Market Services: Productivity Benchmarks for the UK

This paper presents comparisons of labour productivity (value added per hour worked) in market services for the UK, the US, France and Germany in 1993. Market services, defined as (1) Distribution, Hotels and Catering, (2) Transport and Communications and (3) Finance, Insurance and Real Estate, make up 34–43 percent of total employment in the four countries. For productivity in market services overall, the US led the UK by 35 percent in 1993, Germany led the UK by 34 percent and France led the UK by 36 percent. The UK productivity shortfall vis-à-vis Germany and France was wider in market services than in manufacturing.     

Accounting for growth in retail trade: an international productivity comparison

In this paper we argue that the standard approach for measuring output and productivity in the trade sector has become obsolete. The key problem is that changes in prices of goods purchased for resale are not accounted for. We outline a consistent accounting framework for measuring trade productivity and provide new estimates, taking into account purchase prices of goods sold in a double deflation procedure. We find strong productivity improvements in the UK and US compared to France, Germany and The Netherlands since the mid-1990s. This finding is robust for various productivity measurement models.

Business Strategy and Firm Reorganization: Role of Changing Environmental Standards,Sustainable Business Initiatives and Global Market Conditions

My study is framed against the backdrop of increasingly stringent environmental demands on the pulp and paper industry to reduce water and air pollution, and the changing global market conditions. I first present an observation‐based analysis conducted by visiting selected paper mills in Finland, the US, Germany and Sweden. Interesting differences and similarities emerge. Some of the observed differences lie in their focus on achieving incremental efficiency gains from better management of production processes, inventories, supply‐chain, product distribution and timing of modernization investments such as information technology. In the second part of the paper I present evidence on firms' productivity paths and the heterogeneity in productivity among relatively similar firms, and selected evidence of firms' investments in specific areas and how these affected productivity. My findings have implications for organizational behavior and business strategies employed by firms to improve their performance and productivity under changing environmental standards and market conditions. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

Tighter labour markets to finally lift global wages

• Wage growth has been relatively slow since 2007 in advanced economies, but an upturn may be in sight. Slow productivity growth remains an issue but tighter labour markets make a positive response by wages to rising inflation more likely and there are signs that compositional and crisis‐related effects that dragged wage growth down are fading – though Japan may be an exception.
• Overall, our forecasts are for a moderate improvement in wage growth in the major economies in 2017–18, with the pace of growth rising by 0.5–1% per year relative to its 2016 level by 2018 – enough to keep consumer spending reasonably solid.
• Few countries have maintained their pre‐crisis pace of wage growth since 2007. In part this reflects a mixture of low inflation and weak productivity growth, but other factors have also been in play: in the US and Japan wage growth has run as much as 0.5–1% per year lower than conventional models would suggest.
• The link with productivity seems to have weakened since 2007 and Phillips curves – which relate wages to unemployment – have become flatter. A notable exception is Germany, where the labour market has behaved in a much more ‘normal’ fashion over recent years with wage growth responding to diminishing slack.
• ‘Compositional’ factors related to shifts in the structure of the workforce may have had an important influence in holding down wage growth, cutting it by as much as 2% per year in the US and 1% per year in the UK. There are some signs that the impact of these effects in the UK and US are fading, but not in Japan.
• The forecast rise in inflation over the next year as energy price base effects turn positive is a potential risk to real wages. But the decline in measures of labour market slack in the US, UK and Germany suggests wages are more likely to move up with inflation than was the case in 2010–11 when oil prices spiked and real wages fell.

     

The business cycle in the G-7 economies

In this paper the Hodrick–Prescott filter is used to decompose real GDP for the G7 countries into cyclical and trend components. The resulting series of cyclical components are then examined for static relationships, using correlations and graphs; long-run relationships using autoregressive-distributed lag models; and short-run relationships, using error–correction models. The main result is that the patterns of cyclical behaviour changed following the oil price shocks in the 1970s. Since 1980, cyclical fluctuations have been smaller as a result of a decline in synchronisation of the cycles in the G7. Two separate cycles seem to be developing since 1990. One is for Germany, Italy and France, whilst the other is for the US, UK and Canada. Within each of these groups there are both long-run and short-run relationships between the cyclical components of GDP.     

Productivity and Trade Orientation in UK Manufacturing*

We show that improvements in aggregate productivity in UK manufacturing during the first years after the implementation of the Euro, by the UK's main trading partners in Europe, are determined by both market share reallocation and within‐company productivity growth. Furthermore, we outline a structural methodology for estimating parameters of a production function linking the unobservable productivity to endogenous company‐level trade orientation, investment and exit decisions. This allows us to back out consistent and unbiased estimates of productivity dynamics by trade orientation of companies within four‐digit UK manufacturing industries using FAME data over the period 1994–2001. Our estimates of productivity dynamics indicate that improvements in aggregate productivity were mainly driven by market share reallocations away from inefficient and towards efficient exporting companies alongside productivity improvements within non‐exporting companies.     

Keynesian impulses versus Solow residuals: identifying sources of business cycle fluctuations

We employ a neoclassical business‐cycle model to study two sources of business‐cycle fluctuations: marginal efficiency of investment shocks, and total factor productivity shocks. The parameters of the model are estimated using a Bayesian procedure that accommodates prior uncertainty about their magnitudes; from these estimates, posterior distributions of the two shocks are obtained. The postwar US experience suggests that both shocks are important in understanding fluctuations, but that total factor productivity shocks are primarily responsible for beginning and ending recessions. Copyright © 2000 John Wiley & Sons, Ltd.     

A look at productivity at the firm level in eight French service industries

In this paper, we take advantage of information collected by the French annual survey of market services to analyze productivity differences and changes among firms in eight major industries (restaurants, hotels, engineering, computer programming, computer processing, legal services, accounting and building cleaning), over the five-year period 1984–1988. We find a pattern of cross-sectional and time-series type estimates of the Cobb-Douglas production function, which is comparable to that typically found in studies of manufacturing industries, thus raising similar issues of interpretation and modeling. Using a capital stock measure corrected for rented equipment and building and taking into account the number of hours of work of work per employee improve these estimates to some extent. An interesting finding is that the output elasticity seems significantly smaller with respect to hours per employee than with respect to the number of employees.     

Output and productivity growth in the education sector: comparisons for the US and UK

This paper considers the measurement of performance in public service provision in an international context by examining outcome-based measures for the education sector. It first sets out the measurement issues in general terms. The paper then applies these methods to comparing the UK experience with that in the US over the period 1979–2002. The results show higher labour productivity growth in the UK education sector than in the US over this time period, so that the UK eliminated the productivity gap with the US by the end of the Century.

The productivity of transport infrastructure investment: A meta-analysis of empirical evidence

Investments in transport infrastructure have been widely used by decision makers to encourage economic growth, particularly during periods of economic downturn. There has been extensive research on the linkage between transport infrastructure and economic performance since the late 1980s, characterised by widely varying evidence. We conduct a meta-analysis of the empirical evidence on the output elasticity of transport infrastructure, based on a sample of 563 estimates obtained from 33 studies. Previous meta-analyses have focused on total public capital and hence cannot appropriately explain the wide variation in the productivity effect of transport infrastructure nor provide guidance to policymakers on the returns to investment in different types of transport infrastructure. Our results indicate that the existing estimates of the productivity effect of transport infrastructure can vary across main industry groups, tend to be higher for the US economy than for European countries, and are higher for roads compared to other modes of transport. The variation in the estimates of the output elasticity of transport is also explained by differences in the methods and data used in previous studies. Failing to control for unobserved heterogeneity and spurious associations tends to result in higher values, while failing to control for urbanisation and congestion levels leads to omitted variable bias. These findings can be used to inform future research on the choice of model specification and estimation and transport-related policy making.     

Election forecasting: Too far out?

We consider two criteria for evaluating election forecasts: accuracy (precision) and lead (distance from the event), specifically the trade-off between the two in poll-based forecasts. We evaluate how much “lead” still allows prediction of the election outcome. How much further back can we go, supposing we tolerate a little more error? Our analysis offers estimates of the “optimal” lead time for election forecasts, based on a dataset of over 26,000 vote intention polls from 338 elections in 44 countries between 1942 and 2014. We find that optimization of a forecast is possible, and typically occurs two to three months before the election, but can be influenced by the arrangement of political institutions. To demonstrate how our optimization guidelines perform in practice, we consider recent elections in the UK, the US, and France.     

Global wages: we don't (yet) have lift‐off

• ? Policymakers, most notably in the US, have been expecting wage growth to pick up for some time as job markets tighten. But the data over the last six months have shown few indications of wage lift‐off. Our review of the latest evidence suggests that although labour markets are, on the whole, still tightening, we see increased downside risks to our forecasts for faster global wage growth in 2018–19.
• ? Rates of “churn” in labour markets – a possible precursor to faster wage growth – have continued to rise in the US and parts of Europe.
• ? But other structural factors may still be holding wages down. A recovery in prime‐age participation in the US may be helping to cap wage rises, as may a pool of “underemployed” workers in the US and UK (though this pool is shrinking fast).
• ? Productivity growth also remains weak, running at a 0.5%–1% annual pace in Q1 2017 across the US, UK, Germany and Japan. This compares with a G7 average pace of 1.5% per year in 1985–2006.
• ? Overall, the risks to our baseline forecast of faster wage growth in the major economies in 2018 look skewed to the downside. We expect wage growth to firm in 2018 by 0.5–1 percentage points in the US, UK, Germany and Japan. We would give this modal forecast a probability of around 60%, but with a 25% chance that wage growth is somewhat slower than this and only a 15% chance that it is higher.

     

Time-Varying Relationship between Inflation and Inflation Uncertainty

This paper investigates whether the relationship between inflation and inflation uncertainty has changed and whether the change in this relationship has been gradual or abrupt. We extend the time-varying parameter with stochastic volatility in mean model (TVP-SVM) to include a mixture innovation disturbance in the time-varying parameter process. The proposed model produces more reliable estimates and allows us to investigate the occurrence of breaks in the gradually evolving process of the time varying coefficients. Using data of US, Germany, Canada, New Zealand, UK, France, Italy, Spain and Australia, we find that: (i) the relationship between inflation and inflation uncertainty substantially varies over time; (ii) there is strong support for the existence of abrupt changes in the US inflation–inflation uncertainty relationship; (iii) our empirical results of Canada and New Zealand show that the correlation between inflation and inflation uncertainty has been much weaker since early 1990s, which coincides with the timing of the implementation of inflation targeting.     

The change in productivity of Chinese state enterprises, 1983–1987

This study estimates the change in productivity of Chinese state enterprises during 1983–1987 using a panel data set of 403 firms. A new approach to productivity measurement is used. Under this approach, the production functions can differ arbitrarily across firms, important given the heterogeneity of the sample. The resulting coefficients estimate the marginal products of each factor as well as overall productivity growth. The results suggest Chinese productivity increased by 4.6% per year, with about half of this growth due to the rapidly improving education of the labor force.     

Errors of measurement and the recent acceleration in manufacturing productivity growth

Using detailed (4-digit SIC) industry data for the years 1958–1989, I examine whether the recent acceleration in manufacturing productivity can be attributed to the effects of mismeasurement of the prices of inputs and output, by testing a model linking a set of proxy variables for measurement error to a series of measures of acceleration in total factor productivity (TFP). Alternative TFP estimates are presented in order to determine if the findings are sensitive to the method of TFP calculation. The results are inconsistent with the measurement error hypothesis and invariant to the specification of the TFP equation.     

UNEMPLOYMENT,HUMAN CAPITAL DEPRECIATION,AND UNEMPLOYMENT INSURANCE POLICY

This paper presents a structural estimation of a life cycle model with unemployment risk. The model allows for human capital depreciation during unemployment. It is estimated using German and US household‐level data. The data suggest that the adverse impact of unemployment on individual productivity is important in both countries, but quantitatively more relevant in Germany. Moreover, simulations show that the combination of skill depreciation with the generous unemployment insurance system that was in place in Germany until recently is a key factor in explaining the differences in labour market performance between these countries. Copyright © 2012 John Wiley & Sons, Ltd.     

Does pay affect productivity or react to it?: Examination of U.S. manufacturing

There may be a bi-directional relationship between wages and labor productivity. According to conventional theory, employers reward improvements in productivity by raising pay. It also has been argued that wage increases can provide an incentive to improve productivity. This study applies a technique by Geweke to identify the feedback between pay and productivity in U.S. manufacturing. For the 1949–1998 period, measures of directional feedback indicate that both “pay as reward” and “pay as incentive” behaviors have occurred, but the results vary across manufacturing subsectors.     

Measuring the interconnectedness of financial institutions

This paper uses sophisticated empirical methodology to measure the interconnectedness of financial institutions in five developed economies – France, Germany, Japan, UK and USA – for the period January 2000 to November 2009. The study goes beyond the conventional use of first and second moments of returns and uses the timevarying equity price of risk methodology to measure the level of convergence of the financial sectors in the countries of interest. More specifically, Kalman filter convergence tests are applied to the weekly equity price of risk data to measure the interconnectedness between these countries’ and the US finance sectors. Results indicate the presence of short-term timevarying interconnectedness of the finance sectors of France, Germany and the UK with that of the US and steady-state longer term interconnectedness only between Germany and the US. Short-term and long-term steady-state interconnectedness between Japan and the US is not evident. We conclude that going forward in an environment of increased interconnectedness of international financial markets, a coordinated global financial regulatory policy with discretionary allocation of resources and execution strategy at a national level is the preferred regulatory structure to ensure sound operations of international financial systems.     

Price Stickiness in the US and Europe Revisited: Evidence from Internet Prices*

This paper compares price stickiness on the Internet and in traditional brick‐and‐mortar stores and examines differences across five countries: France, Germany, Italy, the UK and the US. Contrary to conventional retail prices, we find that Internet prices change less often in the US than in EU countries. However, this does not hold for all product categories. Second, prices on the Internet are not necessarily more flexible than prices in brick‐and‐mortar stores. Third, our dataset reveals substantial heterogeneity in the frequency of price changes across Internet shops. Finally, panel logit estimates suggest that the likelihood of observing a price change is a function of both state‐dependent and time‐dependent factors.     

A Cost Indirect Evaluation of Productivity Change in UK Universities

The study provides an empirical analysis of productivity change in publicly-funded UK universities, against a background of government policy specifically designed to enhance the productive efficiency of universities in the provision of teaching and research. The nonparametric analysis employs a cost indirect approach to measuring productivity change, taking explicit account of the quality of research output and decomposing productivity change into technical change and efficiency change. The latter is also decomposed into changes in pure technical efficiency, scale efficiency and output congestion. Changes in size efficiency are also computed. On average, productivity declined by 4% over 1989–92, mainly as a result of regressive technical change. Evidence of biased technological change was found, with the frontier shifting out in favour of the teaching outputs and in relative to the research output.