Manufacturing Productivity Growth Research Articles

China's declining business dynamism

AbstractWe document five novel facts about the dynamism of Chinese manufacturing firms between 2003 and 2018. We show that: (i) the revenue and capital shares of young firms have declined, (ii) life‐cycle growth of firm revenues and assets has declined, (iii) life‐cycle growth of process efficiency / product quality and investment in intangibles has declined (iv) younger firms have higher capital productivity than older firms, with the gap increasing over time, and (v) the dispersion of capital growth and the responsiveness of capital growth to capital productivity have both declined. Using a simple model, we estimate that the lower life‐cycle productivity growth of young firms reduces manufacturing productivity growth by 0.8 percentage points annually, and worsening allocative efficiency of capital between young and old firms reduced manufacturing total factor productivity by 1.25% between the early 2000s and late 2010s. We find that business dynamism is weaker in provinces where state‐owned enterprises account for a larger share of the capital stock.

Is output growth of Chinese manufacturing firms input or productivity driven? A flexible production function approach with endogenous inputs

Is output growth of Chinese manufacturing firms input or productivity driven? A flexible production function approach with endogenous inputs

Mechanisms and Heterogeneity of the Impact of Digital Economy on Total Factor Productivity in Manufacturing Based on DEA-Malmquist Method

Based on provincial panel data of 30 provinces from 2013-2019, this paper measures the total factor productivity of China's manufacturing industry using the DEA-Malmquist method, and also employs the generalized least squares (GLS) method to study the impact of the digital economy on total factor productivity in manufacturing. The study finds that the digital economy can promote manufacturing productivity growth, and this growth is driven by technological progress, and at the same time, the digital economy can enhance manufacturing productivity by improving technological innovation and resource allocation efficiency. From different dimensions of the digital economy, the infrastructure of the digital economy, the industrialization of the digital economy and the intelligentization of the industry can significantly contribute to manufacturing productivity.

The intersectoral linkages and manufacturing productivity growth in Italian regions using the I-O approach

The intersectoral linkages in the production structures have been analysed under several angles in recent years, but these were mainly developed at the national level neglecting the regional aspects. In this paper, we aim to fill this gap by analysing the intersectoral linkages from a regional perspective by studying the case of Italian regions. We use the input-output approach to investigate the process of integration between manufacturing and market services, clarifying the role of market services in strengthening the productivity of the regional manufacturing systems. The results show that an increasing share of market services in regional manufacturing is evident across the Italian regions. The empirical estimations clearly show a strong connection between the growth of market services integrated in manufacturing and the growth of manufacturing productivity. The findings are robust when we control for the intersectoral linkages along the value chain, by adopting the vertically integrated sector (or subsystem).

Stagnant manufacturing growth in India: The role of the informal economy

This paper examines the role of structural change in India's performance, and in particular the role of the informal segment in the stagnant growth of the Indian manufacturing sector. Using counterfactual analysis – including a modified shift-share approach – the paper considers to what extent the informal sector can help explain the poor performance of Indian manufacturing over the period 1980-2011. The results suggest that the informal segment of manufacturing has been a drag on overall manufacturing productivity growth, with the informal manufacturing segment unable to provide a productivity bonus when absorbing workers from the agricultural sector. Results from the shift-share analysis indicate that labor reallocation to the informal segment of the manufacturing sector is growth-reducing, with structural change being the main source of this reduction, an effect which in turn is driven by movements of employment within manufacturing sub-sectors.

Manufacturing and service‐sector productivity in Turkey: A perspective from firm‐level data

AbstractSince 2003, productivity growth in Turkey has disappointed. We provide a new analysis of the issue, measuring labour productivity at the firm level. Previous accounts distinguish a period of rapid productivity growth before 2007–2008 from one of slower productivity growth thereafter. In contrast, we show that productivity growth in manufacturing was faster after 2007–2008 than before, while productivity in services declined through 2010, after which it stabilised. The slump in service‐sector productivity was compounded by a shift in employment towards activities with relatively low, slowly growing labour productivity such as construction, hospitality and business services. These trends were attributable to policy. Our findings thus upend the conventional picture of successful policy reform prior to the Global Financial Crisis followed by a period of regression.

The turnaround in Philippine growth: From disappointment to promising success

Philippine actual growth performance has improved during the last two decades. We obtain potential growth rate estimates for 1959-2019 using Kalman filter estimation of Okun's law. We find that potential growth has been increasing since the mid-1990s. It reached 6.1% in 2017-2019, the highest during the last six decades. As the trend labor force growth displays a downward trend, potential labor productivity growth has accounted for most of the country's potential growth rate recently. A decomposition of labor productivity growth shows that within-sector productivity growth accounted for 79% of overall labor productivity growth during 2009-2019. Most of the within-sector effect is due to manufacturing productivity growth. Analysis of the robust determinants of potential labor productivity growth using Bayesian Model Averaging indicates the relevance of proxy variables of both within-sector and reallocation effects, as well as of policy uncertainty.

The Price of Nails Since 1695: A Window into Economic Change

This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. Why nails? They are a basic manufactured product whose form and quality have changed relatively little over the last three centuries, yet the process for producing them has changed dramatically. Accordingly, nails provide a useful prism through which to examine a wide range of economic and technological developments that touch on multiple areas of both micro- and macroeconomics. Several conclusions emerge. First, from the late 1700s to the mid-twentieth century, real nail prices fell by a factor of about 10 relative to overall consumer prices. These declines had important effects on downstream industries, most notably construction. Second, while declining materials prices contribute to reductions in nail prices, the largest proximate source of the decline during this period was multifactor productivity growth in nail manufacturing, highlighting the role of the specialization of labor and reorganization of production processes. Third, the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today’s share of household purchases of personal computers—to a de minimis share more recently; accordingly, nails played a bigger role in American life in that earlier period. Finally, real nail prices have increased since the mid-twentieth century, reflecting in part an upturn in materials prices and a shift toward specialty nails in the wake of import competition, though the introduction of nail guns partly offset these increases for the price of installed nails.

Labour productivity growth and convergence in manufacturing: A nonparametric production frontier approach

ABSTRACT Labour productivity growth in manufacturing is decomposed into technical efficiency change (movement towards or away from the frontier), technological progress (shifts in the production frontier), and capital accumulation (movement along the frontier) using a nonparametric production frontier method. The results suggest that labour productivity growth is primarily driven by capital accumulation and to a lesser extent technological progress, while technical efficiency is deteriorating over the period 1995–2014. We find that technological progress appears to be non-neutral, as the world manufacturing production frontier expands only at higher capital intensities, benefiting highly industrialized nations. We also find evidence of unconditional convergence in labour productivity for the manufacturing sector. Capital accumulation is the main driver of the observed unconditional convergence, whereas technological change is contributing to divergence rather than convergence. The findings suggest that expanding manufacturing activities through capital accumulation is essential for developing countries to catch-up with developed countries.

Environmental Policy Mixes and Green Industrial Development: An Empirical Study of the Chinese Textile Industry From 1998 to 2012

Policy mixes integrate distinct policy instruments into one coherent policy package as a measure to avoid the potentially counterproductive impacts of any given policy on another. In China, local governments recently have pursued policy mix approaches to resolve the existing policy conflicts, which are associated with the debates over the development priorities between manufacturing productivity growth and environmental mitigations. However, there has been little research that has empirically examined the effects of policy mixes, especially those concerned with the dual-faceted requirements that involve both productivity and the control of emissions. The study presented here employs a model designed to examine firm-level total factor productivity (TFP) and green TFP as performance measures. This article assesses the impacts of municipal-level environmental policy mixes on the textile industry in 13 Chinese cities by using the difference-in-differences technique to analyze the microfirm panel data of 12 133 Chinese textile firms during the period from 1998 to 2012. The results show that these environmental policy mixes could significantly promote green performance without compromising productivity growth. The results also indicate that the impacts varied in different cities. This article offers insight into policy mixes and industrial policy literature as well as practical guides for policymakers and industrialists.

Environmental Policy Mixes and Green Industrial Development: An Empirical Study of China

Policy mixes integrate distinct policy instruments into one coherent policy package as a means to avoid the potentially counterproductive impacts of any given policy on another. Chinese local governments recently have pursued policy mix approaches to promote green industrial development in order to attenuate the apparent contradictions between manufacturing productivity growth and the mitigation of environmental impacts. However, there has been little research that has empirically examined the effects of policy mixes. The study presented here employed a model designed to examine firm- level total factor productivity (TFP) and green total factor productivity (Green TFP) as performance measures. This current study served to assess the impacts of municipal-level environmental policy mixes on the textile industry in 13 Chinese cities by using the difference-in-differences (DID) technique to analyze the micro-firm panel data of 12,133 Chinese textile firms during the period from 1998 to 2012. The results showed that these environmental policy mixes could significantly promote green performance without compromising productivity growth. The results also indicated that the impacts varied in the different cities. This paper offers insight into policy mixes and industrial policy literature as well as practical guides for policy makers and industrialists.

Global Supply Chains: European Union, Euro Area and New Member States

Supply chains are comprised of events that link the product or service from conception, different phases of production, to final delivery to the consumers. In this regard, global supply chains (GSC) economics is concerned with the effects on the host economy due to presence of GSC as well as the importance of GSC for exports, or more specifically, the value added from exports. Thus, in this study, the concept of value-added trade was used in relation to exports, employment and foreign direct investment (FDI) in terms of trade facilitation for the host economies. The analysis presented in this article is based on the main dataset for structural business statistics (SBS) presented by Eurostat, where, first, we calculate the extent of overall changes in exports, employment and FDI stock relative to manufacturing, and second, to capture the effect of export restructuring on manufacturing productivity growth, we use the standard growth accounting approach, a production function at the industry level to total factor productivity (TFP) growth. The results show that TFP is reliant on exports for the whole European Union economy and especially for the new member states.

Trade shocks, product mix adjustment and productivity growth in Italian manufacturing

AbstractIn this paper, we use firm‐level data on the universe of Italian manufacturing multi‐product exporters to test whether demand shocks in export markets lead multi‐product exporters to increase their productivity. The main mechanism behind the documented productivity gains is the reallocation of resources across products within firms (American Economic Review, 104, 2014 and 495; National Bureau of Economic Research Working Paper Series No. 22433, 2016). Intuitively, the increased demand stemming from foreign markets will induce firms to adjust their product mix by moving inputs from low to high productive/profitable uses. We find that these productivity gains are significant and can explain between 1/10 and 1/2 of aggregate productivity growth in the manufacturing sector.

Labor-Saving Agricultural Technical Change and Industrial Development

The introduction of labor-saving technologies in agriculture can release workers who find occupation in the manufacturing sector. The traditional view is that this structural transformation process leads to economic growth. However, if workers leaving agriculture are unskilled, the labor reallocation process reinforces comparative advantage in the least skill-intensive manufacturing industries. We embed this mechanism in a multi-sector endogenous growth model where only skill-intensive manufacturing industries innovate and generate knowledge spillovers. In this setup, the increase in the relative size of the unskilled-labor intensive industries reduces the incentives to innovate and slows down growth. We test the predictions of the model in the context of a large and exogenous increase in agricultural productivity in Brazil. We use social security data to develop a new measure of the labor input in innovation which is representative at any level of spatial aggregation. We find that regions adopting the new agricultural technology experienced a reallocation of unskilled workers away from agriculture into the least R&D-intensive manufacturing industries. The expansion of low-R&D industries attracted workers away from innovative occupations in high-R&D industries, slowing down local aggregate manufacturing productivity growth.

Reform of state‐owned enterprises and productivity growth in China

Using firm‐level data from a Chinese industrial survey covering 1999 to 2007, the paper analyses the impact of state‐owned enterprise (SOE) reforms on productivity growth in manufacturing. The results indicate that: (1) aggregate productivity of manufacturing increased rapidly, with an average annual growth rate of 10.6 per cent. Although the aggregate productivity of SOEs was lower than in other types of enterprises, their growth rate was the fastest. (2) The productivity growth due to SOE reform was mainly contributed by the improvements in resource allocation, rather than the growth of firm productivity. (3) The between‐firm effect and the impact of new firms contributed most to the total productivity growth, while the contribution from the exiting of firms was relatively small.

Brexit and the Future of UK Capitalism

Brexit and the Future of <scp>UK</scp> Capitalism

Estimating Who Benefits from Productivity Growth: Direct and Indirect Effects of City Manufacturing TFP Growth on Wages, Rents, and Inequality

We estimate direct and indirect effects of total factor productivity growth in manufacturing on US workers' earnings, housing costs, and purchasing power. Drawing on four alternative instrumental variables, we consistently find that when a city experiences productivity gains in manufacturing, there are substantial local increases in employment and average earnings. For renters, increased earnings are largely offset by increased cost of living; for homeowners, the benefits are substantial. Strikingly, local productivity growth in manufacturing reduces local inequality, as it raises earnings of local less-skilled workers more than the earnings of local more-skilled workers. This is due, in part, to lower geographic mobility of less-skilled workers. However, local productivity growth also has important indirect effects through worker mobility. We estimate that 38% of the overall increase in workers' purchasing power occurs outside cities directly affected by local TFP growth. The indirect effects on worker earnings are substantially greater for more-skilled workers, due to greater geographic mobility of more-skilled workers, which increases inequality in other cities. Neglecting these indirect effects would both understate the overall magnitude of benefits from productivity growth and misstate their distributional consequences. Overall, US workers benefit substantially from manufacturing productivity growth. Summing direct and indirect effects, we find that manufacturing TFP growth from 1980 to 1990 increased purchasing power for the average US worker by 0.5-0.6% per year from 1980 to 2000. These gains do not depend on a worker's education; rather, the benefits from productivity growth mainly depend on where workers live.

Demography and Productivity in the Italian Manufacturing Industry: Yesterday and Today

Population ageing and lack of productivity growth characterize most western countries. We focus on Italy and investigate whether the availability of a young population represents a determinant of manufacturing productivity growth. We follow a historical comparative analysis and provide evidence of the strength of this relation in the past (1861-1911) and today (1961-2011). To account for the sizeable regional heterogeneity characterizing historically the country we use data disaggregated at the provincial level. Our analysis suggests that the availability of a young population represents indeed one of the determinant of manufacturing productivity growth. The strength of the relation was higher in the past than today, but ageing is still nevertheless a factor that cannot be neglected from a policy perspective.

Green manufacturing and environmental productivity growth

PurposeDue to stringent regulations on carbon emissions, green manufacturing has become a critical issue in manufacturers’ strategic planning. Manufacturers are greening production through carbon abatement activities. The purpose of this paper is to investigate the factors that influence the effects of carbon abatement on environmental productivity growth.Design/methodology/approachUsing data envelopment analysis with directional distance function, this study examines productivity growth associated with carbon abatement under regulated and unregulated production technologies. A pollution abatement index (PAI) is constructed for determining the effects of carbon abatement on environmental productivity growth. Panel data of 18 European countries in paper and pulp and coke sectors are collected for the analysis.FindingsThe empirical findings reveal that carbon abatement may positively or negatively affect environmental productivity growth which is dependent on the nature of technology in a sector, the innovation capabilities of a country and environmental regulations.Originality/valueConventional approaches in measuring productivity changes do not normally take undesired outputs (e.g. carbon emissions) into consideration. This study contributes to literature by constructing a PAI that considers productivity changes under a joint production technology (where both desired and undesired outputs are considered). The findings enhance current understandings on the effectiveness of carbon abatement activities and help managers establish corporate environmental strategies to adopt green manufacturing.

Why Has the Philippiness Growth Performance Improved? From Disappointment to Promising Success

This paper analyzes why the Philippines’ growth performance has improved significantly in recent years. As in the medium to long term actual growth adjusts to potential, we posit that the reason behind this improvement is that the country’s potential growth is increasing. We derive an estimate of the potential growth rate, defined as the growth consistent with a constant unemployment rate, through the notion of Harrod’s natural growth rate and Okun’s Law. Kalman filter estimation allows us to obtain a time series of potential growth rate for 1957-2017. Results corroborate that potential growth is increasing. It reached 6.3% in 2017, the highest value during the last 60 years. We find that in recent years, labor productivity growth (technical progress) accounts for most of the country’s potential growth rate, as the trend labor force growth displays a downward trend. A decomposition of labor productivity growth shows that the within effect accounts for 70% of it, and that most of it is due to manufacturing productivity growth. As actual growth in 2017 reached 6.7% and to maintain the growth momentum, Philippine authorities ought to focus on increasing potential growth to enable more room for growth in a stable macroeconomic environment. Finally, two key results emerge from our analysis of output and productivity growth, and employment. First, estimates of Okun’s Law indicate that the response of Philippine unemployment and visible underemployment to output growth is very small. However, the response of total underemployment is positive and significant. Second, productivity growth does not destroy employment.