eu us jp productivity comparison

8/8/2019 EU US JP Productivity Comparison

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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


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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

PART II. COUNTRY CHAPTERS

Hans-Olof Hagn: Growth in the Nordic business sector

OMahony, 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 countriesOulton, N. and A. Rincn-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.


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Productivity in Europe. From the expansionto 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 froma long run perspective


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Labor productivity from a long runperspective

Labour productivity can grow following different patterns:

The USA followed a virtuous path: strong GVA growth together with employment creationand 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.

Japan also showed a positive rate of productivity growth but originated in employmentdestruction.

GVA, hours worked and labour productivity. Annual rate of growth. 1995-2009 (percentage)

-2

-1

0

1

2

3

4

1,85 1,71

3,15

2,44

0,700,48 0,57

0,05

0,51

-1,09

1,371,14

3,10

1,93 1,80

EU-10 USA J apan

GV A P roduc-tivity

Hoursworked

EU-25

GV A Produc-tivity

Hoursworked

GV A P roduc-tivity

Hoursworked

GV A Produc-tivity

Hoursworked

GV A P roduc-tivity

Hoursworked

EU-15

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.

Labour productivity. Annual rate of growth. EU-25. 1995-2009 (percentage)


EU-15

Ireland

Greece

Sweden

Finland

UnitedKingdom

France

Portugal

Germany

Austria

Netherlands

Spain

Belgium

Denmark

Luxemburgo

Italy

Estonia

Latvia

Lithuania

Slovakia

Poland

Eslovenia

Hungary

CzechRepublic

Cyprus

Malta

0

1

2

3

4

5

6

7

3,03

2,101,80 1,74

1,54 1,43 1,37 1,30 1,28

1,09 0,84 0,75

0,30 0,24 0,10

6,34

4,944,64

3,85 3,783,43

3,01

2,46

1,70 1,62

EU-10


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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.

Unit labour cost. Annual rate of growth, 1995-2009 (percentage)

1995-2008 for this country.

Source: ECB (2010), EU KLEMS (2009) and Fundacin BBVA-Ivie.

Eurozone-12 USA Japan-2

-1

0

1

2

3

4

5

0,69

1,74

-1,44

1,73

3,67

0,47

1,04

1,93 1,91

Unit labour cost Wages Productivity


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2.The impact of the crisis


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The impact of the crisis

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

GVA. Annual rate of growth. 1995-2007 and 2007-2009 (percentage)


EU-25 EU-15 EU-10 USA Japan-4

-3

-2

-1

0

1

2

3

4

5

2,44 2,31

3,62

3,02

1,34

-1,65-1,87

0,34

-1,05

-3,13

1995-2007 2007-2009


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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.

Labour (hours worked). Annual rate of growth. 1995-2007 and 2007-2009 (percentage)


EU-25 EU-15 EU-10 USA Japan-4

-3

-2

-1

0

1

2

3

4

5

0,76 0,90

0,10

1,10

-0,72

-1,21 -1,41

-0,22

-3,00-3,35

1995-2007 2007-2009


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Ireland

Sweden

Greece

Finland

UnitedKingdom

Portugal

Germany

Austria

France

Netherlands

Belgium

Luxembourg

Denmark

Spain

Italy

-5

-4

-3

-2

-1

0

1

2

3

4

5

3,56

2,35 2,30 2,281,87 1,75 1,72 1,62 1,62 1,51

1,11 0,990,63 0,54 0,42

-0,15

-1,48

0,92

-1,53

-0,45-0,92

-1,25

-0,74

0,34

-1,47 -1,43

-4,29

-1,67

2,63

-1,85

1995-2007 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.

Labour productivity. Annual rate of growth. EU-15. 1995-2007 and 2007-2009 (percentage)



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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.

Unit labour cost. Annual rate of growth. 1995-2007 and 2007-2009 (percentage)

2007-2008 for this countrySource: ECB (2010), EU KLEMS (2009) and Eurostat (2010)

Eurozone-12 USA J apan-3

-2

-1

0

1

2

3

4

5

0,22

2,10

-1,78

3,50

-0,40

2,60

1995-2007 2007-2009


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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.

In the USA productivity growth was higher than wages growth, thus unit labor cost

decreased.

Unit labour cost. Annual rate of growth. 2007-2009 (percentage)

2007-2008 for this country

Source: ECB (2010), EU KLEMS (2009) and Eurostat (2010)

Eurozone-12 USA J apan-1

0

1

2

3

4

3,50

-0,40

2,60

3,09

1,55

2,73

-0,41

1,95

0,13

unit labour cost wages productivity


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3. Aggregate productivity fromthe industries perspective


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Aggregate productivity from the industriesperspective

Manufacturinghas contributed positively to labor productivity growth, especially in the

EU-10.

The main difference between EU-15 and USA labor productivity growth is not to be

found in Manufacturingbut in the Services industries.

The contribution of the Construction industry was either nil or negative in all groups of

countries.

Industries contribution to labour productivity growth. Market Economy. 1995-2007 (percentage)

1995-2006 for these areas or countries

Source: EU KLEMS (2009).

Agriculture and fishing

Energy

Manufacturing

Construction

Transport and storage and

communication

Financial intermediation and

business activitiesSocial and personal services


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Aggregate productivity from the industriesperspective

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 ofManufacturingwas higher than in Market Services.

The highest growth rate was shown by the Energysector, followed by Manufacturing

andAgriculture and Fishing.

Labour productivity. Annual rate of growth. EU-15. Market Economy. 1970-1995 and 1995-2007 (percentage)

Source: EU KLEMS (2009) .

Market Economy Agriculture andfishing

Energy Manufacturing Construction Market Services-4

-3

-2

-1

0

1

2

3

4

5

6

2,84

5,29

4,80

3,48

1,431,911,76

2,71 2,96 2,81

-0,07

1,57

1970-1995 1995-2007


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4. Sources of productivity growth:the relevance of new technologies (ICT)


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Sources of productivity growth

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).

Growth accounting.Labour productivity. Market Economy. 1995-2007(percentage)

The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.



Labour composition

ICT capital deepening per hour worked

Non ICT capital deepening per hour work

TFP


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In the EU-15ex,Agriculture, Transport and Storage and Communication, and

Manufacturingwhere 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.

Growth accounting.Labour productivity. EU-15ex. Market Economy. 1995-2007(percentage)

The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.


Labour composition

ICT capital deepening per hour worked

Non ICT capital deepening per hour worke

TFP

0

1

2

3

4

-1Market

Economy

Agricultureand fishing

Energy Manufacturing ConstructionTransport andstorage and

communication

Financialintermediationand business

activities

Social andpersonalservices


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Industry classification according to ICT assets

ICT producers ICT non intensive usersElectrical and optical equipment Agriculture, hunting, forestry and fishing

Post and telecommunications Food products, beverages and tobacco

ICT intensive users Textiles, textile products, leather and footwear

Mining and quarrying Wood and products of wood and cork

Pulp, paper, paper products, printing and publishing Rubber and plastics products

Coke, refined petroleum products and nuclear fuel Other non-metallic mineral products

Chemicals and chemical products Basic metals and fabricated metal products

Machinery, nec Construction

Transport equipment Sale, maintenance and repair of motor veh.

Manufacturing nec; recycling Retail trade

Electricity, gas and water supply Hotels and restaurants

Wholesale trade Private households with employed persons

Transport and storage

Financial intermediation

Business activities

Other community, social and personal services


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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.

Share of each grouping in GVA. Market Economy. 1995 and 2007(percentage)


0

20

40

60

80

100

ICT producers ICT Intensive users ICT non intensive users

EU-25 EU-15 EU-10 USA Japan

1995 2007 1995 2007 1995 2006 1995 2007 1995 2006


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However, its contribution to productivity growth is much higher than its share in the

aggregate.

Especially in developed economies such as Japan and the USA

Contribution of each sectoral grouping to labour productivity growth.

Market Economy, 1995-2007 (percentage)

1995-2006 for these areas or countries.


ICT producers ICT Intensive users ICT non intensive users

EU-25 EU-15 EU-10 USA Japan

0

20

40

60

80

100

120


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The higher productivity growth rate in the ICT producing industries has its origin in its

strong MFP growth.

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.

Growth accounting. Labour productivity. Market Economy, 1995-2007 (percentage)

A: ICT producers; B: ICT intensive users; C: ICT non intensive users.

The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom



Labour composition

ICT capital deepening per hour work

Non ICT capital deepening per hour

worked

TFP

A B C A B C A B C

0

2

4

6

8

10

-2

UE-15ex

USA Japan


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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.

As a consequence, the USA maintained its previous productivity growth rate, while inthe EU-15 it became negative.


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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

Manufacturinghas 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 Manufacturingindustries 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, Manufacturingand 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 itscontribution 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

eu us jp productivity comparison

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