Productivity, convergence and policy: a study of OECD countries and industries

This paper analyses trends in labour productivity and its underlying determinants in a panel of OECD countries from 1979 to 2002. Data Envelopment Analysis (DEA) is used to estimate a Malmquist measure of multifactor productivity (MFP) change. We decompose the growth in labour productivity into (i) net technological change (ii) input biased technical change (IBTC) (iii) efficiency change and (iv) capital accumulation. We analyse the effect of each of these factors in the transition towards the equilibrium growth paths of both labour productivity and per capita GDP for the OECD countries, controlling for the effects of different policies and institutions. The results indicate that on average gaps in productivity or income levels are narrowing down although there is no evidence to suggest that the entire OECD area comprises a single convergence “club”. Using kernel estimation methods we find that that labour productivity and per capita GDP are settling toward a twin peak (bimodal) distribution. Panel unit root tests over an extended (1960–2001) period provide general support for the convergence hypothesis. Analysis of the contributions of productivity growth within industries and sectoral composition changes show that aggregate productivity change is predominantly driven by ‘net’ within sector effects with very little contribution emerging from sectoral shifts (the ‘in-between’ static or dynamic effects resulting from higher or above average productivity industries gaining employment shares or low productivity industries losing shares).     

Embodying Embodiment in a Structural,Macroeconomic Input-Output Model

In this paper, I develop a regression-based system of labour productivity equations that account for capital-embodied technological change and I incorporate this system into IDLIFT, a structural, macroeconomic input-output model of the US economy. Builders of regression-based forecasting models have long had difficulty finding labour productivity equations that exhibit the "Solowian' property that movements in investment should cause accompanying movements in labour productivity. The production theory developed by Solow and others dictates that this causation is driven by the effect of traditional capital deepening as well as technological change embodied in capital. Lack of measurement of the latter has hampered the ability of researchers to estimate properly the productivity-investment relationship. Recent research by Wilson (2001) has alleviated this difficulty by estimating industry-level embodied technological change. In this paper, I utilize those estimates to construct capital stocks adjusted for technological change and then use these adjusted stocks to estimate Solow-type labour productivity equations. It is shown that replacing IDLIFT's former productivity equations, based on changes in output and time trends, with the new equations, results in a convergence between the dynamic behaviour of the model and that predicted by traditional (Solowian) production theory.     

Convergence in international output

This paper proposes and tests new definitions of convergence and common trends for per capita output. We define convergence for a group of countries to mean that each country has identical long-run trends, either stochastic or deterministic, while common trends allow for proportionality of the stochastic elements. These definitions lead naturally to the use of cointegration techniques in testing. Using century-long time series for 15 OECD economies, we reject convergence but find substantial evidence for common trends. Smaller samples of European countries also reject convergence but are driven by a lower number of common stochastic trends.     

Evaluating Productivity Growth Measures in the EU

In this paper we evaluate the productivity growth of the member countries in the European Union (EU) before and after the enforcement of the Maastricht convergence criteria in 1992. Total factor productivity was measured by employing the growth-accounting approach and Tornqvist indices. The evaluation of productivity growth was performed by employing the non-parametric method of Data Envelopment Analysis (DEA) in particular years and within three time periods. DEA was also used to evaluate the relative efficiency of EU members with respect to the convergence criteria with important implications for their economic integration. TFP growth was found to have contributed the most in the EU, while its share in the latest recessions was the smallest as compared to labor and capital share.     

Technological Change and Transition: Relative Contributions to Worldwide Growth During the 1990s*

In this paper we use the Kumar and Russell [American Economic Review (2002) Vol. 92, pp. 527–548] growth‐accounting procedure to examine cross‐country growth during the 1990s. Using a data set comprising developed, newly industrialized, developing and transitional economies, we decompose the growth of output per worker into components attributable to technological catch‐up, technological change and capital accumulation. In contrast to the study by Kumar and Russell, which concludes that capital deepening is the major force of growth and change in the world income per worker distribution over the 1965–90 period, our analysis shows that, during the 1990s, the major force in the further divergence of the rich and the poor is due to technological change, whereas capital accumulation plays a lesser and opposite role. Finally, although on average we find that transitional economies perform similar to the rest of the world, the procedure is able to discover some interesting patterns within the set of transitional countries.     

LABOUR PRODUCTIVITY CHANGES AND WORKING TIME: THE CASE OF GREECE

In terms of the annual hours worked per employee, Greece ranks first among EU-15 countries and second among OECD countries. In this context, the austerity measures it adopted (as suggested by the EU and IMF) imply, among other things, a reduction in the over-hours. If such reductions were not to be accompanied by increases in labour productivity, output would be reduced considerably. This paper therefore addresses the question: “What change in sectoral labour productivity levels would have been required to deliver the actual change in final demands in Greece between 1995 and 2005, if working hours in each sector had been reduced to their EU averages?” In this framework, we develop a methodology for calculating labour productivity change by sector of economic activity in an input–output context. Next, we apply it to the Greek economy for the time period 1995–2005, the most recent period for which the required data are available. We find that the required productivity changes are the most substantial for the hotels and restaurants sector, followed by machinery manufacturing and the trade sectors.     

Is the emperor wearing new clothes? A social assessment of the European Union 2007–2013 financial framework

ABSTRACT

Over the years, European leaders have proudly waved a social flag as one of the European Union’s (EU) constituent and differentiating elements. This commitment is assessed here through the social footprint of the European 2007–2013 multiannual financial framework among the EU countries and, worldwide, using an extended multiregional input–output model. The focus is on the quantity and the quality of income and jobs generated. We find that well-known differences among its northern, southern and eastern regions threaten the EU’s intentions for high social standards, enabling first- and second-class winners. Core EU countries account for the most of the Funds and, thus, most of the positive economic and social impacts, mainly through spillovers from peripheral regions. Beyond the EU borders, Funds expenditures induce capital compensation boosts in emerging countries not balanced by a similar labor compensation impulse. Indeed, China captures the bulk of low-skilled and temporary employment.     

Creation of climate-smart and energy-efficient agriculture in the European Union: Pathways based on the frontier analysis

Creation of the climate-smart agriculture requires efficient resource use and mitigation of the environmental pressures among other objectives. Therefore, it is important to assess the energy efficiency and productivity growth in the European Union's agriculture. This paper analyses the sample of the selected European Union member states. The productive technology including the energy consumption and the resulting greenhouse gas (GHG) emission is constructed. The measurement of the energy efficiency and productivity change relies on the slacks-based measure and Luenberger productivity indicator. The productivity growth was decomposed with respect to the input/output variables and the sources of growth (i.e., efficiency change and technical progress). The average annual productivity growth of 0.79% was obtained for the selected countries during 1995–2016. The highest productivity gains were observed in Lithuania, Denmark, Belgium and Romania (1.27%–1.94% per year). The productivity growth related to GHG emission dominated the contributions by the input/output variables in Lithuania, Denmark, Belgium, Romania, Poland, Austria, France, the Netherlands, Hungary and Estonia.     

Exploring the role of technology,tourism and financial development: an empirical study of Vietnam

Vietnam is one of the emerging and industrializing developing countries in East Asia that has experienced a growth in tourism, information and communications technology (ICT) and financial development over the last three decades largely supported by significant structural reforms to escalate its path towards modernization and industrialization by 2020. In this paper, we explore the short-run and long-run effects of tourism, ICT and financial development over the period 1980–2010. Further, we examine the causation between these contemporary drivers of growth. The results show tourism has a positive and statistically significant effect in the short-run whereas ICT and financial development have a momentous positive and significant effect in the long-run. The causality results show unidirectional causation from capital per worker, ICT and financial development to output per worker; from ICT and financial development to capital per worker; and from capital per worker to tourism. Further, we also note a bi-directional causation between tourism and output per worker indicating their mutually reinforcing effect in the economy.     

Post-War Growth, Productivity Convergence and Reconstruction

In this paper, it is shown that aggregate cross-country analyses of the growth process of the industrial countries should take reconstruction effects into account. The enormous growth rates in many European countries and in Japan in the fifties which often appear as outliers in aggregate analyses of productivity convergence can be understood as a catching-up with respect to the past. Neoclassical capital deepening combined with arguments from growth models relying on the stock of knowledge, knowledge spillovers and technological diffusion as the source of economic growth can explain the fast reconstruction after the war, without referring to country-specific growth factors.     

European integration,productivity growth and real convergence: Evidence from the new member states

We estimate the determinants of labor productivity growth in 8 new European Union (EU) member states that joined the Union in 2004. Our focus is on the impact of globalization and EU integration efforts on labor productivity growth. Previous studies test the impact of trade using either exports or trade openness. We also test the impact of imports separately on labor productivity growth. Using panel data for 1995–2006 period, we find that globalization has mixed effects. FDI and exports improve productivity, but imports hurt it. Regarding domestic variables, we find that human capital is the most important source of labor productivity growth in the new member states. There is also considerable adjustment of labor productivity towards EU15 levels, indicating significant “catching up” and hence real convergence. Policy implications of the findings are also discussed.     

Exploring the link between research and economic growth: an empirical study of China and USA

In this paper, we explore the link between scientific and technical research and economic growth in China and USA over the sample period 1981–2012 using the extended Cobb–Douglas model with capital per worker and the quantity of scientific and technical journal articles (research publications) per worker. We examine the cointegration relationship and present the short-run and long-run results using the autoregressive distributed lag bounds procedure. Further, we examine the direction of causality between research publications per worker results and economic growth variables using the Toda and Yamamoto (J Econom 66(1–2):225–250, 1995) procedure. Our results indicate for both countries research publications per worker positively influence the output per worker both in the short-run and the long-run. The causality results for China indicate a bi-directional causality between research publications per worker and output per worker, duly emphasizing the mutually reinforcing effect. In case of USA, we note a unidirectional causation output per worker to research publications per worker indicating that output Granger cause research publications.     

Polarization of the worldwide distribution of productivity

We employ data envelopment analysis (DEA) methods to construct the world production frontier, which is in turn used to decompose (labor) productivity growth into components attributable to technological change (shift of the production frontier), efficiency change (movements toward or away from the frontier), physical capital deepening, and human capital accumulation over the 1965–2007 period. Using this decomposition, we provide new findings on the causes of polarization (the emergence of bimodality) and divergence (increased variance) of the world productivity distribution. First, unlike earlier studies, we find that efficiency change is the unique driver of the emergence of a second (higher) mode. Second, while earlier studies attributed the overall change in the distribution exclusively to physical capital accumulation, we find that technological change and human capital accumulation are also significant factors explaining this change in the distribution (most notably the emergence of a long right-hand tail). Robustness exercises indicate that these revisions of earlier findings are attributable to the addition of (more recent) years and a much greater number of countries included in our sample. We also check to see whether our results are changed by a correction for the downward bias in the DEA construction of the frontier, concluding that these corrections affect none of our major findings (essentially because the level correction roughly washes out in changes.)     

Public support for performing arts. Efficiency and productivity gains in eleven European countries

This paper investigates the importance of public cultural expenditure for the efficiency and productivity of the performing arts (PA) firms. To this aim, we estimate a translog production function using the stochastic frontier approach (SFA), and we obtain the estimates of both technical efficiency and its determinants for the PA firms in EU-11 countries over the period 2009–2017. The large panel data set enables the application of robust true random-effects SFA techniques, which control for noise, unobserved firms' heterogeneity and endogeneity of the inputs. Moreover, by estimating a production function, the characteristics of the production technology in the PA sector is also derived. The empirical results demonstrate that PA firms are technically inefficient, implying that the investigated firms could increase their artistic output between 32 and 42% and that decreasing returns to scale are prevalent, due to the presence of too many micro and large-scale firms in the European PA sector. In contrast to the seminal Baumol and Bowen's [5] paper, we also demonstrate that the total factor productivity (TFP) increased in the EU PA firms over the examined period. Technical efficiency, although relatively low, was the main driver of this productivity growth, as opposed to scale efficiency change or technological change, which display very small or no increases. We also find that, contrary to the common wisdom on its negative effects on firm efficiency, public spending on culture increases the efficiency of PA firms. Within this context some policy implications are discussed.     

Testing the Stability of a Production Function with Urbanization as a Shift Factor

Urban economists have long sought to explain the relationship between urbanization levels and output. In this paper we revisit this question and test the long-run stability of a production function including urbanization using non-stationary panel data techniques. Our results show that a long-run relationship between urbanization, output per worker and capital per worker cannot be rejected for either our sample of 30 developing countries or our sample of 22 developed countries. We do find, however, that the sign and magnitude of the impact of urbanization varies considerably across the countries. In addition, we estimate the long-run average effects on GDPW of urbanization and capital. These results offer new insights and potential for dynamic urban models rather than the simple cross-section approach.     

Structural change and blurred sectoral boundaries: assessing the extent to which knowledge-intensive business services satisfy manufacturing final demand in Western countries

This paper focuses on the vertical integration of knowledge-intensive business services (KIBS) into manufacturing sectors, using a subsystem approach to input–output analysis. It aims at correctly assessing the process of structural change that has occurred in the four main European countries (France, Germany, Italy and the UK) over time (1995–2005). It does not focus on KIBS sectors per se, but on their function as carriers and sources of knowledge which influences the performance of sectors, value chains and clusters across industries and within countries. The analysis shows that KIBS’ contribution to satisfying the final demand of manufacturing is in general largely underestimated; that KIBS vertical integration into manufacturing has increased over time in all the countries investigated except the UK; and that the extent to which manufacturing sectors outsource to KIBS is significantly affected by their technological intensity.     

Technology capital: the price of admission to the growth club

We assess long-run patterns of global agricultural productivity growth between 1970 and 2005 and examine the relationship between investments in technology capital and productivity. To measure agricultural total factor productivity (TFP) we employ a Solow-type growth accounting method to decompose output growth into input and TFP growth. For technology capital we construct two indexes reflecting national capacities in agricultural research and education-extension for 87 developing countries. We then correlate technology capital levels with long-term growth rates in agricultural TFP. Our findings show that global agricultural TFP growth as a whole accelerated since 1980, although performance was very uneven across developing countries. TFP growth rates were significantly influenced by technology capital. Marginal improvements to research capacity, given a minimal level of extension and schooling existed, were associated with faster TFP growth. However, marginal increases in extension-schooling without commensurate improvements in research capacity did not improve productivity performance.     

R&D subsidies and productivity in eastern European countries

This paper shows that R&D subsidy policies at the European Union (EU) and national levels stimulated labor productivity in Central and Eastern European countries (CEEC) in the years after their entry to the EU. However, the average impact of national funding on labor productivity was higher for countries in the Western control group than in the CEEC sample. EU R&D subsidies compensated the CEEC in part for the greater innovation impact of Western economies. Although they crowded out some R&D subsidies by local governments at the country level, the EU subsidies crowded in many national and local subsidies at the firm level. Local/regional state innovation aid to enterprises encouraged no increase in labor productivity in all but one of the sample CEEC countries. These impacts are assessed in a sequential structural econometric model estimated using Eurostat’s collection of Community Innovation Surveys covering the years 2006–2014.     

Localized Innovation and Productivity Growth in Asia: An Intertemporal DEA Approach

Recent contributions to growth theory stress the importance of localized innovation for the performance of more backward countries. In earlier papers, analyses by means of DEA techniques confirmed this intuition. In this paper, we extend this type of analysis by relaxing the macroeconomic viewpoint adopted until now. New databases on output, labor and capital input in the agricultural and manufacturing sectors are developed for 40 countries. Using intertemporal DEA, it is found that changes in the global production frontier are localized at high levels of capital intensity. This result is stronger in agriculture than in manufacturing. Further, a decomposition of labor productivity growth in eight Asian countries for the period 1975–1992 into the effects of capital intensification, learning and innovation is made. The results suggest that there is a particular development path in which increases in capital intensity appear to be a prerequisite to benefit from international technology spillovers.JEL Classification: O14, O30, O40, O47     

Knowledge externalities and demand pull: The European evidence

This paper elaborates the microeconomic foundations of the demand pull hypothesis stressing the role of vertical knowledge externalities stemming from user–producer knowledge interactions that parallel vertical transactions. The paper articulates and tests the hypothesis that such competent demand is actually able to pull technological change only when it is expressed by advanced users, able to provide relevant knowledge externalities to their customers. Using input output tables we test empirically this hypothesis for 15 European countries in the years 1995–2007. The evidence confirms that the increase in productivity of the upstream sectors is positively influenced by the sector-level derived demand, according to the upstream rates of introduction of innovations and to the intensity of the user–producer interactions. The policy implications of the analysis enable to elaborate and implement the notion of a ‘competent’ public demand.