Long-term Productivity Growth Research Articles

When Pandemic Strikes: Balancing Health and Economy toward Sustainable and Inclusive Recovery

COVID-19 has made it undeniably clear that governance and policy choices in the health sector have come at very high costs to lives and the economy. The pandemic plunged the Philippine economy in 2020 into its most severe contraction in the postwar era, pushing about five million workers out of jobs, eroding three to five years of gains in poverty reduction, and inflicting scars that threaten the economy’s long-term potential for inclusive growth. The pandemic has exacerbated existing inequalities and created new ones. The burden of employment contraction has fallen disproportionately on lower-skilled and less-educated workers. The gaps in access to health care, education, and mobility services—already present during normal times—have further widened between the haves and the have-nots. The health crisis has also hastened workplace digitization and artificial intelligence, but the benefits have been limited for workers with little or no education and those without access to reliable and affordable internet services, particularly the poor. The resulting loss of organizational and information capital, lost years of schooling and hunger impairing human capital, investment foregone due to heightened uncertainty, and rising inequality have scarred the economy. Such scarring weakens the prospects for long-term productivity growth and inclusive economic development. The road to sustained and inclusive recovery demands a strategic and timely deployment of policy tools that will strengthen the public health system and protect livelihoods and the most vulnerable population groups. The goal is to quickly recover to the pre-pandemic levels of employment and income to avoid deeper economic scarring and steer back the economy to its previous high-growth trajectory. Beyond recovery, the policy imperative must be to strengthen the resilience of the health-economy system, enabling it to withstand future health shocks and other challenges, such as those related to climate change.

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.

Assessing India’s productivity trends and endogenous growth: New evidence from technology, human capital and foreign direct investment

The study evaluates the role of R&D, human capital, and technology spillovers in influencing India’s long-run productivity growth. The primary contributions of the article are: (1) analyzing the applicability of various endogenous growth models in the Indian context, while only R&D driven endogenous growth models have been studied so far, (2) highlighting the role of technology spillovers through FDI and import channels in affecting India’s productivity at the aggregate level, as opposed to the existing industry level analysis and, (3) the first study to identify the potential non-linear effects of the variables of interest. The main findings are: (a) FDI and human capital influence India’s long-term productivity growth, while R&D based models or technology spillovers via the import channel show mixed evidence of support, (b) the decline in FDI has had a more adverse effect on the economy than the positive effect of increased FDI. Therefore, sustained increase in human capital and FDI is recommended.

The Major Determinants of Innovative Environment Formation in Georgia

In parallel to the globalization of the modern world economy, the development of innovative policies for economic development is considered as a topical problem in a number of countries around the world. For developed countries, innovative economies have become one of the key preconditions for the country’s economic success. In Georgia, despite recent economic reforms, the country has not achieved tangible results in terms of innovation development. Hence the development of the economy needs to facilitate the formation of an innovative economy. Experience in developed countries shows that in a transformative economy the crucial role lies in the development of innovations and technological novelties. Accordingly, the article examines the contribution of innovation to the economic development of transformational countries. Priorities of innovation policy in Georgia have been identified, and the role of innovation in creating a competitive environment, increasing productivity and raising living standards has been assessed. The article uses the Global Innovation Index (GII) to assess the level of innovation in a country. There are discussed mechanisms that can help achieve long-term economic growth, productivity and job growth as well.

Competition, Technological Change and Productivity Gains: A Sectoral Analysis

The empirical relationship between competition intensity and the rate of productivity growth across 30 sectors of the French economy between 1978 and 2015 displays an inverted U-shape. This implies that there exists an optimal level of competition for each sector, defined by the price markup that maximises the growth rate of hourly labour productivity. As there is a significant and strong positive correlation between optimal markups and technical progress rates in each sector, it follows that sectors with high technical progress require higher markups to maximise their labour productivity growth rate. The persistence of non-optimal markups in French sectors is associated with a 0.4% loss in aggregate annual labour productivity growth during the period (1.86%). French long-term productivity growth could have reached 2.25% had markups been at their optimal level. As a result, policies to foster innovation and productivity should aim at enabling the optimal level of markup (or market power), particularly in high-innovation sectors.

Technology intensity and ownership in the Chinese manufacturing industry: A labor productivity decomposition approach

China's manufacturing industry has registered phenomenal development in the past 40 years,which has become the most remarkable aspect of China's economic miracle. In this article,we interrogate labor productivity growth mechanisms in that industry during 1998–2007. Specifically,we assess the relative importance of efficiency,technology,and capital deepening changes in the growth process. Methodologically,we employ a nonparametric tripartite decomposition while controlling for technology and ownership heterogeneity using the concept of metafrontier. We find that most of the productivity growth was driven by capital deepening (125.60%),followed by technology progress (62.47%),and a small fraction (11.23%) was due to efficiency improvement. We also demonstrate strong productivity convergence in China's manufacturing industry,which was driven by technology change and capital deepening effects. These results suggest that China's overall industry development benefited from market mechanism in resource allocation and technology diffusion,but further improvement is possible. Finally,we point out that China's industry can still benefit from capital accumulation in the near future but long-term productivity growth must be based on technology progress.

Measuring regional differences of construction productive efficiency in China

PurposeAs one of the pillar sectors, China’s construction industry (CE) is not efficient in productivity with large regional gaps over the past decades. It is crucial for stakeholders to have insightful information on regional input of resources and output of productive efficiency for making policies and investment decisions. The purpose of this paper is to develop an efficiency measurement for the CE and explore the regional differences of construction productive efficiency across the three regions of China.Design/methodology/approachData envelopment analysis (DEA) is an objective benchmarking methodology used for measuring the performance of construction productivity. Distance friction minimization (DFM) approach, based on DEA model, is applied to identify the causes of inefficiency, sources of growth and the optimal paths to efficient frontier for regional CE. Further studies are conducted to provide insightful information for efficiency improvement, according to DFM modeling results and empirical analysis.FindingsThe results indicate that eastern region leads construction development due to strong performance of coastal provinces. Faced with decreasing supply of skilled workers in developed region, investing more on construction plants and equipment for labor savings is more efficient to the long-term productivity growth of CE in the east. For developing midland region, heavy reliance on cheap manpower should be gradually relieved by allocating more budgets to vocational training and education program to boost quality labor supply, as well as making steady investment on construction equipment and advanced technology. In underdeveloped western region, raising construction labor wages is recommended to attract more workers to meet the market demand and achieve an optimal production efficiency in the CE.Originality/valueThe findings provide insights into the causes of inefficiency, the sources of growth and the best strategies for efficiency improvement in regional CE, recommendations are made for policy making and strategic planning to enhance the overall performance of China’s construction productive efficiency.

Corporate Governance: Evidence from Firms Strategic Emphasis

A firm’s ability to maintain competitiveness, comparative advantage, and long-term productivity growth depends crucially on its Strategic Emphasis (hereinafter; SE). By SE we mean the interaction between firms’ Value Creation and Value Appropriation activities. While Value Creation is based on innovating, producing and delivering products to the market, in contrast, Value Appropriation can be thought of as the extraction of profits by capitalizing on innovative and productive activities (Mizik & Jacobson, 2002). Being able to determine the SE of a firm, is an important factor in understanding the current nature of the firm, and where it is heading, based on the trade-off’s decision embedded within its SE. Despite its importance, very little is known about the role of Corporate Governance in strategic emphasis and the combined effect on firm performance. In this paper, we seek to fill this gap in the literature by providing a comprehensive analysis and new empirical evidence on the relations between CG as represented by the market for corporate control, a firm’s SE, and firm performance. We focus on market for corporate control because, as Mizik and Jacobson (2003) points out, a firm’s internal and external environments are key determinants of Value Creation and the value appropriation. Jensen and Meckling (1979) further demonstrated that the market for corporate control is one of the most important components of a firm’s external environment. Market for corporate control refers to a takeover market where the underperforming or undervalued firms become attractive takeover targets. Hostile takeovers are regarded as one of the harshest forms of managerial discipline and usually result in a subsequent loss of wealth for these managers (Heath & Norman, 2004). As a result of the threat of hostile takeovers, publicly traded firms may be more willing to act in the interest of shareholders. This happens when the internal governance mechanism (board of directors) fails. When firms perform poorly, it often indicates that there was poor internal governance and therefore external governance control takes over. The market for corporate control allows shareholders to discipline the management of the firm. Shareholders usually favor a high-performing firm that can maintain its competitiveness, comparative advantage, and long-term productivity growth and are more likely to exercise their influence over the management of firms that do not demonstrate these characteristics (Anabtawi & Stout, 2007). Although capital markets pressure top managers to focus on short-term projects and neglect innovation (Holmstrom, 1989), innovation is a major driver of economic growth (Solow, 1957; Romer,1990). Thus, this paper attempts to answer the questions: (1) To what extent does the market for corporate control affect a firm’s SE decision? (2) Given that the market for corporate control pressures managers, to what extent does it impact the firm’s allocated resources between VC and value appropriation? We hypothesize that the market for corporate control determines and impacts the intensity of the se increase whether on value appropriation or VC and what influence this direction. The rest of this paper is organized as follows. Section 2 provides related theory development, literature review and hypotheses development. Section 3 describes our data and variable construction. Section 4 describes the methodology. Section 5 discusses our main results, endogeneity concerns and robustness checks. Section 6 provides recommendations for further research and conclusion.

Competition, Technological Change and Productivity Gains: A Sectoral Analysis

This paper addresses the empirical relationship between the level of competition and the rate of productivity growth across thirty sectors of the French production system during the period 1978-2015. It shows that there exists an optimal level of competition for each sector that is defined by the mark-up that maximizes the growth rate of labor productivity. The persistence of nonoptimal mark-ups in French sectors is associated with a 0.4% loss in aggregate average annual labor productivity growth during the period (1.86%). Hence, long-term productivity growth could have reached 2.25% if mark-ups had been at their optimal level. There is a strong significant positive correlation between the optimal mark-up and the rate of Hicks-neutral technical progress in each sector. This finding implies that sectors with high technical progress require higher mark-ups to maximize their rate of labor productivity growth. Overall, the aggregate economy would benefit from a decrease in the gap between nonoptimal and optimal mark-ups, as such an alignment would foster productivity growth.

Competition, Technological Change and Productivity Gains: The Contribution of Information Technologies

This paper addresses the empirical relationship between the level of competition and the rate of productivity growth across thirty sectors of the French production system during the period 1978- 2015. It shows that there exists an optimal level of competition for each sector that is defined by the mark-up that maximizes the growth rate of labor productivity. The information technologies Sectors have the highest mark-ups for maximizing productivity growth. The persistence of nonoptimal mark-ups in French sectors is associated with a 0.4% loss in aggregate average annual labor productivity growth during the period (1.86%). Hence, long-term productivity growth could have reached 2.25% if mark-ups had been at their optimal level. There is a strong significant positive correlation between the optimal mark-up and the rate of Hicks-neutral technical progress in each sector. This finding implies that sectors with high technical progress, as information technologies sectors, require higher mark-ups to maximize their rate of labor productivity growth. Overall, the aggregate economy would benefit from a decrease in the gap between nonoptimal and optimal mark-ups, as such an alignment would foster productivity growth.

A Biophysical Perspective of IPCC Integrated Energy Modelling

The following article conducts an analysis of the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5), specifically in relation to Integrated Assessment Models (IAMs). We focus on the key drivers of economic growth, how these are derived and whether IAMs properly reflect the underlying biophysical systems. Since baseline IAM scenarios project a three- to eight-fold increase in gross domestic product (GDP)-per-capita by 2100, but with consumption losses of only between 3–11%, strong mitigation seems compatible with economic growth. However, since long-term productivity and economic growth are uncertain, they are included as exogenous parameters in IAM scenarios. The biophysical economics perspective is that GDP and productivity growth are in fact emergent parameters from the economic-biophysical system. If future energy systems were to possess worse biophysical performance characteristics, we would expect lower productivity and economic growth, and therefore, the price of reaching emission targets may be significantly costlier than projected. Here, we show that IAMs insufficiently describe the energy-economy nexus and propose that those key parameters are integrated as feedbacks with the use of environmentally-extended input-output analysis (EEIOA). Further work is required to build a framework that can supplement and support IAM analysis to improve biophysical rigour.

Trade and Productivity in a Transition Economy: the Role of Industry and Export Destination

This paper focuses on the joint role of industry technology intensity and export market characteristics in the analysis of export-related productivity gains. Using a unique database of Ukrainian manufacturing firms in 2000-06, we classify all manufacturing sectors according to their technology intensity and estimate destination-specific learning by exporting effects separately for firms operating in high and low technology sectors. New exporters in high technology sectors enjoy robust long-term productivity growth premia when targeting advanced export markets, consistent with learning through exports. Export entrants in low technology sectors, instead, enjoy mostly short-term productivity improvements regardless of the export destination. Our findings suggest that the systematic distinction between the technology intensity of various industries is a relevant dimension for empirical studies on destination-specific learning by exporting.

Essential Factors Determining the Quality of Population Life

Essential Factors Determining the Quality of Population Life

Climate Change and Agriculture in India: Studying Long-Term Patterns in Temperature, Rainfall, and Agricultural Output

This paper provides an estimate of the impact of climate change on agricultural gross domestic product in India. Climate change is now an established reality, and the unusual weather patterns being observed in various parts of the world in the last 30 years is unequivocally due to variations in temperature and rainfall. The long-term trend pattern of the temperature and rainfall in India is studied, which clearly shows a distinct rise in mean temperature and declining trend rainfall after 1980. ARIMA analysis is used to generate the predictive values for temperature and rainfall, which are then used as explanatory variables along with nonclimatic variables to estimate the impact on agricultural output using an augmented Cobb-Douglas production function. The paper clearly establishes a clear and positive correlation between climate change and loss of agricultural output. The trend pattern of long-term productivity growth factor in agriculture is also showing a declining trend, which is due to unfavorable climatic and nonclimatic factors. Climatic parameters like El Niño and sea surface temperature have emerged as key determinants of monsoon rainfall in India. The agriculture sector in India has been adversely affected by rise in mean annual minimum temperature and shown a positive correlation with the changes in monsoon rainfall and mean annual temperature.

Do Technological Innovations Affect Unemployment? Some Empirical Evidence from European Countries

This paper analyses theoretical and empirical scientific literature about the impact of technological innovations on unemployment, considering the former as a key driver of long-term productivity and economic growth. Using panel data from 25 European countries for the period of 2000–2012, we aim to examine whether technological innovations affect unemployment. We used triadic patent families per million inhabitants as our main proxy for technological innovations, as well as other unemployment controls, in our model, which were estimated using System Generalized Method of Moments (SGMM). Finding no significant relationship between technological innovations and unemployment in our base estimation, we re-estimated it testing the impact with a time lag as well as using alternative proxies for technological innovations. Overall, the research estimations do not suggest that technological innovations have an effect on unemployment.

What Happens If the Rules Change? The Impact of Brexit on the Future Strategic Intentions of UK SMEs

The UK vote to leave the European Union (Brexit) in June 2016, was an unparalleled political event with potentially seismic consequences for the economy. Using data from a UK government survey of approximately 10,000 SMEs, this paper investigates which SMEs are most concerned by Brexit and the likely impact of this event on their (self-reported) strategic future intentions related to accessing finance, growth, innovation and capital expenditure. The results of a descriptive analysis suggest that larger, innovative, export-oriented SMEs and those operating in business services perceive Brexit as a major obstacle to the success of their business. The results of a regression based analysis suggest Brexit could potentially result in weaker growth, lower levels of innovation, reduced capital investment and lower access to external finance, especially for innovative and export-oriented SMEs. Importantly, Brexit may have the most significant negative repercussions for the SMEs often viewed as the largest contributors to long-term productivity growth.

Managerial Decision-Making in International Business: Corporate GovernanceeIssues in Emerging Markets

According to Wells (2010), corporate governance has been around since corporates have been formed, at least as long as the corporate system has allowed for conflicts between investors and managers. Also, there is no conclusive historical conduct of corporate governance, and there may never be one, given the enormity of the topic (Cheffins, 2012). However, the history of corporate governance goes back to the 16th and 17th century with the formation of the East India Company, the Hudson Bay, and the Levant Company as well as others chartered entities (Cheffins, 2012). Moreover, corporate governance encompasses a country’s private and public organisations, both formal and informal, which together govern the relationship between the people who manage corporations, and all others who invest resources in corporations in the country (Oman, Fries & Buiter, 2003). Also not to be ignored is in understanding the purpose of corporate governance. According to Oman et al. (2003), the purpose of corporate governance is divided into three elements, and applicable to all countries such as 1) enable and encourage the enactment of corporations by creating and sustaining incentives that motivate corporate insiders to maximise operational efficiency, return on assets and long-term productivity growth; 2) eliminate insider’s abuse of power over corporate resources such as asset stripping or otherwise siphoning off corporate resources for private use (self-serving behaviour); and 3) developing monitoring measures for manager’s behaviour to ensure corporate accountability as well as developing reasonably cost-effective protection measures of investor’s and society’s interests vis-a-vis corporate insiders.

A Piggy Back for Healthcare: Why the Health System Needs Old-age Reserve Funds

Healthcare spending as a proportion of GDP has almost doubled since 1990, from just over 5% to almost 10% now. Healthcare costs rise exponentially in old age. Healthcare costs per capita are relatively stable during the first five decades of life, but they quadruple over the next four decades. This means that most healthcare spending represents a transfer from the working-age generation to the retired generation. The combination of rising life expectancy and low birth rates is a demographic pincer movement for the health system. The ratio of people of retirement age to people of working age currently stands at 28 to 100. This is forecast to rise to 47 to 100 by 2064. The Office for Budget Responsibility (OBR) predicts only modest increases in NHS spending as a proportion of GDP, but this forecast is predicated on the heroic assumption that the NHS is going to double its long-term productivity growth rate. The basic problem is that the NHS is financed on a pay-as-you-go basis. The alternative would be a prefunded system that builds up old-age reserves (comparable to pension funds) for people of working age, and then draws upon them when people retire. In such a system, population ageing would be much less of a problem, because as the number of elderly people grows, the reserves accumulated in the old-age funds would grow alongside. The NHS could begin to build up a similar old-age reserve fund. This would require a one-off increase in taxes, or spending cuts in the non-healthcare budget. But it would prevent steeper tax increases (or spending cuts) in the future. While the basic idea of prefunding is simple, a lot of details would need to be worked out first, the idea of prefunding healthcare expenditure is not even part of our current healthcare debate. It should be.

The Pathways and Challenges of University Engagement: Comparative Case Studies in Austria

The Pathways and Challenges of University Engagement: Comparative Case Studies in Austria

Long-Term U.S. Productivity Growth and Mobile Broadband: The Road Ahead

This paper focuses on the potential of future wireless networks to support U.S. economic growth to 2030. We consider the economic implications of next generation wireless networks for long-term productivity growth and living standards, and relate those to current public policy questions. The result could be an acceleration of productivity growth in the physical industries that adds roughly $2.7 trillion (in 2015 dollars) to U.S. GDP by 2030. This translates into an 11 percent increase in economic output, which is equivalent to boosting the average annual growth rate by 0.7 percentage points. This paper makes three main points. The United States is currently stuck in a slow-growth trap, which is holding down wages and living standards. We show that slow productivity growth today is correlated with the failure of “physical” industries such as manufacturing, health care, and construction to make good use of digital technologies, compared to “digital” industries such as professional services, finance, and entertainment. We estimate that physical industries, which make up roughly 80 percent of the private sector, account for only 35 percent of private infotech investment, and only 40 percent of telecom usage. Using a top-down analysis, we suggest that successfully digitizing physical industries will require a vast increase in remote sensors and remote-controlled devices such as cars, drones, and construction equipment. True, in the short-run, machine-to-machine (M2M) wireless traffic will still only be a small portion of mobile data. Cisco forecasts that M2M wireless traffic in the United States, including wearables, will rise from 3 percent to 11 percent of all mobile data by 2020. In this paper, we further project that IoT-related M2M communications will account for roughly 35-47 percent of mobile data communications by 2030. To boost productivity of physical industries, M2M communications will occupy a much larger share of available bandwidth.Achieving this level of connectivity and productivity improvement will require a sharp increase in the capacity of the nation’s mobile broadband networks. The nature of the capacity increase will depend on the development of technology. Using an analysis based on historical trends, we project that by 2030 it will be necessary to have over 1900 MHz of spectrum in the sub-mmW bands (3 times current availability) and at least 1.2 million cell sites (4 times current level) to fully enable the IoT-driven productivity gains in physical industries over the next fifteen years. By contrast, extensive use of mmW bands, if technologically and economically feasible, will require the deployment of a vast number of additional small cell sites that will require ongoing maintenance.The conclusion: Creating vastly more wireless capacity is essential for getting the United States out of the slow-growth trap we are currently stuck in. In order to catalyze the next round of spectrum-enabled economic expansion, policymakers need to focus on freeing up multiples of the current amount of spectrum — both for licensed and unlicensed uses — while creating an economic environment in which it is profitable to build and maintain a greatly expanded number of cell sites.