SOLID WASTE MANAGEMENT SYSTEM OF FENI PAURASHAVA, BANGLADESH.pdf
The Future of Productivity
1. THE FUTURE OF
PRODUCTIVITY
Nick Johnstone
Head, Structural Policy Division
Directorate for Science Technology and Innovation
… productivity isn't everything, but in the long run it is
almost everything.
Paul Krugman, 1994
2. Cross-country gaps in GDP per capita mainly
reflects productivity shortfalls
-80
-60
-40
-20
0
20
40
60
MEX
TUR
CHL
HUN
POL
EST
GRC
SVK
PRT
SVN
CZE
ISR
KOR
ESP
NZL
ITA
JPN
EU
OECD
GBR
FRA
FIN
BEL
ISL
CAN
DEU
DNK
SWE
AUS
AUT
IRL
NLD
NOR
USA
CHE
LUX³
A. Percentage GDP per capita difference compared with the upper half of OECD countries¹
4
5
-80
-60
-40
-20
0
20
40
60
MEX
TUR
CHL
HUN
POL
EST
GRC
SVK
PRT
SVN
CZE
ISR
KOR
ESP
NZL
ITA
JPN
EU
OECD
GBR
FRA
FIN
BEL
ISL
CAN
DEU
DNK
SWE
AUS
AUT
IRL
NLD
NOR
USA
CHE
LUX³
B. Percentage difference in labour resource utilisation and labour productivity²
Labour productivity Labour resource utilisation
4
5
Note: GDP/Population=(GDP/Employment) * (Employment/Population)
Source: OECD (2015), Economic Policy Reforms: Going for Growth
2
3. Productivity growth slowed across the
OECD, even before the crisis
Labour productivity growth since 1990
GDP per hour worked (China and India refer to GDP per worker)
Source: OECD calculations based on the Conference Board Total Economy Database.
3
4. Why the slow-down? Taking a granular approach:
A) Is it because the productivity frontier is slowing ?
B) Is it because of misallocation and declining business dynamism?
C) …or something else which is discouraging diffusion (i.e. IPRs) ?
D) What is the role of policies?
Productivity will be the key driver of
future growth but uncertain outlook
4
Techno-pessimists
vs
techno-optimists
…
The debate is not settled
Economic odd couple Robert Gordon, left, and Joel Mokyr encapsulate the debate on the future of innovation. ROB HART FOR THE WALL
STREET JOURNAL “”Economists Debate: Has All the Important Stuff Already Been Invented? By Timothy Aeppel, June 15, 2014 10:38 p.m. ET
5. 1. Widespread heterogeneity: very high MFP and
very low MFP firms coincide within narrowly-
defined industries.
2. Adoption lags for new technologies across
countries have fallen, but long-run penetration
rates once technologies are adopted have
diverged (Comin & Mestieri, 2013).
3. MFP growth of laggard firms is more closely
related to productivity developments at the national
frontier (NF), as opposed to the global frontier
(GF) (Bartelsman, Haskel & Martin, 2008)
Analytical framework (1)
5
7. 80
90
100
110
120
130
140
150
160
2001 2002 2003 2004 2005 2006 2007 2008 2009
Most advanced firms
(3.5% per annum)
All firms
(1.7% per annum)
Other firms
(0.5% per annum)
Manufacturing Sector Services Sector
80
90
100
110
120
130
140
150
160
2001 2002 2003 2004 2005 2006 2007 2008 2009
Most advanced firms
(5.0% per annum)
All firms
(0.3% per annum)
Other firms
(-0.1% per annum)
“Frontier firms” corresponds to the average labour productivity of the 100 globally most productive firms in each 2-digit sector. On a rolling basis.
“Non-frontier firms” is the average of all other firms. “All firms” is the sector total. AAGR shown in parentheses.
Source: http://www.oecd.org/economy/the-future-of-productivity.htm
Mind the Gap: Productivity of Frontier Firms
and the Rest
Labour productivity; index 2001=100
7
8. 8
…. the case of some “heavy” industry
sectors
-0.5
-0.3
-0.1
0.1
0.3
0.5
A. Steel
Others Frontier
-0.5
-0.3
-0.1
0.1
0.3
0.5
B. Non-Ferrous
Others Frontier
-0.5
-0.3
-0.1
0.1
0.3
0.5
C. Chemicals
Others Frontier
-0.5
-0.3
-0.1
0.1
0.3
0.5
D. Plastics
Others Frontier
Source: Silva (2015, forthcoming)
9. 9
Focus on the laggards
Source: Silva (2015, forthcoming)
10. The globally most productive firms –
who are they?
Source: http://www.oecd.org/economy/the-future-of-productivity.htm
Mean Std Dev Number Mean Std Dev Number
Productivity 4.06 1.04 3657 2.51 0.91 294031 1.5 ***
Employment 309 3770 3657 229 4119 294031 81
Capital stock (€m) 31 355 3657 19 343 294031 12 **
Turnover (€m) 250 1731 3657 59 754 294031 191 ***
Profit rate 0.57 0.33 3657 0.13 6.33 294031 0.45 ***
Age 21.5 20.3 3657 23.2 18.6 294031 -1.7 ***
MNE status*
Probability 0.47 0.50 3450 0.28 0.45 310765 0.19 ***
Patenting status
Depreciated patent stock 3.71 45.15 3657 0.90 56.17 294031 2.8 ***
Multi Factor Productivity (Solow)
Selected OECD Countries, 2005 (unless otherwise noted)
Global Frontier Firms Non-Frontier Firms
Difference
in means
Mean firm characteristics: frontier firms and non-frontier firms
10
11. The globally most productive firms:
Coming from various countries
11
12. Knowledge based capital accumulation
has been slowing too
Investment in KBC; annual average growth
Source: Corrado et al., (2012).
12
13. Firms at the global productivity frontier
have become older
Average age (years) of firms in the frontier and non-frontier groups
Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD
countries”, OECD Mimeo.
Manufacturing Services
Notes: Frontier is measured by the top 100 firms in each 2-digit industry and each year, based on Solow residual-based MFP.
15
20
25
30
Non-frontier Frontier
15
20
25
30
Non-frontier Frontier
13
14. … consistent the broader decline in
business dynamism
Declining start-up rates across OECD countries
Source: C. Criscuolo, P. N. Gal and C. Menon (2014), “The Dynamics of Employment Growth: New Evidence from 18 Countries”, OECD
Science, Technology and Industry Policy Papers, No. 14. 14
15. Business Dynamism and The Life Cycle
of the Firm
Preliminary Results from Dynemp V2:
Note: the graph illustrates the four components of the growth decomposition normalized over the maximum value across all countries included
in the sample.
Source: OECD DynEmp v.2 database. Data for some countries are still preliminary.
15
16. Some policies shape the diffusion of
innovations from the global frontier
Estimated frontier spillover (% pa) associated with a 2% point increase in MFP
growth at the global productivity frontier
Source: Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From the Global Productivity Frontier: Industry Level
Evidence”, OECD Economics Department Working Papers, No. 1238.
Entry and Exit Innovation policies
16
18. • Establishment of a policy framework which
doesn’t excessively penalise failure
• Recent work at OECD on business dynamics
indicates that while the survival share of
entrants is not related to policies, the
survival of incumbent firms is, especially in
financially dependent industries
• Some policies (especially inefficient
bankruptcy regulations) seem to slow down
the reallocation process
18
Encouraging the “right” level of exit
(1)
19. • Ensure that regulatory and support
measures do not favour incumbents relative
to entrants
• To the extent that measures favour
incumbents relative to entrants this will
discourage exit
• There is a rent that is accrued to those in the
market relative to those who are not (but
could be) or have only recently entered the
market
19
Encouraging the “right” level of exit
(2)
20. Age-differentiated sticks: New Source
Bias in Environmental Regulations
Note: NSB = New Source Bias (to date, no regulation has been set on old plants); NR = No Regulation (Iceland and Luxembourg do not have
coal power plants); PR= Plant Regulation (case by case regulation). 20
21. ‘Age’-differentiated carrots: Provision
of R&D Support
21
Source: OECD, R&D Tax Incentive Indicators, www.oecd.org/sti/rd-tax-stats.htm, July 2015. See OECD STI Scoreboard 2015.
22. • Case for supplementary measures above and beyond good
framework policies and vintage-neutral regulations and support
measures
• Importance of minimising information requirements (of
government) and administrative costs
• And to the extent possible letting the market forces determine
“exitors”
• Arguably – Chinese “white list” is a soft version of such an
approach through the provision of information to market
participants (downstream customers, financial markets)
• Could be assessed empirically – i.e. relative cost of and access to
finance
• Assessment of “harder” measures (i.e. restructuring support)
could be envisioned – need to know characteristics of entrants,
suvivors and exitors = > and incentives for the three groups
22
Issue of structural “excess capacity”
Editor's Notes
Joint work between ECO and STI.
[As per slide]
Productivity growth slowed in many OECD countries even before the crisis, concerns of a structural slowing in productivity growth.
Adoption lags for new technologies across countries have fallen, but there has been a divergence in long-run penetration rates once technologies are adopted (Comin & Mestieri, 2013) Implication: known technologies can remain unexploited by a non-trivial share of firms
Widespread heterogeneity: very high MFP and very low MFP firms coincide within narrowly-defined industries.
Adoption lags for new technologies across countries have fallen, but long-run penetration rates once technologies are adopted have diverged (Comin & Mestieri, 2013).
MFP growth of laggard firms is more closely related to productivity developments at the national frontier (NF), as opposed to the global frontier (GF).
New GF technologies do not immediately diffuse to all firms. They are first adopted by NF firms, and only diffuse to laggards once they are adapted to national circumstances.
Thus, the distribution of aggregate productivity in countries matters. Having NF firms that are close to the GF is vital for productivity performance.
[As per slide]
Productivity growth of the globally most productive firms remained robust in the 21st century, despite the slowdown in aggregate productivity.
Labour productivity at the global technological frontier increased at an average annual rate of 3.5% in the manufacturing sector over 2000s, compared to just 0.5% for non-frontier firms, while the gap is even more pronounced in the services sector.
This rising gap raises questions about why seemingly non-rival technologies and knowledge do not diffuse to all firms ….
and suggests that future growth will depend on re-harnessing the forces of knowledge diffusion, which propelled productivity growth for much of the 20th century.
Red line = productivity of the frontiet (i.e. the top 5% of firms in terms of productivity level). Blue line is all the rest. Key point in steel, doesn’t‘ seem to be growing at much faster rate than everyone else, especialy when compared to other industries (where see decoupling – frontier
Y axis = index , 2001 =0 0.3 average annual growth (productivity). Solow residual , relatiev diffefrecnce between prodcutivyt, more about dispersion not levels.
Frontier
Productivity for frontier steelmaking companies declined at an average annual rate of 2.3%, while productivity for non-frontier steel firms declined at an average annual rate of 4.5%. In practice, this suggests that steel has been less dynamic during the 2000s, when compared to other industries.
Red bottom 5%
Laggard
The productivity levels of laggards in the steel industry more than halved during the decade. Other steelmaking companies were however more resilient to the crisis than the laggards, exhibiting a productivity decrease at an average annual rate around 4%. Interestingly, the decline in productivity of laggards in other industries is still meaningful, but much smaller. For example, the decline for laggards in the chemicals industry (around 3.2%) was less pronounced than the productivity decline for non-laggards in the steel industry (4%).
Our firm level analysis, however, shows that firms at the global productivity frontier have become relatively more productive than other firms over the past decade, which raises the question of why hasn’t this growth at the frontier spilled over and benefited laggard firms more?
Given decreasing potential for catching-up, spillovers from the global frontier are an increasingly important source of future productivity growth.
Accordingly, we explore how policies shape:
[As per slide]
A country is classified as being at the global frontier if it has at least one frontier firm in at least 75% of 2-digit industries.
The frontier is defined as the 100 most globally productive firms in each industry (in 2005), in terms of labour productivity
[As per slide]
It could also be an entry story….
15
BTE and bankruptcy have a double-dividend in terms of resource allocation
