Transcript Slides - World KLEMS
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Productivity in Europe. From the expansion to the crisis
Matilde Mas
University of Valencia and Ivie
World KLEMS Conference. Break Out Session: Europe Harvard, August 20, 2010
Industrial Productivity in Europe: Growth and Crisis
Editors: Matilde Mas & Robert Stehrer Edward Elgar Editors PART I. INTRODUCTION Mas, M.:
“Productivity in the advanced countries. From the expansion to the crisis”
Jorgenson, D.W., Ho Mun S. Samuels, J.D. and K. Stiroh
: “Industry Origins of the American Productivity Resurgence”
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PART II. COUNTRY CHAPTERS Hans-Olof Hagén
: “Growth in the Nordic business sector”
O ´Mahony, M, Nayman, L. Gorning, M. and B. Gorzig
: “Productivity transitions in large mature economies: France, Germany and the UK ”
Kegels, Ch., Peneder, M. and H. van der Wiel
: “Productivity performance in Three Small European countries: Austria, Belgium and the Netherlands”
Havlik, P., Leitner, S. and R. Stehrer
: “Growth Resurgence, Productivity Catching-up and Labour Demand in CEECs”.
Mas, M., Milana, C. and L. Serrano
: “Spain and Italy: catching up and falling behind. Two different tales of productivity slowdown”
Fukao, K., Miyagawa, T., Hak K. Pyo and K. Hee Rhee
: “Estimates of Multifactor productivity, ICT Contributions and Resource reallocation effects in Japan and Korea”
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Industrial Productivity in Europe: Growth and Crisis
Editors: Matilde Mas & Robert Stehrer Edward Elgar Editors PART III. SPECIFIC TOPICS Landesmann, M. Leitner, S. Stehrer , R. and T. Ward: “
Skills and industrial competitiveness”
Esposito, P. and R. Stehrer
: “Effects of High-Tech Capital, FDI, and Outsourcing on Demand for Skills in West and East”
Kangasniemi, M., Mas, M., Robinson, K. and L. Serrano
: “The economic impact of Migration. Productivity Analysis for Spain and the UK ”
Van der Wiel, H. Creusen, H. van Leeuwen and E. van der Pijll
: “Cross your border and look around ”
Hyun Jeong Kim and Hak K. Pyo
: “International comparison of Productivity in Market Services: Korea with EU KLEMS Member countries”
Oulton, N. and A. Rincón-Aznar
: “Rates of return and alternative measures of capital input: 14 countries and 10 branches, 1971 2005”
Inklaar, R. and M.P. Timmer
: “Productivity Convergence Across Industries and Countries: The Importance of Theory based Measurement”.
Productivity in Europe. From the expansion to the crisis Topics that we deal with in this presentation:
1.
Labor productivity from a long run perspective 2.
The impact of the economic crisis started in 2007 3.
Productivity from an industry's perspective 4.
Sources of productivity growth: the relevance of the new information and communication technologies (ICT) We will compare the EU results with that of the USA and Japan
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1.
Labour productivity from a long run perspective
Labor productivity from a long run perspective
GVA, hours worked and labour productivity. Annual rate of growth. 1995-2009
(percentage) 4 3 3,15 3,10 2,44 2 1,85 1,37 1,71 1,14 1,93 1,80 1 0,48 0,57 0,51 0,70 0 0,05 -1 -1,09 -2 GV A Hours w orked Produc tiv ity GV A Hours w orked Produc tiv ity GV A Hours w orked Produc tiv ity GV A Hours w orked Produc tiv ity GV A Hours w orked Produc tiv ity
EU-2 5 EU-1 5
Source:
TCB (2010) and EU KLEMS (2009).
EU-1 0 USA Japan
• • •
Labour productivity can grow following different patterns:
The USA followed a virtuous path: strong GVA growth together with employment creation and productivity growth.
The EU-25 has also followed a positive path, less brilliant however, in terms of GVA and productivity growth.
The New Member States had a strong GVA and productivity performance but hardly any employment creation.
•
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Japan also showed a positive rate of productivity growth but originated in employment destruction.
Labor productivity from a long run perspective
Labour productivity. Annual rate of growth. EU-25. 1995-2009
(percentage)
Source:
TCB (2010) and EU KLEMS (2009).
• • •
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The EU-25 is made up of a heterogeneous array of countries The New Member States (EU-10) are the ones that have experienced the highest rate of productivity growth.
In the EU-15 Ireland had the highest rate and Italy the lowest.
-1 -2 1 0 2 3 4 5
Labor productivity from a long run perspective
Unit labour cost. Annual rate of growth, 1995-2009
(percentage) 3,67 1,93 1,91 1,73 1,74 1,04 0,69 0,47 Eurozone-12 Unit labour cost USA Wages -1,44 Japan¹ Productivity ¹ 1995-2008 for this country.
Source:
ECB (2010), EU KLEMS (2009) and Fundación BBVA-Ivie.
• • In the Eurozone-12 unit labor cost had a positive sign which originated in wages growing at higher rates than productivity.
In the USA unit labor cost growth rates were even higher despite its strong productivity growth, while Japan experienced an improvement in its competitiveness thanks to the slow rate of wages growth.
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2.
The impact of the crisis
The impact of the crisis
GVA. Annual rate of growth. 1995-2007 and 2007-2009
(percentage) -1 -2 -3 -4 1 0 3 2 5 4 2,44 -1,65 EU-25 2,31 -1,87 EU-15 3,62 0,34 EU-10 3,02 -1,05 USA 1995-2007 2007-2009
Source:
TCB (2010) and EU KLEMS (2009).
1,34 -3,13 Japan • • The first 3 years of the crisis hit Japan harder than the EU or the USA The contraction in terms of GVA was more intense in the EU-15 than in the USA, while the New Member states maintained a positive growth rate
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The impact of the crisis
Labour (hours worked). Annual rate of growth. 1995-2007 and 2007-2009
(percentage) 3 2 5 4 1 0 -1 -2 -3 -4 0,76 -1,21 EU-25 0,90 -1,41 0,10 -0,22 1,10 EU-15 1995-2007 EU-10 2007-2009 -3,00 USA -0,72 -3,35 Japan
Source:
TCB (2010) and EU KLEMS (2009).
• • Employment destruction has been very severe in Japan and the USA The EU was more in favor of labor hoarding (not in Spain!) with only minor adjustments in the new member states aggregate.
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The impact of the crisis
1 0 -1
Labour productivity. Annual rate of growth, 1995-2007 and 2007-2009
(percentage) 5 4 3 2 1,67 1,41 3,52 1,93 1,95 2,06 -0,43 EU -25 -0,46 EU -15 0,57 EU -10 U SA 0,23 Japan 1995-2007 2007-2009
Source:
TCB (2010) and EU KLEMS (2009).
• • The USA maintained its rate of productivity growth thanks to the intense reaction of its labor market, while in the EU-15 it had a negative growth rate as a consequence of labor maintenance.
In Japan productivity slowed down in spite of its strong labor contraction
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The impact of the crisis
Labour productivity. Annual rate of growth. EU-15. 1995-2007 and 2007-2009
(percentage) -1 -2 -3 -4 5 4 1 0 3 2 -5 3,56 -0,15 2,35 -1,48 2,30 0,92 2,28 -1,53 1,87 -0,45 1,75 -0,92 1,72 -1,25 1,62 -0,74 1,62 0,34 1,51 -1,47 1,11 -1,43 0,99 -4,29 0,63 -1,67 0,54 2,63 0,42 -1,85 • 1995-2007
Source:
TCB (2010) and EU KLEMS (2009).
2007-2009 All the EU-15 countries, with the only exception of Spain, have experienced a slowdown in labor productivity. In Spain its acceleration is due to strong employment destruction.
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The impact of the crisis
Unit labour cost. Annual rate of growth. 1995-2007 and 2007-2009
(percentage) 0 -1 -2 -3 5 4 3 2 1 0,22 3,50 Eurozone-12 2,10 -0,40 USA -1,78 2,60 Japan¹ 1995-2007 ¹ 2007-2008 for this country
Source:
ECB (2010), EU KLEMS (2009) and Eurostat (2010) 2007-2009 • During the first 3 years of the crisis, unit labor cost decelerated in the USA (improving its competitiveness), while it accelerated sharply in Japan and even more in the Eurozone.
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The impact of the crisis
Unit labour cost. Annual rate of growth. 2007-2009
(percentage) 4 3,50 3,09 3 2,60 2,73 2 1,55 1,95 1 0,13 0 -0,41 -0,40 -1 Eurozone-12 USA unit labour cost ¹ 2007-2008 for this country
Source:
ECB (2010), EU KLEMS (2009) and Eurostat (2010) wages productivity Japan¹ • • During the crisis the wages of employed workers rose in all countries.
In the Eurozone wages increased while productivity decreased, pushing up unit labor cost and thus reducing competitiveness.
•
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In the USA productivity growth was higher than wages growth, thus unit labor cost decreased.
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3.
Aggregate productivity from the industries perspective
Aggregate productivity from the industries perspective
Industries contribution to labour productivity growth. Market Economy. 1995-2007
(percentage) Agriculture and fishing Energy Manufacturing Construction Transport and storage and communication Financial intermediation and business activities Social and personal services ¹ 1995-2006 for these areas or countries
Source:
EU KLEMS (2009).
•
Manufacturing
EU-10.
has contributed positively to labor productivity growth, especially in the • The main difference between EU-15 and USA labor productivity growth is not to be found in
Manufacturing
but in the
Services
industries. • The contribution of the
Construction
industry was either nil or negative in all groups of
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countries.
Aggregate productivity from the industries perspective
Labour productivity. Annual rate of growth. EU-15. Market Economy. 1970-1995 and 1995-2007
(percentage) -1 -2 -3 -4 3 2 1 0 6 5 4 2,84 1,76 5,29 2,71 Market Economy Agriculture and fishing 4,80 2,96 Energy 3,48 2,81 Manufacturing 1,43 -0,07 1,91 1,57 Construction Market Services 1970-1995 1995-2007
Source:
EU KLEMS (2009) .
• The slowdown of productivity in the EU-15 in the 1995-2007 period affected all sectors, being
Construction
the only one with a negative sign. • The growth rate of
Manufacturing
was higher than in
Market Services
.
•
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The highest growth rate was shown by the
Energy
sector, followed by
Manufacturing
and
Agriculture and Fishing
.
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4.
Sources of productivity growth: the relevance of new technologies (ICT)
Sources of productivity growth…
Growth accounting.Labour productivity. Market Economy. 1995-2007
(percentage) Labour composition ICT capital deepening per hour worked Non ICT capital deepening per hour worked TFP ¹ The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.
² 1995-2006 for this country.
Source:
EU KLEMS (2009) .
• • The higher labor productivity growth in the USA as compared with EU-15ex had a double origin: a higher rate of ICT capital deepening and a higher rate of growth of technical progress (MFP).
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Sources of productivity growth…
0 -1 3 2 1
Growth accounting.Labour productivity. Market Economy. 1995-2007
(percentage) 5 4 Labour composition ICT capital deepening per hour worked Non ICT capital deepening per hour worked TFP ¹ The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.
² 1995-2006 for this country.
Source:
EU KLEMS (2009) .
• • The countries belonging to the EU-15 that have experienced higher rates of productivity growth are also the ones showing: a higher rate of ICT capital deepening and/or a higher rate of growth of technical progress (MFP).
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Sources of productivity growth…
Growth accounting.Labour productivity. EU-15ex. Market Economy. 1995-2007
(percentage) 4 3 2 1 Labour composition ICT capital deepening per hour worked Non ICT capital deepening per hour worked TFP 0 -1 Market Economy Agriculture and fishing Energy Manufacturing Construction Transport and storage and communication Financial intermediation and business activities Social and personal services ¹ The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.
Source:
EU KLEMS (2009) .
• •
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In the EU-15ex,
Agriculture, Transport and Storage and Communication,
and
Manufacturing
where the industries showing the highest contribution of MFP.
On the contrary, the contribution of MFP was negative in
Construction, Financial Intermediation and Business Activities,
and
Social and Personal Services
.
2 0 -2 4 6
Sources of productivity growth…
Growth accounting. Labour productivity. USA. Market Economy. 1995-2007
(percentage) Labour composition ICT capital deepening per hour worked Non ICT capital deepening per hour worked TFP -4 Market Economy Agriculture and fishing Energy Manufacturing Construction Transport and storage and communication Financial intermediation and business activities Social and personal services •
Source:
EU KLEMS (2009) .
This is an important difference with respect to the USA where all the Services Sectors, including
Financial Intermediation and Business Activities and Personal Services
experienced positive MFP contributions. as well as
Social
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Sources of productivity growth…
Industry classification according to ICT assets ICT producers
Electrical and optical equipment Post and telecommunications
ICT intensive users
Mining and quarrying Pulp, paper, paper products, printing and publishing Coke, refined petroleum products and nuclear fuel Chemicals and chemical products Machinery, nec Transport equipment Manufacturing nec; recycling Electricity, gas and water supply Wholesale trade Transport and storage Financial intermediation Business activities Other community, social and personal services
ICT non intensive users
Agriculture, hunting, forestry and fishing Food products, beverages and tobacco Textiles, textile products, leather and footwear Wood and products of wood and cork Rubber and plastics products Other non-metallic mineral products Basic metals and fabricated metal products Construction Sale, maintenance and repair of motor veh. Retail trade Hotels and restaurants Private households with employed persons
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Sources of productivity growth…
Share of each grouping in GVA. Market Economy. 1995 and 2007
(percentage) 100 80 60 40 20 0 1995 2007 EU-25 ICT producers 1995 2007 EU-15 1995 2006 EU-10 ICT Intensive users
Source:
EU KLEMS (2009) .
1995 2007 USA ICT non intensive users 1995 2006 Japan • •
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The share of ICT producers industries is very small In the USA the share of the ICT related sectors (producers and intensive users) have a higher weight than in the other grouping of countries.
Sources of productivity growth…
Contribution of each sectoral grouping to labour productivity growth. Market Economy, 1995-2007
(percentage) 120 100 80 60 40 20 0 EU-25 EU-15 EU-10¹ USA Japan¹ ICT producers ICT Intensive users ¹ 1995-2006 for these areas or countries.
Source:
EU KLEMS (2009) .
ICT non intensive users • However, its contribution to productivity growth is much higher than its share in the aggregate.
•
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Especially in developed economies such as Japan and the USA
Sources of productivity growth…
Growth accounting. Labour productivity. Market Economy, 1995-2007
(percentage) 10 8 0 -2 6 4 2 A B C A B C A B C Labour composition ICT capital deepening per hour worked Non ICT capital deepening per hour worked TFP USA Japan¹ UE-15ex A: ICT producers; B: ICT intensive users; C: ICT non intensive users.
¹ The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom ² 1995-2006 for this country.
Source:
EU KLEMS (2009) .
• The higher productivity growth rate in the ICT producing industries has its origin in its strong MFP growth. •
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In the USA, the efficiency improvements have spilled over the ICT intensive sectors, while in the EU-15ex and in Japan the sectors other than ICT producers have benefited only slightly.
Conclusions
The set of 25 countries analyzed show very different patterns, as well as strength, of growth.
During the expansion years the USA showed a “virtuous” profile, combining GVA and productivity growth together with employment creation.
The EU-15 had a much modest profile, while the EU-10 benefited from both its initial laggard position and its integration in the EU.
The consequences of the economic crisis
The recent crisis starting in 2007 hit the geographical areas with different intensity. Japan was the country experiencing the highest GVA contraction, followed by the EU-15.
Labor markets also responded different. The USA adjusted sharply to the change of the cycle, while the EU opted for hoarding labor.
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As a consequence, the USA maintained its previous productivity growth rate, while in the EU-15 it became negative.
Conclusions
Spain was the only EU-15 country that experienced a positive labor productivity acceleration in 2007-2009 originating in its strong employment destruction.
Wages of employed people kept growing during the crisis, pushing up the unit labor cost in the Eurozone and Japan but not in the USA. As a consequence, the USA has gained competitiveness during those years.
The importance of the industry's disaggregation
Manufacturing
has been an important source of productivity growth in all countries, especially in the New Member States However, what makes the difference between the USA and EU are not the
Manufacturing
industries but the
Services Sectors.
Growth in all countries has been driven by ICT capital deepening and MFP growth.
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Conclusions
In the EU-15 and the USA the MFP growth was especially intense in
Agriculture, Manufacturing
and
Transport and Communication.
However, while in the USA all the
Services Sectors
showed a positive contribution of MFP in the EU it was strongly negative.
ICT and productivity growth
ICT producing industries have a small share in the aggregate but its contribution to productivity growth is very relevant, especially in the most developed countries.
ICT producing industries have experienced a strong MFP growth in the EU-15ex, USA and Japan.
However, there is an important difference. While in the USA its positive effects spilled over the other sectors of the economy (especially the intensive users), in the UE-15 its positive effects restricted to only the ICT producers.
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Productivity in Europe. From the expansion to the crisis
Matilde Mas
University of Valencia and Ivie
World KLEMS Conference. Break Out Session: Europe Harvard, August 20, 2010