Decline In Productivity Growth Research Articles

A Framework for Economic Growth with Capital-Embodied Technical Change

Technological advance is often embodied in capital inputs, like computers, airplanes, and robots. This paper builds a framework where capital inputs advance through (i) increased automation and (ii) increased productivity. The interplay of these two innovation dimensions can produce balanced growth, satisfying the Uzawa Growth Theorem even though technological progress is capital-embodied. The framework can further address structural transformation, general-purpose technologies, the limited macroeconomic impact of computing, and declining productivity growth and labor shares. Overall, this tractable framework can help resolve puzzling tensions between micro-level observations of innovation and balanced growth while providing new perspectives on numerous macroeconomic phenomena. (JEL E22, E23, E24, E25, L16, O33, O41)

Automation and Augmentation: Artificial Intelligence, Robots, and Work

This article reviews the literature that examines the potential, limitations, and consequences of robots and artificial intelligence (AI) in automation and augmentation across various disciplines. It presents key observations and suggestions from the literature review. Firstly, displacement effects from task automation continue to persist. However, one should not assume an unequivocally increasing efficacy of technology in automation or augmentation, especially given the declining productivity growth in high-income countries and some large emerging economies in recent decades. Jobs less likely to be negatively impacted are those that require diverse tasks, physical dexterity, tacit knowledge, or flexibility, or are protected by professional or trade associations. Despite countervailing effects, without policy intervention, automation and augmentation could widen inequality between social groups, labor and capital, and firms. Secondly, AI's promise in task automation and labor augmentation is mixed. AI tools can cause harm, and dissatisfaction and disengagement often arise from their opaqueness, errors, disregard for critical contexts, lack of tacit knowledge, and lack of domain expertise, as well as their demand for extra labor time and resources. The inadequate autonomy to override AI-based assessments further frustrates users who have to use these AI tools at work. Finally, the article calls for sociological research to specify conditions and mechanisms that ameliorate adverse consequences and enhance labor augmentation by embedding the study of automation and augmentation in concrete social and political contexts at multiple levels.

Analysis of the Public Transport Efficiency, Productivity and Economies of Scale: The Case of Sfax – Tunisia

Abstract This study aimed to determine the efficiency and productivity of the production factors in the case of public transport in Sfax – the second most important agglomeration in Tunisia–. The analysis of factor productivity enabled identifying the shortcomings in the supply of this service and advocating certain strategies to boost supply. We use an estimation of the trans-logarithmic costs function with different restrictions while relying on the foundations of the microeconomic theory. We relied on annual statistical data from the Regional Transport Company in Sfax over the period preceding the COVID 19 crisis spanning from 1985 to 2018. The estimation results showed the presence of scale diseconomies, the gain in productivity over the years is too slow. The technical progress of public transport in Sfax is very low and the technical efficiency is also very limited. The results revealed that there is a decline in productivity growth due to a growing inefficiency throughout the study period. The underutilization of production capacities in the transport sector was judged as a consequence of excess of capacity and lack of efficiency attributed mainly to the lack of competition. The study identified some external factors that have an impact on the measured efficiency but are outside the company control. Public authorities should act on these factors to help companies improve their performance. A deregulation of the public transport sector by redefining the most important objectives has become urgent.

Market Power and Innovation in the Intangible Economy

This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s. (JEL D22, D24, E23, L11, O31, O47)

The Brexit Vote, Productivity Growth, and Macroeconomic Adjustments in the U.K.

Abstract The U.K. economy experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the European Union. To understand these adjustments, this paper presents empirical facts using novel U.K. macroeconomic data and estimates a small open economy model with tradable and non-tradable sectors. We demonstrate that the referendum outcome can be interpreted as news about a future decline in productivity growth in the tradable sector. An immediate fall in the relative price of non-tradable goods induces a temporary “sweet spot” for tradable producers. Economic activity in the tradable sector expands in the short run, while the non-tradable sector contracts. Aggregate output, consumption, and investment growth decelerate.

Global value chains and structural transformation: Evidence from the developing world

Multiple studies on economic transition have argued that participation in Global Value Chains (GVCs) can facilitate the process of structural transformation in developing economies by reallocating labor from less productive to more productive sectors. However, there is a dearth of empirical work investigating the claim. We analyze forty countries from the regions of Asia, Africa, and Latin America over the period 1993–2015 to explore the relationship between GVC participation and structural transformation in developing economies. We do not find any significant association between participation in GVCs and structural transformation, as measured by the reallocation of labor towards sectors with higher productivity levels. Rather, we find some evidence that participation in GVCs might be associated with the increasing concentration of labor in sectors experiencing declining productivity growth and /or falling employment in sectors witnessing positive productivity growth, thus contributing towards hindering the process of successful structural transformation in developing economies.

Evaluating the efficiency and productivity of Malaysian logistics companies using epsilon-based measure and Malmquist index during the Covid-19 pandemic

Purpose: The impact of the Covid-19 outbreak since March 2020 has put Malaysia’s logistics sector in a contrasting reality to other sectors, as during the implementation of the movement control order (MCO), this sector was declared as providing essential service and allowed to operate in order to fulfil customers’ needs. This study aims to assess the efficiency and productivity of the logistics industry in Malaysia before and during the pandemic so that the performance of this industry can be observed.Design/methodology/approach: This study uses secondary data. Yearly records from the annual reports for the period of 2010–2020 were gathered pertaining to 15 Malaysian logistics companies treated as decision making units (DMUs) in this study. The efficiency and productivity of the Malaysian logistics industry during the Covid-19 pandemic have been assessed by using a hybrid DEA model consisting of a combination of epsilon-based measure (EBM) and Malmquist index.Findings: Findings showed that Lingkaran Trans Kota Holdings Berhad was the most efficient and productive logistics company with an average efficiency score of 1 and 12.7% growth in the average productivity index during the study period. In contrast, MISC Berhad obtained the lowest average efficiency score of 0.285. Nevertheless, the average productivity index for MISC Berhad showed an increase by 25.7%. During the early outbreak of Covid-19, Complete Logistics Services Berhad achieved full efficiency and also attained the highest positive growth of 76.2%. Harbour-Link Group Berhad was the least efficient company, scoring an efficiency score of only 0.254 and a decline in productivity growth by 40.8%.Research limitations/implications: The data used in this study may not be sufficient to represent the performance of the entire logistics industry as the pandemic is still not completely over. More useful insights can be obtained if the data can be extended until 2022 to assess the performance of logistics companies after the outbreak of Covid-19 in Malaysia. Many resources that have not been explored in this study and past research may provide an avenue for further research on the performance measurement of logistics companies, particularly in the Malaysian context.Practical implications: This study’s discovery may be used to facilitate the evaluation of resource utilisation and help inefficient logistics companies maximise their efficiency. Also, the findings may be used to help policymakers evaluate the existing policy in order to ensure that logistics companies have sufficient resources to offer reliable and efficient courier services.Originality/value: Although numerous studies have been conducted on the efficiency measurement of logistics companies, so far, scarce research in Malaysia has deployed a quantitative approach to measure the performance of Malaysia’s logistics industry, especially during the Covid-19 pandemic. Therefore, this study fills this gap by assessing the efficiency and productivity of the logistics industry in Malaysia before and during the pandemic of Covid-19.

Thailand

Thailand’s economy is recovering from an unprecedented crisis emanating from multiple waves of the COVID-19 pandemic. Ample policy space has allowed a swift and bold policy response and vaccine rollout has accelerated. However, the recovery is weak and uneven across sectors, with inflation rapidly rising driven by energy prices. Downside risks dominate the outlook, sharpening policy tradeoffs. The pandemic has also brought to the fore the urgency for Thailand to identify new growth drivers to reverse the pre-pandemic trend of declining productivity growth and meet the challenges of the post-pandemic world.

A Multi-Country Empirical Study of ICT-Induced Productivity Variances by Economic Magnitude and Industry

Global trends such as the prolonged decline in productivity growth and lower fertility rates across many regions have rendered productivity-led growth an important phenomenon. This paper investigates: 1) Does the effect of ICT use on firm-level productivity vary between firms operating in the manufacturing and services industry? 2) How does the country's economic magnitude influence the impact of ICT use on firm-level productivity in manufacturing and services firms? We incorporate the evaluation of the endogeneity issue for the generation of the final results using the 2SLS approach. Using a sample of 2407 manufacturing and service firms operating in 34 countries with diverse economic magnitude, we find that ICT use positively affects manufacturing firms' productivity compared to the service sector. Furthermore, we find that effect of ICT use on firm-level productivity is more potent for manufacturing firms operating in high-income countries when compared to their counterparts in lower-income countries.

An agent-based model for Secular Stagnation in the USA: theory and empirical evidence

This paper deals with the Secular Stagnation in productivity growth that marks the US economy since the end of the Golden Age. I contribute to the understanding of this phenomenon proposing a theoretical and empirical analysis. On the theoretical side, I develop an agent-based, stock-flow consistent model to investigate the deep relationship between functional income distribution and productivity through the channel of innovation. Findings suggest that the continuous shift of income from wages to profits may have resulted in a smaller incentive to invest on R&D, with the corresponding decline in productivity growth that characterizes US Secular Stagnation. In this respect, a social compromise between workers and capitalists in terms of higher wages helps foster innovation and economic growth, but it does not necessarily entail significant improvements in terms of income concentration, because of higher unemployment rates. Additionally, I question the neoclassical belief on the negative interest-elasticity of investments, since decreases in the rate of interest are not associated with increases in capital accumulation, but they decrease income inequality through higher employment rates. On the empirical side, this paper presents a panel cointegration analysis on US manufacturing industries for the period 1958–2011. If, on the one hand, the linkage between R&D and wages is corroborated, on the other hand, I find the lack of any long-run relationship between innovative search and the rate of interest, which does not necessarily conflict with theoretical predictions.

Productivity and trade dynamics in sudden stops

This paper proposes a framework to jointly study productivity and trade dynamics during financial crises. The persistent output loss caused by crises is driven by lower productivity growth, which is determined by changes in product entry and exit margins in domestic and export markets. We calibrate and validate the model using unique data on firms’ product portfolios, finding they closely match the behavior of various margins during Chile's 1998 sudden stop. We decompose the sources of the welfare cost of sudden stops, finding that 30% is due to a decline in productivity growth. Lower productivity growth, in turn, is due mostly to slower firm and product entry into the domestic market, while a persistent real exchange rate depreciation induces surviving firms to tilt their product portfolios toward export markets, driving the productivity recovery in the aftermath of the crisis.

Path dependence, the COVID-19 crisis, and inequality in the United States

This paper considers both secular and medium-run trends to argue that the US economy was already vulnerable to shocks before the COVID-19 crisis. Long-run trends have shown a pattern of secular stagnation and increasing inequality since the 1980s, while the economy has displayed hysteresis during the sluggish recovery from the Great Recession. The immediate policy response through the Coronavirus, Relief and Economic Security (CARES) Act highlighted the coordinating role of fiscal policy on the economy, but also showcased limits, especially with regard to the paycheck protection program. The historical trajectory of the US economy before the COVID-19 crisis cast serious doubts on recent cries of ‘overheating’ and inflationary pressures that should supposedly arise from the $1.9 trillion relief package just signed into law by President Biden. Projecting forward to the long run, redistribution policies may provide useful first steps in reversing the trends of rising inequality and declining productivity growth that the US economy has seen over the last few decades.

A Productivity-Focused Growth Policy Model

This paper responds to a multi-decade decline in the rate of U.S. economic growth by proposing a four-element technology-based growth policy, emphasizing productivity as the key policy target. Multiple indicators are presented to demonstrate the negative impacts of declining investment in key growth variables. The length of the U.S. decline, although in some cases not the magnitude, has also been experienced by most western economies, so the following discussion has broad relevance. In the U.S. case, a decline in productivity growth has resulted not only in slower income growth but also in increased income inequality. The consequence has been varying degrees of social and political turmoil, which has been accentuated by policy mistakes, such as imposition of tariffs and withdrawal from international trade agreements. The growth policy problem is explained in terms of systematic underinvestment in four major categories of economic assets—technology, capital formation (hardware and software), skilled labor, and technology-based infrastructure—that are required to drive long-term productivity growth. Economic growth policy research has for decades emphasized investment in technology (R&D) and a rather strained extension to economic impact. The reason for the conceptual inadequacy is the fact that three other major asset categories are critical to achieving sustained economic growth: capital formation, skilled labor, and technical infrastructure. These latter three asset classes are absolutely essential to the technology-based economy, but they receive incomplete attention at best. Failure to adopt this four-asset growth model has greatly constrained rates of growth in general and particularly in workers’ incomes over the past 40 years.

The Impact of ICT on Labour Productivity – Europe vs. U.S.

Research background: The European economy has been experiencing declining productivity growth rates since the 1970s despite high investments in information and communication technologies (ICT). Investments in ICT are considered a key driver of productivity growth that serves as a basis for further improvements in living standards. However, despite the emergence of new technologies and industries, especially after 1995, European productivity growth has slowed and lagged behind the United States. The critical question is why? Purpose of the article: This article aims to examine the effects of ICT on the European labour market in the period when machines and systems such as artificial intelligence, new information technologies, the Internet of things, and other technologies are becoming increasingly interconnected and intertwined. Additionally, the article examines the key reasons why European productivity lags behind the U.S. and explains them. Methods: The panel regression method analyzes the productivity lag of selected European developed countries and emerging markets in 2007-2019. The article additionally makes a qualitative analysis of the benefits of new technologies on productivity in Europe compared to the U.S. Findings & Value added: The results of the econometric analysis applied in this article confirm the positive but insignificant impact of ICT investments on the labour productivity of the case of European developed countries in the post-Great Recession period. Thus, the article fills the gap in the research literature regarding the relationship between ICT investments and the labour productivity of selected European countries.

Productivity and Trade Dynamics in Sudden Stops

This paper proposes a framework to jointly study productivity and trade dynamics during financial crises. The persistent output loss caused by crises is driven by lower productivity growth, which is determined by changes in product entry and exit margins in domestic and export markets. We calibrate and validate the model using unique data on firms' product portfolios, finding it closely matches the behavior of various margins during Chile's 1998 sudden stop. We decompose the sources of the welfare cost of sudden stops, finding a third of the welfare cost is due to a decline in productivity growth. Lower productivity growth, in turn, is due mostly to slower firm and product entry into the domestic market, while a decrease in production costs induces surviving firms to tilt their product portfolios towards export markets, boosting the productivity recovery in the aftermath of the crisis.

The Secular Stagnation of Productivity Growth

The concern that an economy could experience persistent stagnation, caused by a structural weakness of aggregate demand, goes back to Alvin Hansen’s (1939) thesis of ‘secular stagnation’. Hansen’s thesis has been revived in recent times, when it became clear that productivity and potential growth in the OECD countries have been declining for decades. However, in line with deep-rooted theoretical beliefs, that inadequate demand can only affect growth in the short run, secular stagnation (of potential growth) is treated as an exclusively supply-side problem, the root of which is a worrying steady decline in productivity growth. This paper argues that it is a mistake to dismiss secular demand stagnation as main cause of declining potential growth in the OECD. We argue that the theoretical case for demand-caused secular stagnation is strong and empirical evidence that it has affected the U.S. economy after the mid-1970s is entirely convincing. Demand is leading supply, also in the long run. Hansen had it right, after all.

Are Markups Too High? Competition, Strategic Innovation, and Industry Dynamics

Since the 1970s, there have been significant changes in firm dynamics within and across industries in the US. Industries are increasingly dominated by a small number of large firms (superstars). Markups, market concentration, profits, and R&D spending are increasing, whereas business dynamism, productivity growth, and the labor share are in decline. We develop a unified framework to explore the underlying economic mechanisms driving these changes, and the implications for economic growth and social welfare. Our theoretical framework combines a detailed oligopolistic competition structure featuring endogenous entry and exit with a new Schumpeterian growth model. Within each industry, there are an endogenously determined number of superstars that compete a la Cournot and a continuum of small firms which collectively constitute a competitive fringe. Firms dynamically choose their innovation strategies, cognizant of other firms' choices. The model is consistent with the changes in the macroeconomic aggregates, and it replicates the empirical relationship between innovation and competition within and across industries. We estimate the model to disentangle the effects of separate mechanisms on the structural transition, which yields striking results: (1) While the increase in the average markup causes a significant static welfare loss, this loss is overshadowed by the dynamic welfare gains from increased innovation in response to higher profit opportunities. (2) The decline in productivity growth is largely driven by the increasing costs of innovation, i.e., ideas are getting harder to find.

Transcending the threshold limitation: a fifth industrial revolution?

PurposeThe purpose of this paper is to present the argument that there exists a threshold limitation to new knowledge creation, associated with a global productivity growth slowdown, a global decline in research and development (R&D) productivity and a decline in the growth of globalisation.Design/methodology/approachTaking the form of a conceptual paper, this paper seeks to advance the polemic that despite discussions of a ‘fourth industrial revolution,’ there has been no substantive change in a global decline in productivity growth, particularly in developed countries. Specific threats are identified and related to the consequences of technological proliferation in the absence of an effective research response to address them. Certain theoretical propositions are derived, with the suggestion that novel theory promises a ‘fifth industrial revolution,’ one that might ultimately reverse the downward trend in global productivity growth.FindingsDrawing on management theory, derivation of the theoretical propositions suggests the existence of a mechanism related to research productivity enhancement. Discussions suggest that this mechanism might ultimately explain how the R&D productivity decline, evident since the 1970s, may ultimately be reversed.Originality/valueThe paper seeks to provoke novel thinking about the consequences of a failure to develop a research agenda explicitly focused on the attainment of economies of scale in the research process itself.

On Productivity Measurement and Interpretation: Some Insights on Italy in the European Context

Over the period 1995–2016, the Italian performance in terms of productivity was poor in historical terms and in comparison with its main international partners. This issue goes beyond Italy, with declining productivity growth observed, from the second half of the nineties, in several other advanced economies. Possible explanations for the slowdown include factors such as lower capital investment by firms, decreased competition, excessive regulation, and capital misallocation. The diffuse slowing rates of measured productivity growth has also raised questions on whether GDP and output current compilation methods are adequate (i.e. the mis-measurement hypothesis). The “ICT revolution” has created new ways of exchanging and providing goods and services as result of increased connectivity. These developments challenge the way economic activity is traditionally measured. There are also measurement problems associated with estimating output and input volumes especially related to the quality of price indexes for some products and services. These problems have an impact on productivity estimates and might impair international comparability. In this paper, we intend to investigate what the core problems in productivity measurement and interpretation are in the European context, with a specific focus on Italy.

The role of R&D and input trade in productivity growth: innovation and technology spillovers

Productivity improvements generally are driven by technology innovation and its spillovers. This study explores the role of R&D investment and intermediate input trade in productivity growth using country-industry-level data for 25 advanced and emerging economies. This paper confirms that R&D investment and intermediate input import/export (both intra- and inter-industry) with technologically advanced economies play important roles in productivity growth in non-frontier countries. We further find that the productivity gains of technology spillovers via input trade channels are likely larger for countries/industries where technology converges to the frontier. These findings imply that the recent slowdown in R&D investment and intermediate input trade in some advanced economies may contribute to declining productivity growth. The potential productivity improvements from R&D investment and free trade as well as the importance of domestic capacity in facilitating technology spillovers should be recognized.