Average Labor Productivity Research Articles

Factor Utilisation and Productivity Estimates for the United Kingdom

This paper derives series for capital utilisation, labour effort and total factor productivity (TFP) from a general equilibrium model with variable factor utilisation and labour adjustment costs. Impulse responses from the model show that firms initially respond to unanticipated shocks by altering factor utilisation rates. In subsequent periods, firms adjust observable inputs such as physical capital and employment. As a result, utilisation rates are a leading indicator of firms' hiring of both capital and labour. We find that our estimate of capital utilisation tracks survey-based measures quite closely, while movements in total hours worked drive our labour effort series. Our estimate of TFP growth is found to be less cyclical than the rate of growth of a traditional Solow residual. Nevertheless, a weighted average of capital utilisation and labour effort - aggregate factor utilisation - is not closely related to the detrended Solow residual. This suggests that measures that conflate capacity utilisation and temporary deviations in TFP from its steady-state growth rate may be misleading indicators of excess demand pressure. Rather, our measure of aggregate factor utilisation is correlated with detrended labour productivity, providing more evidence that differences in average and marginal labour productivity may be linked to factor hoarding. Labour productivity, when calculated as output per unit of effective labour input, is less cyclical than a simple measure of output per hour.

Transatlantic Roundtable on High–skilled Migration and Sending Countries Issues

Globalization and the advent of the knowledge economy have created a new context where there is a greater demand for the highly skilled, especially in the information technology (IT) industry. High–skilled migration has become increasingly more complex, even if in recent years the term “brain drain” has become a generic reference to “high–skilled migration” of all types. It has also become clear that brain mobility does not automatically translate into “brain drain”, and that impacts vary by the types of skills held by migrants.The meeting demonstrated that while much is known about high–skilled migration and its effects on source countries, there is also a great deal yet to be learned in a dynamic environment. Many participants deplored the lack of reliable data, which makes it difficult to know what is really going on and to establish appropriate policies. Clearly, there are an array of policies that can offset possible adverse effects of skilled mobility and even leverage the flow into positive outcomes for source countries. A key element is improvement of the population’s general level of education. Low levels of skills keep average labour productivity and wages low and therefore retard development. Long–term strategies to promote economic growth are needed to enable developing countries to retain and draw back their highly skilled and address the negative effects of the brain drain. Migrants themselves can play an important role through their remittances, diaspora networks, and own willingness to return – at least temporarily — to share their skills and contribute to economic progress. Finally, destination countries can facilitate the process through policies that promote circulation of highly skilled migrants.

Are ICT Spillovers Driving the New Economy?

Some observers have raised the possibility that production spillovers and network effects associated with information and communications technology (ICT) are an important part of the “New Economy.” Across U.S. manufacturing industries, however, ICT capital appears correlated with the acceleration of average labor productivity (ALP) growth as predicted by a standard production model, but not with total factor productivity (TFP) growth as these New Economy forces imply. Once one allows for productivity differences across industries, measured TFP growth is uncorrelated with all capital inputs, including ICT capital. This provides little evidence for a New Economy story of ICT‐related spillovers or network effects driving TFP growth throughout U.S. manufacturing.

The ‘New Economy’ : The Role of Policies and Institutions *

The most important claim of the 'new economy' is that a new wave of technologies is lifting potential GDP. The effects were first seen in the United States. In the first half of the nineties, information and communication technologies (ICT) stimulated capital accumulation and employment, without any visible impact on productivity growth the so-called 'Solow paradox'. Starting in the middle of the decade, the long-awaited increase in productivity growth at last came about : from 1995 to 2001, average labour productivity in the US grew at 2.4%, one percentage point above the rate that prevailed between 1973 and 1995.

Agglomeration effects in Europe

The paper estimates agglomeration effects for France, Germany, Italy, Spain, and the UK. Estimation takes into account endogeneity of the spatial distribution of employment and spatial fixed effects. Empirical results suggest that agglomeration effects in these European countries are only slightly smaller than agglomeration effects in the US: the estimated elasticity of (average) labor productivity with respect to employment density is 4.5 percent compared to 5 percent in the US.

Labor Productivity: Structural Change and Cyclical Dynamics

A longstanding issue in empirical economics is the behavior of average labor productivity over the business cycle. This paper provides new insights into the cyclicality of aggregate labor productivity by examining the cyclical behavior of productivity at the plant level as well as the role of reallocation across plants over the cycle. We find that plant-level productivity is even more procyclical than aggregate productivity, because short-run reallocation yields a countercyclical contribution to labor productivity. At the plant level, we find that cyclicality of productivity varies systematically with long-run employment growth. Over the course of the cycle, plants that are long-run downsizers exhibit significantly greater procyclicality of productivity than do long-run upsizers. When we control for the direction of a cyclical shock, we find that the fall in productivity from an adverse cyclical shock for long-run downsizers is significantly larger in magnitude than is the fall in productivity from an equivalent adverse cyclical shock for long-run upsizers. We argue that these findings raise questions about one of the most popular explanations of procyclical productivity: changing factor utilization over the cycle.

Productivity growth in British manufacturing: spatial variation in the role of scale economies, technological growth and industrial structure

This paper investigates the role of scale economies, technological growth and industrial structure in creating spatial variation in manufacturing labour and Total Factor (TFP) productivity in Britain. Separate estimates of a translog specification are presented for British manufacturing firms located in defined areas of the country over the period 1994–1998. The results show that TFP change due to scale economies and technological growth has been of much less important in influencing the output growth of manufacturing firms than input growth or industrial structure. Regarding the components of TFP, technological growth has been the dominant force at play. The analysis of average labour productivity identifies shifts to other factors of production and industrial structure as being the main determinants of change, scale economies appear to have had a marginal role. The results identify spatial patterns indicating that more favourable locational effects arise for firms in areas adjacent to large urban centres, rather than for those located within cities, on the extreme periphery of the urban hinterland, or in rural areas and smaller towns.

Resource Movements and Labour Productivity, An Australian Illustration: 1994-95 to 1997-98

This paper presents the results of an exploratory analysis of industry change designed to shed light on the adjustment processes of Australian firms, and the impact of these adjustments on firm and industry labour productivity. The analysis is based on data for 1994-95 to 1997-98 for a non-representative sample of about 4400 Australian firms. Firm entry, exit, merger, acquisition and incorporation activity affect data on firm and industry productivity. The resource movements that accompany some of these events contribute to changes in labour productivity. The analysis shows that, for the firms in the sample: - labour productivity varied considerably between firms within the same industry; - average labour productivity in an industry increased through a combination of improvements by incumbent firms and the exit of firms; - incumbent firms were the most important source of productivity gain over the three years covered by the sample. Labour productivity increased in half of incumbent firms; - firms that exited had, on average, relatively low labour productivity; and - new firms exhibited relatively low labour productivity on average, suggesting that they take some time to become established and show strong labour productivity improvement. The data used in this study are not sufficiently comprehensive to draw firm conclusions on the impacts of resource movements on productivity improvements, particularly at the economy-wide level. Nevertheless, the analysis demonstrates the importance of industry dynamics in gaining better understanding of the nature of industry adjustment.

Dynamics of Macroeconomic Adjustment in a Globalized Developing Economy: Growth, Accumulation and Distribution, Turkey 1969–1999

ABSTRACT Our purpose in this paper is to establish stylized facts of the Turkish macroeconomic adjustments using data from 1969 to 1999. We adopt a traditional a priori definition of business cycles as cyclical co-movements of economic variables such as public, private and construction investments, trade balance, labour productivity, wages and fiscal accounts with the cyclical component of real GDP. We also incorporate in our analysis an investigation of the cyclical components of exchange rates, interest rates, price inflation, and the monetary aggregates. Our quantitative findings reveal a robust and significant positive relationship between public and private investments and real GDP growth, suggesting the presence of “crowding in” effects of public investment. Trend growth of manufacturing wages and average labour productivity are loosely associated over the whole period, and the rapid gains in productivity in the post-1980 reform era are not observed to be materialized as gains in remunerations of wage labour. We also find a significant negative correlation of manufacturing wages with merchandise exports and the exchange rate; and document further evidence of the strong negative correlation between variations in consumer prices and production.

Good Jobs versus Bad Jobs

This article develops a model of noncompetitive labor markets in which high‐wage (good) and low‐wage (bad) jobs coexist. Minimum wages and unemployment benefits shift the composition of employment toward high‐wage jobs. Because the composition of jobs in the laissez‐faire equilibrium is inefficiently biased toward low‐wage jobs, these labor market regulations increase average labor productivity and may improve welfare.

Labor Productivity in Transition: A Regional Analysis of Russian Industry

This paper examines within-industry variation in labor productivity at the beginning of Russia's transition process in 1992, as well as regional variation in the percentage of firms that exhibit below industry average labor productivity. The main hypothesis is that industries and regions where a disproportionate share of firms exhibited below average labor productivity in 1992 will experience above average employment reductions between 1992 and 1995. In only 25 percent of the locales included in this analysis, however, does the predicted match emerge. Most of these locales are located in the Central region. (This abstract was borrowed from another version of this item.)

Labour Productivity Differences Between Domestic and Foreign-Controlled Establishments in the Canadian Manufacturing Sector

This study uses data to study differences in labour productivity gains across domestic and foreign-controlled establishments in the manufacturing sector for the period 1973 to 1993. In doing so, it also examines the extent to which labour productivity differences exist between small and large establishments and across industry sectors and how they have been changing over time. The analysis consists of three parts. In the first section, the connection between labour usage and output is examined. This analysis investigates differences in marginal labour propensities for the different subgroups in the short and long-run. Here volatility is seen to be lower for foreign-controlled establishments. The second section examines the difference between the growth in average labour productivity for the same groups. Here foreign-controlled establishments are seen to have the highest growth rates. The third section investigates whether any trend can be found in the rates of growth for large and small, domestic and foreign establishments and finds that these differences have been increasing over time.

Productivity convergence in OECD manufacturing industries

The extent of β- and σ-convergence of average labor productivity across manufacturing industries in 18 OECD countries over the period 1972–1992 shows large inter-industry differences. One reason for these differences is knowledge and capital barriers preventing the occurrence of catch-up. We find the level of average labor productivity, as a proxy for these barriers, is correlated with the extent of convergence.

Türk İmalat Sanayiinde Uzun Dönem Denge İlişkisi

This study investigates whether if the long-run equilibrium implied by profit maximization is valid for the Turkish manufacturing industry for the period of 1950-1993, or not. Empirical analysis was carried by applying co-integration for real wage and the average labor productivity. The results of co-integration tests showed that there exists a long-run equilibrium relationship between reel wage and the average labor productivity in Turkish manufacturing industry. In this long-run equilibrium relationship, the elasticity of substitution was estimated to be 1.24. Keywords: Long-run equilibrium, Co-integration, Elasticity of Substitution, Returns to scale.

Raising the Speed Limit: U.S. Economic Growth in the Information Age

Raising the Speed Limit:U.S. Economic Growth in the Information Age Dale W. Jorgenson and Kevin J. Stiroh The continued strength and vitality of the U.S. economy continue to astonish economic forecasters.1 A consensus is now emerging that something fundamental has changed, with "new economy" proponents pointing to information technology (IT) as the causal factor behind the strong performance. In this view, technology is profoundly altering the nature of business, leading to permanently higher productivity growth throughout the economy. Skeptics remain, however, arguing that the recent success reflects a series of favorable, but temporary, shocks. This argument is buttressed by the view that the U.S. economy [End Page 125] behaves rather differently than envisioned by the "new economy" advocates.2 Productivity growth, capital accumulation, and the impact of technology were topics once reserved for academic debates, but the recent success of the U.S. economy has moved them into popular discussion. This paper employs well-tested and familiar methods to analyze important new information made available by the recent benchmark revision of the U.S. national income and product accounts (NIPAs). We document the case for raising the speed limit: for an upward revision of intermediate-term projections of future growth to reflect the latest data and trends. The late 1990s were exceptional in comparison with the growth experience of the U.S. economy over the past quarter century as a whole. Although growth rates have not yet returned to those of the golden age of the U.S. economy in the 1960s, the data nonetheless clearly reveal a remarkable transformation. Rapid declines in the prices of computers and semiconductors are well known and carefully documented, and evidence is accumulating that similar declines are taking place in the prices of software and communications equipment. Unfortunately, the empirical record is seriously incomplete, and therefore much remains to be done before definitive quantitative assessments can be made about the complete role of these high-technology assets. Despite the limitations of the available data, the mechanisms underlying the structural transformation of the U.S. economy are readily apparent. As an illustration, consider the increasing role that computer hardware plays as a source of economic growth.3 For the period 1959-73, computer inputs contributed less than 0.1 percentage point to annual U.S. economic growth. Since 1973, however, the price of computers has fallen at a historically unprecedented rate, and firms and households, following a basic principle of economics, have substituted toward these relatively cheaper [End Page 126] inputs. Since 1995 the price decline for computers has accelerated, reaching nearly 28 percent per year from 1995 to 1998. In response, investment in computers has exploded, and the growth contribution of computer hardware has increased more than fivefold, to 0.46 percentage point per year in the late 1990s.4 Software and communications equipment, two other types of IT assets, contributed an additional 0.30 percentage point per year for 1995-98. Preliminary estimates through 1999 reveal further increases in these contributions for all three high-technology assets. Next, consider the acceleration of average labor productivity (ALP) growth in the 1990s. After a twenty-year slowdown dating from the early 1970s, ALP grew 2.4 percent per year during 1995-98, more than a percentage point faster than during 1990-95.5 A detailed decomposition shows that capital deepening, the direct consequence of price-induced substitution and rapid investment, added 0.49 percentage point to ALP growth. Faster total factor productivity (TFP) growth contributed an additional 0.63 percentage point, partly reflecting technical change in the production of computers and the resulting acceleration in their price decline. Meanwhile, slowing growth in labor quality retarded ALP growth by 0.12 percentage point relative to the early 1990s, as employers exhausted the pool of available workers. TFP growth had been an anemic 0.34 percent per year for 1973-95 but accelerated to 0.99 percent for 1995-98. After more than twenty years of sluggish TFP growth, four of the five years ending in 1998 saw growth rates near 1 percent. It could be argued that this represents a new paradigm. In this view, the diffusion of IT improves business...

Comparisons of Foreign Multinationals and Local Firms in Asian Manufacturing over Time

This paper first shows that shares of foreign multinational corporations (MNCs) in the manufacturing sectors of five Asian host economies (Hong Kong, Indonesia, Malaysia, Singapore and Taiwan) were generally large in terms of exports, small in terms of employment and moderate in terms of production. Correspondingly, the average product of labour and export propensities were often significantly higher in foreign MNCs than in local firms. In addition, foreign MNCs tended to be relatively large and to have relatively high average capital productivity, capital intensity, skilled‐labour intensity, R&D intensity, profit rates and import propensities, but relatively low shares of labour compensation in value added, and these differences were also statistically significant in many cases. Differences between wholly‐ or heavily‐foreign plants and foreign plants with lower foreign ownership shares were also significant in many cases and generally in the same direction as the differences between MNCs and local plants noted above. Differences among MNCs by foreign source were generally small and insignificant in Hong Kong. In Singapore, European and US firms tended to be larger and characterized by relatively high average labour productivity, capital intensity, profitability and export propensities, but relatively low shares of labour compensation in value added compared to Japanese and other Asian firms.

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.

General Trends of Technological Changes in Agriculture

In this article we show that technological development in agriculture exhibits general trends when assessed on a large scale. These trends are generated by changes in the larger socioeconomic context in which the farming system operates. We characterize agricultural performance by land and farm labor productivity and the pattern of use of technological inputs. By means of a cross-sectional analysis of agricultural performance of 20 countries (at the national level), we show that increases in demographic pressure and socioeconomic pressure (increases in average income and labor productivity) in society are the main driving forces of technological development in agriculture. Further, it is shown that the ecological impact of farming (environmental loading) is linked to the particular combination of land productivity and labor productivity at which the agricultural sector operates (through the particular mix and the level of inputs used in agricultural production). Briefly we discuss the role of internationa...

General Trends of Technological Changes in Agriculture

In this article we show that technological development in agriculture exhibits general trends when assessed on a large scale. These trends are generated by changes in the larger socioeconomic context in which the farming system operates. We characterize agricultural performance by land and farm labor productivity and the pattern of use of technological inputs. By means of a cross-sectional analysis of agricultural performance of 20 countries (at the national level), we show that increases in demographic pressure and socioeconomic pressure (increases in average income and labor productivity) in society are the main driving forces of technological development in agriculture. Further, it is shown that the ecological impact of farming (environmental loading) is linked to the particular combination of land productivity and labor productivity at which the agricultural sector operates (through the particular mix and the level of inputs used in agricultural production). Briefly we discuss the role of international trade in agricultural policies and performance. Special attention is given to the situation of Chinese agriculture.

Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems

Since 1973 technological, political, regulatory, and economic forces have been changing the worldwide economy in a fashion comparable to the changes experienced during the nineteenth century Industrial Revolution. As in the nineteenth century, we are experiencing declining costs, increaing average (but decreasing marginal) productivity of labor, reduced growth rates of labor income, excess capacity, and the requirement for downsizing and exit. The last two decades indicate corporate internal control systems have failed to deal effectively with these changes, especially slow growth and the requirement for exit. The next several decades pose a major challenge for Western firms and political systems as these forces continue to work their way through the worldwide economy.