International comparison of_productivity_jari_hyvärinen_pdf


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International comparison of_productivity_jari_hyvärinen_pdf

  1. 1. International Comparison of Productivity 2013 Jari Hyvärinen The developed countries are taking new steps to operate in economic circumstances in which the labour force is decreasing and physical investments are becoming less competitive. In these countries, the only way to improve economic growth is to develop mechanisms that improve labour productivity and intangible capital. Labour productivity is calculated from terms of 1) value added, 2) value added deflator, and 3) working hours. We use a methodology that establishes the productivity level to the year 2007. Cross-sectional comparisons for 2007 are made by using Eurostat SBS and LCS data (Hyvärinen, 2011). Comparisons for other years are computed using productivity time series that are obtained from OECD STAN, Rev. 4. Productivity growth is shown as a productivity time series for 1975–2011. Comparing Finland to other industrialised countries, we find that productivity growth in key industrial sectors in Finland has increased more rapidly than in the OECD benchmark countries on the long run. Manufacturing (ISIC 10-33) Labour productivity increased in the Finnish manufacturing industries to nearly the highest international levels. In the early 1980s, Finnish industrial productivity was below the level of Germany and USA. During the 1990s, productivity increased more rapidly than in other countries and reached the US level. One of the main sources of Finnish productivity growth and slowdown is the ICT revolution that began in the early 1990s. 60 50 Value added (EUR) per hour 40 30 Finland 20 Sweden Germany 10 USA 0 1975 1980 1985 1990 1995 2000 2005 2010Tekesin strateginen tieto -yksikkö rahoittaa innovaatioympäristöä palvelevaa tutkimusta teemakohtaisilla hauilla.
  2. 2. Wood and wood products (ISIC 16 ) The productivity level of the wood and wood product industries in Finland for 2007 was almost parallel with Sweden’s level. Afterwards, development in Finland has been more moderate than in Sweden. In these comparisons, US productivity appears to be surprisingly low. Further examination is required to determine why the productivity level of the US wood industries was exceptionally low in 2007. 50 Finland 40 Sweden Value added (EUR) per hour Germany 30 USA 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010 Pulp, paper and paper products (ISIC 17) In the pulp and paper industries, we used the 2007 level, although there were radical shifts in productivity levels compared with other studies.2 Finland has a clear productivity advantage, but in the 2007 comparisons, the Swedish pulp and paper industries were at the highest level. The pulp and paper industries are highly capital-intensive industries. However, during the 2000s, the Finnish pulp and paper industries underwent several stages of reorganisation that increased productivity growth. 80 Finland 70 Sweden 60 Germany 50 USA EUR 40 30 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010Tekes Strategic Intelligence Unit
  3. 3. Basic metals (ISIC 24) In basic metals, the rapid growth and slump of basic metals exported from Finland has affected rapid changes in value added even if working hours have remained stable. In other countries, volatility has been less strong than in Finland. Main steel producers are China, Japan, the US, India, Russia, South Korea and Germany. Their share is 77 per cent of World production (ETLA 2012). 120 Finland 100 Sweden 80 Germany USA 60 40 20 0 1975 1980 1985 1990 1995 2000 2005 2010 Fabricated metal products (ISIC 25) One of the main producers in these industries is Germany, where also productivity is strong. The main export countries from Finland are Russia, China, Sweden, the US and Germany (ETLA 2012). The Finnish productivity has been an average while in productivity rankings Finland is above Sweden and at the same level than the US. The productivity has remained rather stable during the crisis. 60 Finland 50 Sweden Germany 40 USA 30 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010Tekes Strategic Intelligence Unit
  4. 4. Electrical Equipment (ISIC 27) Electric equipment includes electric motors, generators, transformers etc (271), batteries and accumulators (272), wiring and wiring devices (273), electric lighting equipment (274), domestic appliances (275) and other electrical equipment (279). In the 2000s, the productivity growth has been strong in Finland, but productivity has been at high level in Sweden since the 1970s. In Finland, exports of electrical equipment has reached 50 per cent share in electrical machinery (ETLA 2012). 80 Finland 70 Sweden 60 Germany 50 USA EUR 40 30 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010 Machinery and equipment (ISIC 28) In the US and Swedish machinery and equipment industries, the level of productivity in 2007 was dramatically lower than in 2004 and in other productivity comparisons (Kaitila et al.,2008). With regard to productivity growth, the fastest improvement in productivity was observed in the Finnish industries during the 2000s. The Finnish machinery has succeeded well during the crisis. 50 Finland 40 Sweden Germany 30 USA EUR 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010Tekes Strategic Intelligence Unit
  5. 5. Computer, Electronic and Optical products (ISIC 26) Electrical and optical equipment includes electronic components and boards (261), computers and peripheral equipment (262), communication equipment (263), consumer electronics (264), and various optical products (265-268). In these industrial sectors, many price indices were unavailable or unreliable. Therefore, we show only the aggregate productivity of computer, electronic and optical products. The most productive sector has been the ICT industry in Finland, Sweden and the US, which has demonstrated record-breaking productivity growth since the ICT revolution began in the 1990s. Technology improvements in mobility, wired and wireless telecommunications, communication processes and data recording are the ICT characteristics that have significantly improved productivity in Finland (Maliranta, 2004; Maliranta – Rouvinen, 2004). One factor in the rapid increase of Swedish and the US productivity has been the globalisation process where assembly has off-shored to the developing countries such as to Asia. However, value added flows to the home country where high-skill tasks such as headquarter, R&D, marketing locate. 350 Finland 300 Sweden 250 Germany USA 200 EUR 150 100 50 0 1975 1980 1985 1990 1995 2000 2005 2010 Sources: ETLA (2012). Toimialakatsaus, Suhdanne 2012:2. Hyvärinen, J. (2011). Productivity: An International Comparison, ETLA Discussion Papers No. 1264. Kaitila, V. – A. Nevalainen – M. Maliranta – R. Mankinen (2008). Tuottavuuden mittaaminen – Suomi kansainvälisessä vertailussa, ETLA Discussion Papers No. 1123. Maliranta, M. – P. Rouvinen (2004). Informational Mobility and Productivity – Finnish Evidence, ETLA Discussion Papers No. 919. OECD STAN Database 2013.Tekes Strategic Intelligence Unit