Technological change,efficiency gains and capital accumulation in labour productivity growth and convergence: an application to the Spanish regions

The main objective of this article is to analyse labour productivity growth and convergence in the Spanish regions between 1965 and 1995, decomposing total factor productivity gains into technological progress and efficiency change by means of Malmquist productivity indices. On the basis of this decomposition, labour productivity growth is broken down into components attributable to technological change (shifts in the frontier), efficiency gains (movements toward the frontier) and capital accumulation (movements along the frontier). The approach followed in this study is based on work initiated by Färe et al., where a link between the economic growth and convergence literature and the production frontier approach was established. Furthermore, in the spirit of Quah's approach, the evolution of the whole distribution is considered. Thus, the analysis of the dynamics of the entire distribution of labour productivity and the factors behind it – technological progress, efficiency gains and capital accumulation – combine both approaches, yielding new insights into the process of productivity growth and convergence experienced by the Spanish regions over the last 30 years.     

Research and development and labour productivity: do high-tech firms exhibit labour- or capital-saving technical change?

Employment and output in the advanced technology sectors have generally exhibited above-average growth for more than two decades. While this industry accounts for a relatively small share of total employment, the majority of private sector research and development (R&D) expenditures in the US is concentrated within seven sub-sectors. However, little attention has been paid as to whether high-tech productivity exhibits Hicksian capital or labour ‘savings’ bias or tendency to displace either factor input over time. Biased technical change can occur as economies transition between growth regimes. An augmented production function is employed to analyse the additional impact of R&D activity on firm-level labour productivity. A panel data set comprised of high-tech firms located across the advanced economies, China and India from 1990 to 2013 is used in the analysis. Labour-saving technical change was present across the advanced technology sectors and most countries. The expanded models of labour productivity that used fixed effects with lagged regressors confirmed the prior results as well as finding that R&D per employee, relative R&D intensity and firm market share contribute to firm-level labour productivity growth across countries and sectors. Additional support was found for diminishing returns to scale but not for R&D spillover effects.     

Sources of aggregate labour productivity growth in Canada and the United States

Abstract.  In this paper we propose a decomposition technique to examine the sources of industrial contribution to aggregate labour productivity growth. We show that in terms of pure labour productivity growth, the manufacturing and service sectors contributed equally to the aggregate Canada‐U.S. labour productivity growth gap during the 1987–98 period. But, in terms of total industrial contributions, which also take into account the contributions from a change in relative size, the service sector was the largest contributor. We also find that high labour productivity growth industries did not attract resources from stagnant industries – a phenomenon consistent with Baumol's cost disease of stagnant industries. JEL Classification: O47, C43     

Policy reform and productivity change in Chinese agriculture: A distance function approach

Agricultural policy reform has been an important source of change in the Chinese agricultural sector. The reforms led to productivity growth and helped China to pursue its self-sufficiency goal especially in the grain sector. In order to analyze whether observable productivity growth stems from technologically induced components or from the market induced parts, a multi-input–multi-output model is derived by using an econometric distance function framework. A decomposition allows to distinguish allocative effects, scale effects, technological change, and technical efficiency change. Data on farms in Zhejiang from 1986 to 2000 are used to analyze the impact of policy reform.     

Innovation spending and productivity growth in the German economy 1980–1986

A newly developed technique involving vertically integrated input-output sectors is used to examine the relationship between labour productivity and innovation expenditures in the German economy during the period 1980 to 1986. The productivity measures used, dubbed Harrod-Robinson-Read (HRR), take into account the direct and indirect labour used in each consumption goods sector. Included in these measures is the labour content of new capital investment.

The HRR measures show higher rates of productivity growth in most sectors, compared to the simple direct labour requirements measures. This is due to the fact that the HRR measures take into account the increased efficiency with which new capital is produced. The second part of the study examines the relationship between labour productivity and innovation expenditures as measured by the IFO (Institute for Economic Research – Munich) innovation survey. Using cross section data for 58 German industries, a strong correlation was found between direct labour productivity growth and direct innovation expenditure.

These results suggest that with more detailed capital expenditure data it should be possible to describe more precisely the relationships between innovation activity, spending on new capital, and productivity changes. The key to examining these relationships in more detail is the growing wealth of information contained in recent innovation surveys such as those done by the IFO.     

Productivity Trends in Australian and New Zealand Manufacturing

The purpose of this article is to study relative trends in total factor productivity (TFP) between the Australian and New Zealand manufacturing sectors from 1986 to 1996. Since 1984 both economies have undergone major structural changes with varying degrees of speed and intensity. We use the Malmquist index to measure TFP growth and decompose it into an efficiency change and a technical change component. This decomposition provides extra insight on assessing relative productivity trends during a period of economic reform. The results indicate the Australian manufacturing sector exhibits better rates of individual factor productivity performance while multifactor productivity is estimated to be higher in New Zealand manufacturing. TFP growth in New Zealand is driven by technical rather than efficiency change. In fact, the New Zealand manufacturing average rate of efficiency change is estimated to be negative over the sample period.     

Efficiency and technical progress: sources of convergence in the Spanish regions

The paper analyses the contribution of efficiency as a mechanism of labour productivity convergence, taking as the unit of analysis the Spanish regions in the period 1964–1993. Using the stochastic frontier approach, a translogarithmic production function is estimated for the different sectors of the Spanish regional economy, demonstrating on this basis the existence of substantial differences in efficiency between sectors as well as between regions. With regard to convergence, the results obtained indicate that at aggregate level the convergence observed in labour productivity is explained by the faster growth of the capital-labour ratio of the initially poorer regions and the contribution of technical change and the efficiency, hence by the convergence of TFP. However, the information by sectors shows different results. Thus, on the one hand, the importance of the convergence in production per employee is seen in all sectors except agriculture and, on the other it is observed that technical change is a factor of convergence in all sectors but construction, and, qualitatively, the contribution of technical change is greater than the contribution of efficiency. By sectors, technical change contributed significantly to labour productivity convergence in agriculture, but the faster growth of the capital-labour ratio of the rich regions acted as a mechanism of divergence, completely counteracting the technological catching-up effect. It is further concluded that, as well as the contribution of the accumulation of factors, the positive evolution of efficiency in the poorest regions favoured convergence in the construction and industry sectors, whereas technical progress was decisive in industry and the services sectors.     

Sources of energy productivity growth and its distribution dynamics in China

The purposes of this paper are to determine the sources of energy productivity growth at the provincial level in China and to examine the relative contributions of the sources and their impacts on regional inequality. Energy productivity change is first decomposed into five components attributable to changes in capital–energy ratio, labor–energy ratio, output structure, and technical efficiency change and technological change. Then a nonparametric analysis is implemented to statistically test the relative contributions of the components and their roles in the distribution dynamics of energy productivity. It is found that (1) changes in capital–energy ratio, output structure, and technological change contribute to energy productivity growth in China, (2) increase in capital–energy ratio caused by capital accumulation is the primary driving force for energy productivity growth, and (3) capital accumulation contributes to energy productivity convergence between Chinese provinces over the time period of 1990–2005.     

Optimal Growth with Endogenous Technical Progress: Hicksian Bias in a Macro Model

If productivity growth is endogenous, the question of whether to allocate some resources to increase the efficiency of capital needs to be examined in spite of the conventional wisdom that only Harrod-neutral technical progress is compatible with the steady state. This paper describes the crucial role that the production technology and research sectors play in determining the allocation of resources for accumulating physical capital and enhancing the productivity of inputs. We develop a model of biased growth, where, even in the steady state, the efficiency of capital and labour are increasing due to the allocation of resources to the research sector.
JEL Classification Numbers: C62, O31.     

Technological Progress versus Efficiency Gain in Manufacturing Sectors

This study decomposes the nonparametric Malmquist productivity index for 36 Korean manufacturing sectors into two components: technological change and technical efficiency change. The empirical results show that while each sector displays quite different growth patterns, productivity growth is dominated by technological change. Technological change is found to have a negative correlation with efficiency change. Secondary regression performed in this study identifies the relationship between productivity growth measures and several key policy variables, such as effective protection rate, market concentration, and so forth. The productivity estimates are compared with those of the conventional Törnqvist productivity index.     

Human capital in OECD countries: Technical change,efficiency and productivity

The aim of this paper is to analyse the role of human capital in the productivity gains of the OECD countries in the period 1965-90, breaking down the productivity gains into technical change and gains in efficiency. For this purpose we use both a stochastic frontier approach and a non-parametric approach (DEA) and calculate Malmquist indices of productivity. The results obtained indicate the existence of both a level effect (a higher level of human capital raises labour productivity) and a rate effect (a higher level of human capital affects positively the rate of technical change) associated with human capital. The differences among countries in endowments of human capital have worked against labour productivity convergence, since the richer countries, thanks to their greater endowment of human capital, have experienced higher rates of technical change.     

Measuring embodied technical change in the US local telephone industry

This study attempts to measure the rate of embodied technical change by using a short-run variable cost function that contains arguments for labour and capital quality. In this short-run variable cost model, the expansion of the amount of physical capital increases variable costs due to more maintenance outlays, and then it leads to improvements in capital quality. When a measure of competition is included as a proxy for organizational efficiency, improvements in labour and capital quality explain more than two-thirds of productivity growth. The degree of returns to scale and the shadow cost of capital input in the embodiment cost model are presented as well. The study is based on pooled time-series and cross-section data of eight US local exchange carriers.     

Structural Change and Economic Growth in China

This study develops a new analytical framework to account for sources of rapid economic growth in China. The traditional Solow approach is expanded to include another source of economic growth—structural change. The empirical results show that structural change has contributed to growth significantly by reallocating resources from low‐productivity sectors to high‐productivity sectors. It is found that the returns to capital investment in both agricultural production and rural enterprises are much higher than those in urban sectors, indicating underinvestment in rural areas. On the other hand, labor productivity in the agricultural sector remains low, a result of the still large surpluses of labor in the sector. Therefore, further development of rural enterprises and an increase in labor flow among sectors and across regions are key to improvements in overall economic efficiency.     

Distributive impact of structural change: Does environmental degradation matter?

Vulnerability to reduction of natural capital depends on defensive substitution possibilities that, in turn, are affected by the availability of other productive factors. However in several developing countries asset distribution tends to be highly skewed. Taking into account these elements, this paper proposes a model considering an economy polarized into two classes (the rich and the poor) and characterized by the following stylized facts: income and productivity of the rural poor is highly dependent on natural resources; labour remuneration in rural sector represents the opportunity cost for wage labour; the rich can partially substitute natural capital with physical capital and wage labour. In this context, agents differ for feed back mechanisms and interactions between their choices of production and environmental dynamics. Moreover environmental depletion may trigger economic transition, but the structural change is likely to result regressive.     

FACTOR DETERMINANTS OF TOTAL FACTOR PRODUCTIVITY GROWTH FOR THE JAPANESE MANUFACTURING INDUSTRY

This study uses industrial panel data for Japanese manufacturing to estimate the sources of productivity growth by simultaneously considering embodied technical progress, spillover effects, and openness, after controlling for returns to scale, imperfect competition, and capacity utilization. Estimation results show the existence of considerable embodied technical progress and interindustry externalities of capital investments positively affecting productivity growth. Furthermore, embodied technical progress causes research and development (R&D) capital to affect productivity growth insignificantly, suggesting that the impact of R&D is realized only after being embodied into other capitals. From sector‐wise estimations, we notice differences in factors affecting productivity growth between the durable and nondurable manufacturing sectors. (JEL D24, O30)     

Aggregate profitability and income distribution in the UK corporate sector, 1963–1985

This paper analyses the secular and cyclical behaviour of the rate of profit for the UK corporate sector from 1962 to 1985, using the growth accounting framework developed by Weisskopf (1979) for the USA, and the labour share decomposition of Henley (1987). The results show that the five per cent per annum decline in net profit rate in the UK over the period is explained in part by each of the three factors of declining profit share, declining capital productivity and, to a lesser extent, declining capacity utilization. As in the USA profitability peaks prematurely in each business cycle as a result of distributional pressure. Further decomposition of these components points to the importance of inadequate growth of real labour productivity as an explanatory factor, and to the inability of firms to protect profit share from the effect of the pre-1979 growing employer labour tax burden. The post-1980 profit revival in the UK is not explained by a ‘breakthrough’ in terms of an improved growth rate of labour or capital productivity but rather by the sheer length of the sustained business upswing and, as yet, absence of the usual midcycle upward pressure on labour share.     

The Asian Miracle and Modern Growth Theory

The article argues that the rapid growth in a number of Asian economies that occurred between 1960 and 1996 was accompanied by a major change in the structure of their economies including shifts in the size of firms and the sectors of specialisation. These changes were a fundamental component of the growth process. While capital accumulation was an important source of growth, its productive assimilation was a critical component of the success of these economies. Estimates of the contribution of total factor productivity to aggregate growth that neglect these phenomena may lead to erroneous estimates.     

A two-sector Kaleckian model of growth and distribution with endogenous productivity dynamics

This study extends a two-sector Kaleckian model of output growth and income distribution by incorporating endogenous labour productivity growth. The model is composed of investment goods and consumption goods production sectors. The impact of a change in wage and profit shares on capacity utilisation and output growth rates at the sectoral and aggregate levels are identified. The study reveals short-run cyclical capacity utilisation rates and productivity growth dynamics. Even if the short-run steady state is stable, the capital accumulation rate in the consumption goods sector must decrease more than that in the investment sector for long-run stability. When simultaneous rises in profit shares in both the sectors affect long-run aggregate economic growth differently at a steady state, the distributional interests between the same class in different sectors may hamper the long-run economic growth. A policy message is that the effect of income distribution on industrial output growth is not always beneficial. These phenomena are specific to two-sector models and cannot be observed when using conventional aggregate growth models.     

总需求、国际贸易与我国省际生产率变化——基于省际面板数据的研究

全要素生产率的提高是促进经济持续增长的重要原因,对生产率的研究,主要是从供给方面展开的,本文试图从需求角度研究全要素生产率变动的原因。理论上看,总需求通过影响技术创新、技术选择、规模经济效益和要素的使用效率等途径引起生产率的变化,国际贸易则通过促进分工深化、产生技术溢出等促进生产率的提高。然后,本文采用数据包络分析方法测算了中国省际全要素生产率变化,并将其分解为技术效率的变化和技术进步。结果发现中国改革开放以来全要素生产率增长主要是技术进步的结果,技术效率的作用很小。在测算和分解的基础上,利用省际面板数据,就总需求和国际贸易对生产率增长的影响作了实证分析,发现最终消费和资本形成对技术进步和全要素生产率的提高作用显著,出口对生产率增长的作用不显著,进口显著地促进了省际全要素生产率增长和技术进步。     

Convergence in OECD countries: technical change,efficiency and productivity

The aim of this study is to analyse labour productivity convergence in the OECD countries over the period 1975-90. A nonparametric frontier approach is used to calculate the Malmquist productivity index. By breaking it down, the contribution in the growth of labour productivity of technical progress, of changes in efficiency, and of the accumulation of inputs per worker are quantified. Unlike other studies, the results obtained show that technical change has worked against labour productivity convergence, since it has always been greater in the countries with higher labour productivity.