Pr Productivity oductivity Gr Growth? owth? Key Macro Trends and - PowerPoint PPT Presentation

What’s Happening to Pr Productivity oductivity Gr Growth? owth? Key Macro Trends and Patterns Karim m Foda January ary 13, 2017

Motivation Mo vation • GDP growth is slowing down around the world, driven in large part by GDP per capita growth 6 (annual average) weak productivity growth. 5 • Labor force participation rates for 4 percent prime-working-age men have been 3 falling. 2 1 • Many advanced and some emerging economies have aging populations. 0 Advanced Emerging and Developing 1990-1999 2000-2007 2008-2015  Pr Produc uctiv tivity ity is key to futur ture e growth th

The Bo Th e Botto tom m Li Line ne • There is a widespread slowdown in labor productivity growth across both advanced and emerging market economies. • It is primarily driven by slowing TFP growth, but capital deepening has played a more visible role in recent years. • The slowdown is broad-based, spanning manufacturing and service industries. • The slowdown predates the crisis in advanced economies, beginning in 2004 in the U.S. after the ICT boom and earlier in Europe and Japan.

La Labo bor Prod oduc uctivity tivity Grow rowth th 7 6 Emerging & Developing 5 4 3 percent Advanced 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -1 -2 Source: The Conference Board. Note: Output per person employed.

Note: Output per hour worked. Data source: OECD Productivity Statistics. percent -1 0 1 2 3 4 5 Tren 1971 end 1972 1973 d La 1974 1975 Labo 1976 Canada 1977 bor Prod 1978 1979 1980 1981 1982 oduc France 1983 1984 uctivity 1985 1986 tivity Growth 1987 1988 Germany 1989 1990 1991 1992 owth in 1993 1994 1995 Italy 1996 in Adv 1997 1998 1999 dvan Japan 2000 2001 ance 2002 2003 ced 2004 US UK 2005 d Econ 2006 2007 2008 US 2009 onomies 2010 2011 omies 2012 2013 2014 2015

Con onvergenc ergence e an and d Div ivergenc ergence e in in Lab Labor or Pr Prod oduc uctivity tivity United States = 1 1950-1990 1990-2015 1.10 1.10 1.00 1.05 0.90 1.00 0.80 0.95 0.70 0.90 0.60 0.85 0.50 0.80 0.40 0.75 0.30 0.70 0.20 0.65 0.10 0.60 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Japan Canada United States France Japan Canada United States France Germany Italy Spain United Kingdom Germany Italy Spain United Kingdom Source: Calculations based on data from The Conference Board. Note: Output per hour worked, output in constant 2015 US$ (converted to 2015 price level with updated 2011 PPPs)

Labo La bor Prod oduc uctivity tivity Grow rowth th in in Adv dvan ance ced d Econ onomies omies 3.5 3.0 2.5 2.0 percent 1.5 1.0 0.5 0.0 Advanced United States Europe Japan Other Advanced 1990-1995 1996-2004 2005-2015 Source: Calculations based on data from The Conference Board. Note: Output per hour worked. Groups aggregated using GDP-PPP weights. Other Advanced includes Australia, Canada, Hong Kong, Israel, New Zealand, Singapore, South Korea and Taiwan.

La Labo bor Prod oduc uctivity tivity Grow rowth th in in Adv dvan ance ced d Econ onomies omies 3.5 3.0 2.5 2.0 percent 1.5 1.0 0.5 0.0 UK Euro Area France Germany Italy Spain Sweden Australia Canada 1990-1995 1996-2004 2005-2015 Source: Calculations based on data from The Conference Board. Note: Output per hour worked. Groups aggregated using GDP-PPP weights.

De Decompos posing ing Labor r Pr Producti ctivity vity Gr Growt wth: h: TF TFP a P and Ca Capital tal De Deepen ening ing United States 3.0 TFP ICT capital deepening 2.5 Non-ICT capital deepening 0.3 2.0 0.6 percent 1.5 0.3 1.0 0.3 0.4 1.6 0.2 0.5 0.7 0.6 0.0 1990-1995 1996-2004 2005-2015 United States Data source: OECD Productivity Database. Note: Decomposition of growth in output per hour worked.

De Decompos posing ing Labor r Pr Producti ctivity vity Gr Growt wth: h: TF TFP a P and Ca Capital tal De Deepen ening ing United States TFP 3.0 ICT capital deepening 2.5 Non-ICT capital deepening 0.3 2.0 0.6 1.5 percent 0.4 0.3 1.0 0.3 0.4 0.3 1.6 0.2 0.5 0.7 0.7 0.1 0.6 0.3 0.0 -0.1 1990-1995 1996-2004 2005-2015 2005-2011 2012-2015 -0.5 United States Data source: OECD Productivity Database. Note: Decomposition of growth in output per hour worked.

Decompos De posing ing Labor r Pr Producti ctivity vity Gr Growt wth: h: TF TFP a P and Ca Capital tal De Deepen ening ing Other Advanced Economies 3.0 TFP ICT capital deepening 2.5 Non-ICT capital deepening 2.0 1.5 1.0 0.5 0.0 1990-1995 1996-2004 2005-2015 1990-1995 1996-2004 2005-2015 1990-1995 1996-2004 2005-2015 1990-1995 1996-2004 2005-2015 1990-1995 1996-2004 2005-2015 1990-1995 1996-2004 2005-2015 -0.5 Japan United Kingdom France Germany Italy Spain Data source: OECD Productivity Database. Note: Decomposition of growth in output per hour worked.

A Broa oad-Bas Based ed Ris ise e an and F d Fal all l in in US TFP Growth owth Percentage point change in average industry TFP growth Broad oad Rise se Broad oad Fall 1988-1995 to 1996-2004 1996-2004 to 2005-2014 25 15 20 10 15 10 5 5 0 0 -5 -5 -10 -10 -15 -20 -15 0 10 20 30 40 50 60 0 10 20 30 40 50 60 Industry Industry Source: Calculations based on data from Bureau of Labor Statistics Multifactor Productivity database. Note: Industries ranked by change in average value-added TFP growth between both periods, based on Byrne, Fernald and Reinsdorf (2016). Striped bars denote manufacturing industries. Industries with largest positive acceleration in recent period (right panel) are (i) funds and trusts, (ii) water transport and (iii) oil and gas extraction. Industries with largest negative deceleration in the same period are (i) apparel and leather and applied products, (ii) petroleum and coal products and (iii) computer and electronic products.

Ris isin ing g an and F d Fal alli ling ng Tog oget ethe her Average US industry TFP growth 8 Faster growth 1996-2004 Agriculture, Forestry and Fishery 6 4 Manufacturing Wholesale Trade 2 Services Information Transportation Retail Trade Finance, Insurance and Real Estate 0 -8 -6 -4 -2 0 2 4 6 Slower growth Construction 2005-2015 -2 Mining Utilities -4 -6 Source: Calculations based on data from Bureau of Labor Statistics Multifactor Productivity database. Note: Recreated from Baily and Montalbano (2016), but with changes in average value-added TFP growth between both periods, based on Byrne, Fernald and Reinsdorf (2016).

In Indu dustry try Con ontrib tributi utions ons to to th the e Ris ise e an and F d Fal all l in in US S TF TFP P Growth owth The Rise The Fall Contributions to TFP Growth 1996-2004 minus Contributions to TFP Growth 2005-2014 minus Contributions 1987-1995 Contributions 1996-2004 Services Manufacturing 0.43 -0.74 Manufacturing Retail Trade 0.40 -0.31 Wholesale Trade Wholesale Trade 0.15 -0.30 FIRE Services 0.11 -0.15 Agriculture Agriculture 0.10 -0.09 Information Construction 0.09 -0.08 Retail Trade Transportation 0.07 -0.07 Transportation Information 0.02 0.04 Mining Utilities -0.05 0.04 Construction Mining -0.08 0.13 Utilities FIRE -0.17 0.18 Aggregate TFP Growth Aggregate TFP Growth 1.08 -1.36 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 Source: Calculations based on data from Bureau of Labor Statistics Multifactor Productivity database. Note: Domar weights used to aggregate industry contributions. Recreated from Baily and Montalbano (2016).

Hol oldi ding ng In Indu dustry try We Weig ight hts s Fi Fixed ed United States average TFP growth 2.0 Count unter er-fact actual ual Actual ual 1.5 percent 1.0 0.5 0.0 1987-1995 1995-2004 2004-2013 Source: Byrne, Fernald and Reinsdorf (2016). Note: Orange bars show actual average growth in business sector TFP. Blue bars show counterfactual where industry weights (shares in aggregate value added) are held constant at 1987 values.

A Wi A Wide despread, pread, Br Broa oad-Base Based d Sl Slow owdo down wn Percentage point changes in industry TFP Growth: 1996-2004 to 2005-2014 10 2 8 UK France Germany 5 6 0 0 4 -2 -5 2 -10 0 -4 -15 -2 -6 -20 -4 -8 -25 -6 -30 -8 -10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Industry Industry Industry 10 8 6 Sweden Spain Netherlands 6 4 5 4 2 2 0 0 0 -5 -2 -2 -4 -10 -4 -6 -15 -8 -6 -10 -20 -8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Industry Industry Industry Source: Calculations based on data from EU KLEMS. Note: Lighter shade bars denote manufacturing industries. UK data begins in 1999, Germany and Netherlands data begins in 2001, Sweden data ends in 2013.