Productivity Slowdown Research Articles

Challenges to Mismeasurement Explanations for the US Productivity Slowdown

The United States has been experiencing a slowdown in measured labor productivity growth since 2004. A number of commentators and researchers have suggested that this slowdown is at least in part illusory because real output data have failed to capture the new and better products of the past decade. I conduct four disparate analyses, each of which offers empirical challenges to this “mismeasurement hypothesis.” First, the productivity slowdown has occurred in dozens of countries, and its size is unrelated to measures of the countries' consumption or production intensities of information and communication technologies (ICTs, the type of goods most often cited as sources of mismeasurement). Second, estimates from the existing research literature of the surplus created by internet-linked digital technologies fall far short of the $3 trillion or more of “missing output” resulting from the productivity growth slowdown. Third, if measurement problems were to account for even a modest share of this missing output, the properly measured output and productivity growth rates of industries that produce and service ICTs would have to have been multiples of their measured growth in the data. Fourth, while measured gross domestic income has been on average higher than measured gross domestic product since 2004—perhaps indicating workers are being paid to make products that are given away for free or at highly discounted prices—this trend actually began before the productivity slowdown and moreover reflects unusually high capital income rather than labor income (i.e., profits are unusually high). In combination, these complementary facets of evidence suggest that the reasonable prima facie case for the mismeasurement hypothesis faces real hurdles when confronted with the data.

Labor Productivity Slowdown in the Developed Economies - Another Productivity Puzzle?

The paper addresses the topic of an overall long-term productivity slowdown in labor productivity for a panel of 25 developed countries. Besides studying individual long-term trends of single countries using filtering techniques we also test for multiple structural breakpoints in the long-term trends. Furthermore after determining the country specific long-term productivity trends using state-space approaches, we extract a common factor from these long-term trend series using factor analysis. The country specific differences are only of second order importance. Dominant is an overall long-term productivity slowdown. The beginning of this slowdown already started in the 1970s and has persisted without any significant structural breakpoint afterwards until now. The same analysis for GDP growth and hours worked data were performed. We found similar results for the GDP growth data compared to the productivity data but not for the hours worked data. Furthermore Granger causality tests reveal that the trend productivity slowdown is driven by the downward trending GDP growth and not vice versa. For the hours worked data no significant relation to productivity growth could be confirmed.

Does Home Production Drive Structural Transformation?

Using new home production data for the U.S., we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report two main findings. First, the estimation results show that home services have a lower income elasticity than market services. Second, the slowdown in home labor productivity, started in the late 70s, is a key determinant of the rise of market services. Our counterfactual experiment shows that, without the slowdown, the share of market services would be lower by 5.8% in 2010.

From Firm-Level Imports to Aggregate Productivity: Evidence from Korean Manufacturing Firms Data

Using the Korean manufacturing firm-level data, this paper confirms that three stylized facts on importing hold in Korea: the ratio of imported inputs in total inputs tends to be procyclical; the use of imported inputs increases productivity; and larger firms are more likely to use imported inputs. As a result, we find that firm-level import decisions explain a non-trivial fraction of aggregate productivity fluctuations in Korea over the period between 2006 and 2012. Main findings of this paper suggest a possible link between the recent global productivity slowdown and the global trade slowdown.

From Firm-Level Imports to Aggregate Productivity: Evidence from Korean Manufacturing Firms Data

Using the Korean manufacturing firm-level data, this paper confirms that three stylized facts on importing hold in Korea: the ratio of imported inputs in total inputs tends to be pro-cyclical; the use of imported inputs increases productivity; and larger firms are more likely to use imported inputs. As a result, we find that firm-level import decisions explain a non-trivial fraction of aggregate productivity fluctuations in Korea over the period between 2006 and 2012. Main findings of this paper suggest a possible link between the recent global productivity slowdown and the global trade slowdown.

From Firm-Level Imports to Aggregate Productivity: Evidence from Korean Manufacturing Firms Data

Using the Korean manufacturing firm-level data, this paper confirms that three stylized facts on importing hold in Korea: the ratio of imported inputs in total inputs tends to be procyclical; the use of imported inputs increases productivity; and larger firms are more likely to use imported inputs. As a result, we find that firm-level import decisions explain a non-trivial fraction of aggregate productivity fluctuations in Korea over the period between 2006 and 2012. Main findings of this paper suggest a possible link between the recent global productivity slowdown and the global trade slowdown.

A dynamic model for firm-response to non-credible incentive regulation regimes

Economic network regulation increasingly use quantitative performance models (from econometrics and engineering) to set revenues. In theory, high-powered incentive regulation, such as revenue-caps, induces firms to cost-efficient behavior independent of underlying model. However, anecdotal evidence shows regulated firms occasionally maintaining cost-inefficiency under incentive regulation even under slumping profitability. We present a model for firm-level efficiency under a regime with a probability of failure explaining this phenomenon. The model is based on the hypothesis that the regulatory choice of method can be associated with intrinsic flaws leading to judicial repeal and replacement of it by a low-powered regime. The results show that the cost efficiency policy is proportional to the type of firm (cost of effort), value of time (discount factor) and the credibility of the method (risk of failure). A panel data set for 2000–2006 for 128 electricity distributors in Sweden is used to validate the model predictions (radical productivity slowdown, failing profitability and efficiency) at the launch and demise of a non-credible regulation method. The work highlights the fallacy of viewing incentive regulation as a method-independent instrument, a result applicable in any infrastructure regulation.

The Italian productivity slowdown in a Real Business Cycle perspective

This paper investigates the structural relation between the Italian weak macroeconomic performances and the productivity decline experienced over the last 15 years, estimating a Dynamic Stochastic General Equilibrium model. Modifying Ireland and Schuh’s (Rev Econ Dyn 11:473–492, 2008) two-sector RBC model in order to account for cointegration between consumption and investment, we interpret the unsatisfactory Italian economic dynamics in the light of a permanent negative shock to the component of productivity which is common across the consumption-good and the investment-good sector. In the light of our results, the common view that the Italian productivity problems involve only the Made in Italy sectors is only partially confirmed, since growth in the investment-good sector relies on the counterbalancing properties of its transitory sector-specific productivity component. Moreover, the model indirectly stresses the importance of the intermediate-good productions in the observed productivity decline. The short- and long-run implications of productivity dynamics for consumption, investment and hours worked are also discussed.

Italy’s decline and the balance-of-payments constraint: a multicountry analysis

According to the literature, the decline experienced by the Italian economy in the last two decades depends on a slowdown of its labour productivity, starting in the 1990s. The supply-side explanations of this slowdown are inconsistent with the major stylised facts. In this paper, we verify whether a better explanation is provided by the effect of a negative demand shock, through Italy’s external constraints, in the framework of Kaldor-Dixon-Thirlwall’s cumulative growth model. To this end, we use a multi-country generalisation of Thirlwall’s balance-of-payments-constrained growth model, which allows us to investigate the contribution of Italy’s main trade partners to Italy’s long-run growth from 1970 to 2010. The trade partners are disaggregated into seven groups: Eurozone core, Eurozone periphery, United States, other European countries, OPEC countries, BRIC, and the rest of the world. The results show that Italy’s long-run growth has been consistent with the Bop-constraint, that its decline can be explained by a progressive tightening of this constraint, that the sudden slowdown of labour productivity in the 1990s corresponds to a major shock on Italy’s external constraint, and that the major contributions to this shock came, through different channels of transmission, from the core Eurozone countries and from OPEC countries.

Analysis of transition dynamics caused by technological breakthroughs: Cause of productivity slowdown and drop in existing firms’ stock prices

This paper examines the transition dynamics caused by technological breakthroughs. Our results show that technological breakthroughs cause a productivity slowdown and a drop in the stock prices of existing firms; these findings are consistent with observations in the 1970s. We explain how technological breakthroughs cause these phenomena. The emergence of a new technology creates new business opportunities, which reduces existing firms’ profits, thus causing their stock prices to drop. This decline in existing firms’ profits discourages R&D-intensive firms from entering the sector; this decreases aggregate R&D activity, and thus the growth rate of productivity declines.

농가인구예측 모형 개발 및 중장기 전망

Abstract A population decline in rural area is correlated with the number of household, with agricultural workers,as a result, affects the farming income. Agricultural population is a foundation of agriculture structure. Agricultural population decline influences agricultural policies to be implemented for the future and there is concern about slowdown in productivity. The purpose of this study is to build the ability to use the model and conduct applied analyses of various kinds and to make rational agricultural policies by forecasting and analyzing agricultural population change. Unlike previous studies, which have some assumptions about the giving-up farming rate (GFR)of the key points on the agricultural population model or, After estimating only one equation with respect to the totalpopulation, and then distribute by sex and age. This study was conducted to investigate the reactions are differentfrom the farmhouse, gender, age by estimating giving-up farming rate (GFR) equations each gender & age. Throughthis research, we can find that Farm Population changes of the simulation can be performed for a variety of agricultural policy in conjunction with existing agricultural simulation models as well.

The Pre-Great Recession Slowdown in Productivity

In the years since the Great Recession, many observers have highlighted the slow pace of productivity growth around the world. For the United States and Europe, we highlight that this slow pace began prior to the Great Recession. The timing thus suggests that it is important to consider factors other than just the deep crisis itself or policy changes since the crisis. For the United States, at the frontier of knowledge, there was a burst of innovation and reallocation related to the production and use of information technology in the second half of the 1990s and the early 2000s. That burst ran its course prior to the Great Recession. Continental European economies were falling back relative to that frontier at varying rates since the mid-1990s. We provide VAR and panel-data evidence that changes in real interest rates have influenced productivity dynamics in this period. In particular, the sharp decline in real interest rates that took place in Italy and Spain seem to have triggered unfavorable resource reallocations that were large enough to reduce the level of total factor productivity, consistent with recent theories and firm-level evidence.

Banking Crises and 'Japanization': Origins and Implications

Japan’s “two lost decades” perhaps represent an extreme example of a weak recovery from a financial crisis, and are now referred to as “Japanization.” More recently, widespread stagnation in advanced economies in the wake of the global financial crisis led to fears that Japanization might spread to other countries. This study examines the dimensions of Japanization — including low trend growth, debt deleveraging, deflation and massive increases in government debt — and analyzes their possible causes — including inadequate macroeconomic policy responses, delayed banking sector restructuring, inadequate corporate investment, loss of industrial competitiveness, a slowdown in total factor productivity (TFP) growth due to excessive regulation and economic rigidities, and an aging society.

Contribution of RpoS to metabolic efficiency and ectoines synthesis during the osmo- and heat-stress response in the halophilic bacterium Chromohalobacter salexigens.

Chromohalobacter salexigens is a halophilic γ-proteobacterium that responds to osmotic and heat stresses by accumulating ectoine and hydroxyectoine respectively. Evolution has optimized its metabolism to support high production of ectoines. We analysed the effect of an rpoS mutation in C. salexigens metabolism and ectoines synthesis. In long-term adapted cells, the rpoS strain was osmosensitive but not thermosensitive and showed unaltered ectoines content, suggesting that RpoS regulates ectoine(s)-independent osmoadaptive mechanisms. RpoS is involved in the regulation of C. salexigens metabolic adaptation to stress, as early steps of glucose oxidation through the Entner-Doudoroff pathway were deregulated in the rpoS mutant, leading to improved metabolic efficiency at low salinity. Moreover, a reduced pyruvate (but not acetate) overflow was displayed by the rpoS strain at low salt, probably linked to a slowdown in gluconate production and/or subsequent metabolism. Interestingly, RpoS does not seem to be the main regulator triggering the immediate transcriptional response of ectoine synthesis to osmotic or thermal upshifts. However, it contributed to the expression of the ect genes in cells previously adapted to low or high salinity.

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Perception of Respondents towards the Effect of Jeevika Project in Bihar State

Slowdown in agricultural growth and productivity, changing cropping patterns, increase in distress migration, changing consumption patterns, and government policies favouring industrial houses, among others have seriously undermined the food and livelihood security of the poorer households. An integrated, multi-dimensional and holistic approach to poverty eradication efforts is crucial to preserve and enhance the livelihoods of the poor. The rural poverty situation in India is highly complex and greatly differentiated by geography, demography and social class. Nearly 60% of the rural poor households are concentrated in the states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh. Taking cognizance of the enormity of problem, the government of Bihar has initiated a project Jeevika – Bihar Rural Livelihoods Promotion Project in six districts of Bihar viz., Nalanda, Gaya, Khagaria, Muzaffarpur, Madhubani and Purnia in 2007. This study is attempting to undertake a micro-level analysis of collected data to assess the effect of Jeevika Project in Bihar state as perceived by the respondents through study of their perception towards the effect of the programme in their life in terms of institutional and capacity building, financial inclusion, social development and entitlements, used by them and provided by the project in Muraul Block of Muzaffarpur District of Bihar. A total sample size of 160 respondents from the SHGs formed as the basic working units of Jeevika project were selected by simple random sampling Procedure. Data were collected by using personal interview method in 2014. Out of 160 respondents, 116 respondents (72.5%) had perceived that there was change in their life due to effect of Jeevika and 44 respondents (27.5%) perceived that there was no effect and 150 (93.8%) respondents were ‘aware’ and 10 respondents (6.3%) were ‘not aware’ about Self-Help Groups (SHGs) before joining the project; none of the respondents were member of any other SHGs before joining the project; out of 160 respondents only 34 respondents (21.1%) were availing loan facility provided by the project's SHGs.

Comment on “Escaping the Middle‐Income Trap in Southeast Asia: Micro Evidence on Innovation, Productivity, and Globalization”

Lee and Narjoko (2015) provide a comprehensive literature survey of empirical studies that use manufacturing plant-level or firm-level data to investigate the relationship between innovation and globalization in Southeast Asian countries. Their survey covers studies for Indonesia, Malaysia, Philippines, Thailand, and Vietnam because the quality and availability of the microdata in these countries are better than that in the other countries of the Association of Southeast Asian Nations. Based on their literature survey, Lee and Narjoko conclude that globalization via trade and foreign direct investment plays an important role in the firm's innovative activities and productivity improvements in these countries, and recommend that innovation policies should be directed toward the enhancement of productivity, particularly in export-oriented sectors. One of my major concerns with Lee and Narjoko's paper is in the causal interpretation of the empirical results. As the authors mentioned, all the results surveyed in this paper have not examined the causal relationship running from firms' overseas activity to their innovation input (e.g. research and development activity) or productivity. Further considering the fact that only a few studies have examined the linkage among firm innovation, productivity, and overseas activity by firm size, I think that the statements such as “Innovation policy targeted at enhancing productivity, especially in export-oriented sectors” (p. 143) and “SMEs might warrant special attention given that the productivity constraint to exporting is likely to be larger for these firms” (p. 143) are not sufficiently supported by the concrete empirical evidence. Another concern I have relates to the heterogeneity of the countries covered in their survey studies. The economic structures and the degrees of participation in international trade are widely different across the countries in the Southeast Asian region. This implies the possibility that the environments surrounding small and medium enterprises (SMEs) and the levels of foreign firm participation in each country can be also quite different. Given such heterogeneity among the economic conditions in each country, it seems rather difficult to provide a common policy recommendation. It is important for Lee and Narjoko to take the differences such as heterogeneity among countries into account in their discussion, and hopefully propose policy recommendations according to the different stages of development in each country. Related to the second point, one way to explicitly study the heterogeneity of firms in each country is to examine the dynamics of firm-level productivity measured by, for example, total factor productivity (TFP). More precisely, it would be informative to examine the catch-up process of low productivity firms (usually SMEs) in the country toward the national productivity frontier firms or global frontier firms (e.g. high productivity firms in the USA as in the literature). As one example, Fukao et al. (2011) employ the empirical model in Bartelsman et al. (2008), and examine such a catch-up process using Japanese, Korean, Taiwanese, and Chinese manufacturing firm data. Another concern about Lee and Narjoko's paper is that it does not provide clear explanation of the relationship between firm network participation and its innovative activity. Furthermore, previous studies in the region do not explicitly examine the mechanisms of how the internal and external linkages are related to a firm's innovation performances. As a reference, Ma et al. (2014), for example, analyze the mechanism of a firm's export participation on its productivity development using Chinese manufacturing data, and find that “firms become less capital-intensive but more productive after exporting, compared to nonexporters that share similar ex ante characteristics” (abstract). It would be useful if Lee and Narjoko implemented a similar empirical analysis using microdata in Southeast Asian countries. As a final remark, given that the region is facing the slowdown in TFP growth and find it important to overcome the middle-income trap, Lee and Narjoko should conduct the productivity growth decomposition and discuss the sources of the productivity slowdown in these countries. Such an analysis might allow the authors to confirm that improving the resource allocation in a country through trade liberalization is a better policy recommendation than increasing TFP growth rather than promoting more firms to participate in the export market. As one extant study in this context, Hsieh and Klenow (2009) find that both China and India can increase their aggregate TFP by reducing resource misallocation in each country.

U.S. Total Factor Productivity Slowdown: Evidence from the U.S. States

Total factor productivity (TFP) growth began slowing in the United States in the mid-2000s, before the Great Recession. To many, the main culprit is the fading positive impact of the information technology (IT) revolution that took place in the 1990s. But our estimates of TFP growth across the U.S. states reveal that the slowdown in TFP was quite widespread and not particularly stronger in IT-producing states or in those with a relatively more intensive usage of IT. An alternative explanation offered in this paper is that the slowdown in U.S. TFP growth reflects a loss of efficiency or market dynamism over the last two decades. Indeed, there are large differences in production efficiency across U.S. states, with the states having better educational attainment and greater investment in R&D being closer to the production “frontier.”

The French Productivity Puzzle

Since 2008, France experiences a sharp productivity slowdown. Both output per hour and total factor productivity are particularly deceptive in the market economy. This recent trend contrasts with the acceleration of productivity during the previous crisis in the 1990’s and the continuous increase during the following decade. This text provides the first comprehensive exploration of this puzzling break. The direct impacts of the Great Recession on industry composition or reallocation of capital are not significant suspects for a slowdown occurring across business activities. Labour market mechanisms are better candidates. On the one hand, the French labour market policy has massively boosted the creation of low-productive jobs including very-short term employees and self-employed workers. On the other hand, firms, which benefit from massive tax cuts, have hoarded their high-skilled workforce. In addition, the spread of innovative HRM incentives, e.g. employee shareholding, seems to have turned productivity more sensitive to the business cycle (and especially to the fall of stock markets).

Obsolescence and productivity

The increase in the obsolescence of intangible capital caused by the adoption of new information technologies can play an important role in accounting for the productivity slowdown undergone by the US economy since 1974. To explore this hypothesis, we have developed a standard growth model with physical and intangible capital in which technical progress is equipment–specific. We assume that the obsolescence of intangible capital increases when the equipment–specific technical progress accelerates. The model is calibrated for the period 1957–1973 and the response of the economy to an increase in the rate of equipment–specific technical progress — as observed since 1974 — is simulated. We show that this setup can account for a large part of the post–1974 slowdown observed in productivity and in the Solow residual.