary coefficient; therefore, there is a quick and significant response to the equilibrium error between the wage inflation rate and its determinants. Besides this adjustment, the wage inflation rate responds positively to a lagged wage inflation rate. The variation in the unemployment rate and the average labour productivity growth present the expected signal, negative and positive respectively, but without significance in the short term. The dummy that refers to the April 1974 revolution is significant.

Labour Productivity Developments in the Euro Area

This paper provides a description and a discussion of some important aspects relating to recent productivity developments in the euro area. Following decades of stronger gains in the euro area than in the US, labour productivity growth has fallen behind that in the US in recent years. This reflects a decline in average labour productivity growth observed in the euro area since the mid-1990s, which stands in sharp contrast with opposite developments in the US. The decline in labour productivity growth experienced in the euro area since the mid-1990s resulted from both lower capital deepening and lower total factor productivity growth. From a sectoral perspective, industries not producing or using intensively information and communication technology (ICT) would appear mostly responsible for the decline in average labour productivity growth since the mid-1990s. These developments were broadly experienced by most euro area countries. A comparison with developments in the US suggests that the euro area economy seems to have benefited much less from increased production and use of ICT technologies, in particular in the services sector. Diverging trends in labour productivity growth between the euro area and the US in recent years mainly reflect developments in a number of specific ICT-using services such as retail, wholesale and some financial services where strong gains were registered in the US. The evidence presented in this paper suggests that, in order to support economic growth in the euro area, emphasis should be given to both policy measures that directly address the determinants of productivity and, given the interactions among the various factors of growth, to policies that raise labour utilisation. JEL Classification: J24, O47

Labor Productivity and Foreign Direct Investment in Irish Manufacturing Industry: A Decomposition Analysis

Overall labor productivity in the Irish manufacturing sector increased by 158 percent between 1991 and 1999. This growth in labor productivity coincided with strong growth in employment during the same period, in stark contrast to the experience of other European countries. This paper examines the components of this labor productivity growth in the period 1991-1999, using a decomposition analysis based on plant level data. In order to account for the large presence of foreign plants, we carry out our analysis separately for foreign and domestic plants, as well as for four ownership subgroups, four sectoral subgroups, and two time sub-periods. Our results show that although the main drivers of average labor productivity growth in all groups arise within plant and from plant entry, there are marked differences in the relative sizes of these effects across the ownership/sector/time-period.

Productivity in New Zealand 1988 to 2002

This paper reports new aggregate and industry productivity series for the New Zealand economy for the period 1988 to 2002. Comparison between Australia and New Zealand shows that market sector multifactor productivity growth has been similar in both countries over the full sample period. Since 1994 average labour productivity growth has been higher in Australia, which reflects the relatively lower rate of physical capital accumulation in New Zealand after 1993. On the other hand, New Zealand's capital productivity growth has been higher than Australia's capital productivity growth since 1994, reflecting the relatively higher growth in hours worked in New Zealand.

Did the European unification induce economic growth? In search of scale effects and persistent changes

Did the European Unification Induce Economic Growth? In Search of Scale Effects and Persistent Changes. — In this paper we investigate whether the European unification has had an impact on the Union’s average labor productivity growth. Based on a time-series approach we do not find a scale effect as suggested by new growth theory. However, the data do not reject the hypothesis that the EU growth experience is well described by a textbook Solow model. Panel data estimations moreover firmly reject the idea of a growth bonus associated with EU membership.

Productivity growth in Australian manufacturing: a vintage capital model

Uses a model of technical change embodied in capital equipment to analyse average labour productivity growth. Determinants of productivity growth identified in this analysis are: (1) the rate of labour‐saving technical change; (2) the differential in the rates of change of wages and the rental price of capital; and (3) the rate of growth of industry productive capacity. Finds evidence that each of the identified factors has a positive and statistically significant relationship to average labour productivity growth in a cross‐section of Australian manufacturing industries.

Total Factor Productivity and Wages Policy

What role should estimates of growth in total factor productivity play in Australian national wage cases? There currently seem to be two schools of thought on this issue. The Business Council of Australia (and certain others) argue that total factor productivity data should displace the role traditionally filled by estimates of average labour productivity growth. The Australian Council of Trade Unions (ACTU) and the Commonwealth government have argued that total factor productivity data have no substantive role to play in the wage fixing context. The first section of this paper begins by outlining the traditional rationale for seeking to gear wages to average labour productivity growth. This rationale rests crucially on: (a) a competing income claims view of wage and price setting behaviour in the economy; and (b) the assumption, within that approach, that claims are determined in terms of aggregate factor shares, or by reference to the proportionate price mark- up factor implicit in those shares. It is then demonstrated that if this same model is modified so that price mark-ups are computed to secure a particular rate of return on capital employed, and competing income claims are determined by reference to the rate of return on capital, rather than capital's aggregate factor share, then it becomes appropriate to gear wages to total factor productivity growth rather than to average labour productivity growth. The appropriate formula is, however, a multiple of total factor productivity growth rather than 'straight' total factor productivity growth. The multiple is the reciprocal of labour's factor share. The paper then goes on to examine some key design features of the total factor productivity series recently developed and published by the Australian Bureau of Statistics (ABS). This examination is carried out to assess the suitability of the ABS series for use in the defined wages policy context. It is concluded that the methodology adopted in the compilation of the ABS figures is not the most appropriate for this context. The upshot is that were a total factor productivity wages policy rule based directly on the ABS estimates of total factor productivity growth to be implemented, it is uncertain whether it would have the advantages over an average labourproductivity rule, of the types discussed earlier in the paper. The paper concludes by suggesting certain modifications to the ABS series that, it is argued, would provide a total factor productivity indicator with features more appropriate for wages policy debate purposes.

The Productivity of Capital in a Period of Slower Growth

THE UNITED STATES has invested a smaller fraction of its gross national product in capital goods than almost any of its major international competitors in the 40 years since 1948. Over this same period, average labor productivity growth in the United States has also been among the slowest. For the first 25 years of the period there was little cause for dissatisfaction. U.S. productivity growth was higher than it was in the prewar years, and the still higher rates in Europe could easily be explained as a catch-up phenomenon. But after 1973 U.S. labor productivity growth fell to only a little more than 1 percent a year, and in the past five years net investment has dropped substantially. Many people have argued that increasing the level of physical investment in the U.S. economy would have a large payout in higher productivity growth. We agree that investment should be increased, but we suspect that the potential productivity improvements are being exaggerated. The issue is important both for economic analysis and for economic policy. If the growth payoff from increasing the capital stock is large, economic policy can concentrate on raising national saving and investment. If the payoff is small, the nation would be wise to bend some of its efforts toward other means of improving productivity growth. From the perspective of economic analysis, we want to know how to