Human capital effects on labour productivity in EU regions

Recent years have seen a wealth of articles on spatial effects in empirical growth specifications. Endogenous growth models, together with the arguments of the new economic geography, have led to spatial dependence being identified with the existence of externalities which cross regional borders. This article continues in this line of research and offers new empirical evidence on the contribution of human capital and agglomeration economies to the differences in productivity in European Union regions. The article uses the spatial Durbin model with different weight matrices to explain the relation between human capital variables and labour productivity, with the advantage that it allows the effects of spatial externalities associated to human capital and agglomeration economies to be quantified.     

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     

An analysis of multiple structural breaks in US relative farm prices

The movement of farm prices relative to other commodity prices is analysed for the period 1913:01 to 2003:12, investigating the number and time of structural breaks and discussing likely causes of structural breaks in the relative farm prices. Bai and Perron's (1998, 2003) multiple structural change test with a dynamic programming algorithm is used. This test makes it possible to have an efficient computation of the estimates of the break points as global minimizers of the sum of squared residuals. We find six structural breaks when we consider only the mean process and two breaks when we consider the mean and autoregressive processes. Possible causes for these breaks are discussed.     

Discrete and smooth switching regressions for Australian labour productivity growth

One of the potential hazards in empirical wok is structural instability. In the simple case where the change from one reime to another is instananeous the analyst can resort to switching regressions after idetifying the offending break. However, what if the transition is gradual, rather than discrete, and takes time to complete? This paper offers a suitable modification of the switching regression model and illustrates how this more general technique can handle smooth transitions when estimating the growth of Australian labour productivity.     

Balanced growth and structural breaks: evidence for Germany

One of the central hypotheses of the neoclassical growth literature is the balanced-growth hypothesis, which predicts that output, consumption and investment grow at the same rate. Empirically, this implies that the consumption-to-output ratio and the investment-to-output ratio must be stationary and that consumption and investment must be cointegrated with output. This article tests these implications with respect to Germany, using unit root tests and cointegration techniques that allow for an endogenously determined structural break. We find that the long-run growth path of the German economy is consistent with the balanced-growth hypothesis if we allow for a structural break associated with the worldwide productivity slowdown of the early 1970s.     

Long-run technical change and multifactor productivity growth in US manufacturing

This study utilizes a translog cost function to produce econometric estimates of the separate influences of technical change versus scale efficiency in contributing to multifactor productivity growth within the US manufacturing sector. The analysis generates (two-digit) industry-specific parameters that capture the effects of output versus time-related shifts in the cost function over the 1949–1991 period. Thus initial evidence concerning the relative importance of technical progress (versus ‘scale’) cannot be provided as a source of productivity gains within two-digit industries. The parametric estimates of total factor productivity growth are compared with existing Divisia measures to explore the shortcomings of the growth accounting technique. These long-run patterns hold implications for the productivity convergence hypothesis traced to knowledge spillovers between industries.     

Cointegration analysis with structural breaks and deterministic trends: an application to the Canadian dollar

This article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real Canada–US exchange rate and commodity prices. Previous empirical studies disagree on whether these variables are cointegrated. The root of disagreement could be in the handling of deterministic trends and potential structural breaks. I find that even after controlling for these matters, the question of whether the real exchange rate and commodity prices are cointegrated for Canada remains unresolved.     

Price convergence in US cities: a cointegration approach with two structural breaks

This article investigates how the price indices of major cities of the US respond to the shock from a city and from monetary policy. We find that the crisis of Bretton Woods system in 1968 and the oil crisis in 1974 should be incorporated as structural breaks in monetary policy variables and price indices. Using cointegration technique with structural break in our aggregated data, we find that the average half-life is 1.75 years, which is closer to what some of others found in disaggregated data, and that the interest rate is an effective tool for controlling cities’ price in short run.     

Capital accumulation,output growth and disparities in labour productivity among Canadian regions

This paper extends the original formulation of the Verdoorn Law and derives a productivity equation in order to measure the effects of capital accumulation, scale economies, and technical progress on growth of productivity in the manufacturing sector of six Canadian regions. Productivity growth appears to be strongly influenced by growth of output but the impact of capital accumulation, although small, is not negligible. The results also indicate that there is evidence of substantial economies of scale in all regions and, contrary to common belief, that productivity growth rate adjusted for cyclical variations continued to decline during the 1980s. The fall in the output growth rate is found to be responsible for most of this decline     

Government intervention,sectoral productivity growth and structural transformation

This article examines the long-term impact of government intervention and sectoral productivity on structural transformation. We construct a multi-sector Dynamic General Equilibrium model that explicitly incorporates government intervention as a force of structural transformation. The government affects the economy through taxation and lump sum transfers. We show that in the steady state, a reduction in the tax rate and an increase in sectoral productivity will decrease the agricultural employment share, and when nonhomotheticity of preference is strong enough, these changes can also increase the share of services employment.     

Regional productivity growth in the EU since 2000: something is better than nothing

This paper examines productivity growth across NUTS 2-regions in the EU during the period in which the Lisbon Strategy was rolled out (period 2000–20     

Commodity exports and labour productivity in the long run

Empirical analysis of dynamic panel data models shows that dependence on exports of ores and metals is associated with lower labour productivity. For other commodity groups, there is no statistically significant effect.     

The significance of structural transformation to productivity growth

This paper critically discusses the most common methodology for decomposing productivity change into inter- and intra-firm effects. It is argued that the methodology can be improved to explicitly take the role of structural transformation into account, and by so doing, a potential source of bias in the results is corrected. This requires the use of a tool from the field of theoretical evolutionary biology: Price’s equation. A review of a sample of studies that apply decomposition analyses shows that the methodology is best suited for studies of the evolution of labour productivity and the reallocation of labour. Based on Danish data for 1992–2010, it is then demonstrated how the results of decomposition analyses can be considerably improved by the explicit inclusion of levels in the selection process. In the specific analysis conducted by the current paper, economic selection among industries is included. It is found that the structural transformation of the economy has a large impact on the results of decomposition studies, not least on the magnitude of the inter-firm selection effect. Structural transformation from capital-intensive and thus high-labour-productivity manufacturing towards labour-intensive and thus low-labour-productivity services entails that the traditional methodology is biased downwards in its measure of economic selection. Finally, it is demonstrated that the length of the interval studied, while often determined by data limitations, has a significant but predictable effect on the results, and it is tentatively demonstrated that economic selection tends to be stronger in the trough of the business cycle.     

Age dependency and labour productivity divergence

This study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth. We applied the fixed effects panel model using data on a large number of countries over the period 1980–2010. Our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity. Child dependency has a more adverse effect on labour productivity than old age dependency. We specifically find that the marginal effects of gross capital formation, information and communication improvement, and labour market reforms are significant at lower levels of age dependency. However, the marginal effect of savings on labour productivity is high at a high level of age dependency. The impact of age dependency varies between developed and developing economies. Diversity in the size and nature of age dependency across regions and different income groups help to explain the labour productivity differential across them.     

The positive relation between average labour productivity and labour intensity

Conclusion In this paper an attempt has been made to reconcile the phenomenon of a simultaneous increase in average labour productivity and labour intensity with neo-classical theory. Under certain technical and psychological conditions, this phenomenon can indeed be generated by a neo-classical model, once it has been assumed that production does not only depend on labour and the number of capital goods but on the operating-hours per machine as well. A necessary condition is that the elasticity of substitution is less than unity. Moreover, the elasticity of the degree of overtime aversion with respect to the number of operating-hours per machine has to be negative and smaller in absolute value than the substitution coefficient.Today almost everybody agrees that in reality the elasticity of substitution is less than unity. So, the technical condition may be called realistic. However, it is doubtful whether this is the case with the psychological condition. It seems rather unrealistic that the aversion against overtime work decreases if one has to work at more inconvenient hours.Thus, we may conclude that it is doubtful whether amended neoclassical theory is able to give a realistic explanation of the phenomenon of simultaneously increasing labour intensity and labour productivity. In this respect approaches which discern the phenomenon of labour hoarding [5] or employ U-shaped short-run cost curves [2], may be more promising.I wish to thank Professors F. Hartog, F. J. de Jong, and G. F. Pikkemaat, and Mr. J. W. Gunning for making useful comments on a first draft of this paper.     

The Delta-Model Revisited: Recent trends in the structural performance of the Dutch economy

Since the late 1980s, the Dutch economy has outperformed neighbouring countries in terms of employment and GDP growth. We argue that the recent growth performance of the Netherlands has primarily been the result of a correction of the belowaverage performance during the 1970s. This correction was mainly brought about by a significant wage moderation since the early 1980s, probably strengthened by the creation of a more effective wage negotiation structure and measures to reduce the replacement rate. Furthermore, we show that the euphoria about the 'Delta model' is dampened by a slowdown in labour productivity performance, which appears to be particular serious in major parts of the services sector.     

Input substitution,economies of scale and productivity growth in the US upholstered furniture industry

Cost, factor demand and productivity growth are considered in the upholstered furniture industry over 1958–87. Factors are divided into labour, capital and materials. It is found that all inputs are substitutes in production although substitution elasticities are small. Factor demand is price-inelastic for all inputs. The industry operates around minimum average cost. Productivity growth is small but significant. The results indicate that labour will continue to be important in the industry. However, regional comparative advantage is not related to labour alone; the results suggest that policies to attract or retain the industry must consider the low degree of factor substitution.     

Community banks,money and labour productivity

Does money affect productivity? We examine whether bank deposits, a measure of the money supply that excludes currency in circulation, influence labour productivity. Banks deposits are special in that they facilitate transactions and, in aggregate, add liquidity and credit availability to a region. By exploiting the distribution of community bank deposits across the states, we test the hypothesis that money is an input to the production function under a variety of panel data methods. We find evidence that bank transaction deposits and total deposits along with other production function inputs such as wages, labour and gross state product are cointegrated across the states; however, the economic contribution of money to labour productivity appears limited.