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.     

The Impact Of Computer Prices On International Comparisons Of Labour Productivity

This paper analyses the international comparability of methods used to convert the value added of the office and computing machinery sector (OCM) into constant prices for nine OECD countries. It concludes that the variations which exist in the price indexes are largely due to differences in the methods countries use to capture changes in the quality of an industry's output over time. The paper evaluates the impact of these different OCM price indexes on the growth rate of labour productivity during the 1980s by conducting a sensitivity test where the US OCM index is substituted for each of the individual country indexes. This experiment causes the OCM labour productivity growth rate to change by over a factor of ten for several countries. This result suggests that international comparisons of labour productivity should not be made for the OCM sector using the official data, and that labour productivity comparisons of sectors OCM belongs to—non-electrical machinery and fabricated metal products and machinery—should be conducted cautiously, if at all.     

Recent trends and structural breaks in the US and EU15 labour productivity growth

This article examines shifts in labour productivity growth in the US and in Europe between 1970 and 2007 based on econometric tests of structural breaks. Additionally, it makes use of time-series-based projections of labour productivity growth up to 2009 in order to detect breaks depending on confidence intervals of the projections. The identification of structural breaks in the US labour productivity growth is far from obvious. A statistically significant break is found in the late 1990s only if at least the 97.5th percentile of forecasts materializes in the future, which means that despite a clear pick up in productivity growth in the second half of the 1990s, the size of the hump is not large enough compared with past variations to make this change a statistically significant break. However, a significant break point is detected in the mid-1990s for the difference in labour productivity growth between the US and the EU15, even when controlling for the convergence of Europe towards the US productivity levels that has contributed to higher European performance in the early catch up phase. Finally, within Europe, the accumulation of Information and Communication Technology (ICT) capital seems to be related to differences in the shifts in structural labour productivity growth across countries.     

Is there an export or import-led productivity growth in rapidly developing Asian countries? a multivariate VAR analysis

In contrast to cross-country studies, the paper investigates the relationships between trade and labour productivity for nine rapidly developing Asian countries in a time-series framework using a vector error-correction model. Independent tests on the long-run and short-run relationship between trade variables of exports and imports and productivity are conducted. The results suggest that trade has an important impact on productivity and output growth in the economy, however it is imports that provide the important?‘virtuous’?link between trade and output growth. The results indicate that exports and imports have qualitatively different impacts on labour productivity. The long-run result shows that there is no causal effect from exports to labour productivity growth for Hong Kong, Indonesia, Japan, Taiwan and Thailand; thereby suggesting that there is no export-led productivity growth in these countries. However, significant causal effects were found from imports to productivity growth, suggesting import-led productivity growth in India, Indonesia, Malaysia, Philippines, Singapore and Taiwan. In addition, the results indicate that imports tend to have greater positive impact on productivity growth in the long run.     

Are wages and productivity converging simultaneously in Euro-area countries?

A convergence analysis is applied to wages and productivity for Euro-area countries in the period from 1981 to 2001. The results show a reduction in the dispersion of wages and unit labour costs, but not in productivity. Different patterns are found for real and nominal wages: higher levels of inflation in countries with higher growth rates of unit labour costs have caused nominal wages to move towards equalization. Moreover, disparities in all the variables have remained more or less the same since 1997, suggesting that the establishment of a single currency area has not accelerated the process of wage equalization.     

Coordination versus flexibility in wage formation: a focus on the nominal wage impact of productivity in Germany,Greece, Ireland,Portugal, Spain and the United States

Wage coordination between countries of the European Monetary Union (EMU) aims at aligning nominal wage growth with labour productivity growth at the national level. We analyse the developments in Germany, the EMU’s periphery countries Greece, Ireland, Portugal and Spain along with the United States over the period 1980 to 2010. Apart from the contribution of productivity to nominal wages, we take into account the contributions of prices, unemployment, replacement rates and taxes by means of an econometrically estimated nonlinear equation resulting from a wage bargaining model. We further study the downward rigidities of nominal wages. The findings show that in past times of low productivity, price inflation and reductions in unemployment still put significant upward pressure on nominal wage growth. The periphery countries are far from aligning nominal wage growth with productivity growth. German productivity is a major wage determinant, but surely not the only one. Within the context of a free bargaining process between employers and labour unions, policy-makers can effectively use the replacement rate to steer the nominal wages outcome.     

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.     

Causal relationship between apparel exports and macroeconomic factors

Apparel exports make a significant contribution to economic growth in major apparel exporting economies such as Bangladesh, Sri Lanka and Vietnam. This study aims to investigate the causal relationship between apparel export growth and its determinants such as GDP growth, infrastructure, financial development, foreign direct investment (FDI) and labour productivity using panel data from 11 major apparel exporting countries for the period 1996 to 2013. The results confirm a long-run equilibrium association among the variables and reveal that GDP growth, infrastructure, financial development, FDI, and labour productivity have a significant positive influence on apparel export growth. Furthermore, the heterogeneous panel non-causality test results suggest that GDP growth, infrastructure and labour productivity contribute to apparel export growth in the short-run. These findings have several policy implications for the governments of the countries under study.     

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.     

Lessons for Europe from the U.S. Growth Resurgence

This paper analyses the sources of U.S. labour productivitygrowth in the late 1990s and presents projections for both outputand labour productivity growth. We show that investment in informationtechnology (IT) played a substantial role in the U.S. productivityrevival and that similar trends are evident in data for otherleading OECD countries. We then outline a methodology for projectingtrend output and productivity growth for the broadly definedU.S. economy. Our base-case projection puts trend productivitygrowth at 1.78 percent per year over the next decade with arange of 1.14 to 2.38 percent, reflecting fundamental uncertaintiesabout the rate of technical progress in IT-production and investmentin IT-equipment and software. Our central projection is belowthe average growth rate of 2.07 percent during 1995 -2000. Similarprojections for Europe must await more complete information.(JEL J2)     

ON EXPORT-LED GROWTH IN AUSTRALIA AND CANADA: COINTEGRATION, CAUSALITY AND STRUCTURAL STABILITY*

This paper uses cointegration and vector-error correction (VEC) modelling to investigate whether the export-led growth hypothesis applies to Australian and Canadian exports and labour productivity. The Johansen (1988) procedure is used to test whether manufacturing and aggregate measures of exports and labour productivity are cointegrated. Exports and labour productivity are found to be cointegrated, suggesting the export-led growth hypothesis holds for the small, open Australian and Canadian economies, although the estimated cointegrating vectors suggest the relationship is of small order. The tests suggested in Hansesn (1992), for parameter stability in relationships with I(1) variables, are estimated to examine if the parameters estimated from the Johansen procedure are unstable and whether the null of cointegration can be rejected in favour of structural change. No evidence is found of parameter instability in either the Australian or Canadian long-run relationships at conventional significance levels. Estimation of VEC models suggests that exports are seen to cause productivity growth, although the quantitative impacts are again small. The reverse causality is rejected for both countries, except for the Canadian manufacturing sector for which there is a small, significant positive effect of labour productivity on manufactured exports.     

Demand,employment, and labour productivity in the European economies

This paper presents an explanation of the causes of the slowdown in growth in labour productivity in European economies in recent decades. In first instance, the weakness of domestic demand is what determines this slowdown in productivity. However, differences with the (mediocre) rates of growth of productivity between European countries are also related to the specific features of their respective labour markets because, in a context of weak domestic demand, there is a trade-off between employment and productivity.     

Do Workplace Contracts Harm Labour Productivity Growth? A Reconsideration of the Macroeconomic Evidence from New Zealand

This article reconsiders the argument advanced or endorsed by a large number of leading Australian academics and others that labour productivity growth in New Zealand fell markedly during the period in which New Zealand's Employment Contracts Act 1991 (ECA) was operative—that is, for most of the 1990s. On the one hand, based on total economy estimates developed by The Conference Board and the Groningen Growth and Development Centre, labour productivity growth was unexceptional though a little higher than the New Zealand average of the last three decades or so. On the other hand, based on newly released official estimates of New Zealand's ‘measured sector’ (which accounts for about two‐thirds of the total economy), labour productivity growth was almost identical to that of Australia during the EC A period. This in turn suggests that New Zealand's labour productivity growth rose markedly for the measured sector during the EC A years. All in all, the evidence presented in this article is inconsistent with claims that the period of the EC A was associated with relatively weak New Zealand productivity growth. Selected issues arising from these findings are briefly canvassed.     

Sectoral Energy- and Labour-Productivity Convergence

This paper empirically investigates the development of cross-country differences in energy- and labour productivity. The analysis is performed at a detailed sectoral level for 14 OECD countries, covering the period 1970–1997. A σ-convergence analysis reveals that the development over time of the cross-country variation in productivity performance differs across sectors as well as across different levels of aggregation. Both patterns of convergence as well as divergence are found. Cross-country variation of productivity levels is typically larger for energy than for labour. A β-convergence analysis provides support for the hypothesis that in most sectors lagging countries tend to catch up with technological leaders, in particular in terms of energy productivity. Moreover, the results show that convergence is conditional, meaning that productivity levels converge to country-specific steady states. Energy prices and wages are shown to positively affect energy- and labour-productivity growth, respectively. We also find evidence for the importance of economies of scale, whereas the investment share, openness and specialization play only a modest role in explaining cross-country variation in energy- and labour-productivity growth.      

Sectoral sources of sub-Saharan Africa’s convergence

From 1970 to 2010, sub-Saharan African’s (SSA) labour productivity hovered at around 6% of the US level. This lacklustre performance, which remained stubbornly low despite the SSA’s growth spurt that started in the mid-1990s, masks a great deal of variations across sectors and countries. Using a structural decomposition, we examine, for a representative sample of SSA countries, the sectoral sources that hold back their convergence to the US frontier. Our results suggest the presence of strong – and possibly long-lasting – headwinds that have wiped out the favourable effects of substantial, yet circumstantial, tailwinds. Headwinds, quantified by the unfavourable within- and reallocation-effects, are indicative of significant capital-deepening and technology gaps, both of which are extremely hard to bridge. The tailwinds, represented by favourable between-effects, result from the convergence of the SSA labour force to sectors where some US sectors have seen a slowdown of their productivity relative to that of the whole economy – a development unrelated to the fundamentals underlying the SSA economy. Although few exceptions emerged out of this general pattern, these results are indicative of a bleak outlook for the SSA economic performance at least in the medium run.     

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.     

The productivity effect of government capital in developing and industrialized countries

This paper uses an aggregate production function to examine the effect of government capital formation on growth of labour productivity in an annual panel of 12 developing and 12 OECD economies covering the period 1976–1989. The results from a pooled model of all 24 countries indicate that contribution of government capital to labour productivity is positive and statistically significant. This result also holds in separate samples of the industrialized and developing economies where we find that, while there are productivity differentials between the two types of economies with respect to private capital, there are no differences with regards to public capital.     

Does productivity in Africa benefit from advanced countries’ R&D?

This study employs dynamic ordinary least squares and panel co-integration to estimate advanced countries’ R&D spillover effects on labour productivity in 28 Sub-Saharan African countries over the period 1992–2011. Results show that African countries that import and receive (technical and non-technical) development aid from advanced countries experience an increase in labour productivity, suggesting that trade and aid are transmitters of foreign R&D. However, the extent to which labour productivity responds to R&D spillovers varies based on the country of origin, where spillovers from the USA have a greater impact compared to those from other advanced countries.     

Structural transformation in Egypt,Morocco and Tunisia: Patterns,drivers and constraints

This study analyses structural transformation in three Middle East and North Africa (MENA) countries: Tunisia, Morocco and Egypt over a large time period (1960–2010). We examine labour productivity evolution and structural change contribution to productivity growth over different sub‐periods. We analyze the contribution of different economic sectors to aggregate structural change in the three countries. An econometric analysis is also performed to identify the main factors underlying the intensity and the pattern of structural change. Results suggest that the three countries initiated and achieved some progress in structural transformation over the 1970s, 1980s and early 1990s. However, this process has stagnated at low‐income levels and has remained unfinished. Deindustrialization occurred at an early stage of development in the three countries, in contrast to that noticed in developed and emergent countries. The results of the econometric analysis suggest a significant and positive association between investment and structural change as capital accumulation increases the future productive capacity and triggers reallocative efficiency. The human capital quality and availability has a positive and significant impact on structural change. Trade openness is also expected to boost structural transformations. However, labour market rigidity hampers structural transformation.