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31. Raising EU productivity through innovation

Author:
Reinhilde Veugelers and Frederic Warzynski
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Research and development is seen as a key contributor to growth because it generates knowledge, leading to new or improved products through product innovation, and makes firms more efficient at producing goods through process innovation. Firm level studies generally find evidence of strong positive productivity effects for firms that invest in R&D. In this context, digital systems could be an important driver of productivity growth, particularly in combination with investments in R&D. But there has been little hard evidence of a significant productivity boost from digital technologies. How the relationship between productivity growth, innovation and digital technology adoption plays out is particularly important for the European Union, where productivity growth has long been weak. Researchers from the MICROPROD project have assessed the effect of technology investment on productivity and performance. Combining recent unique firm-level data and state-of-the art research methodologies, MICROPROD research provides a better overview of which firms are most likely to adopt digital technologies and to innovate, and to turn these investments into productivity growth.
Topic:
European Union, Investment, Innovation, and Productivity
Political Geography:
Europe

32. Regional Diffusion of Foreign Demand Shocks Through Trade and Ownership Networks

Author:
Lionel Fontagné and Gianluca Santoni
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
International demand shocks are transmitted within the trade and ownership firms' networks and impact directly or indirectly domestic firm productivity and labor misallocation. Considering manufacturing firms for Italy, Spain and France over the period 2009-2017, we quantify these transmission channels from the global economy to the domestic firms, and within the domestic economy across locations, sectors and firms. We compute in a shift share fashion international demand shock at the district-sector-year level as plausibly exogenous to individual firms. Our results confirm that global shocks are transmitted through trade networks and that this transmission is largely mediated by firms' ownership networks both across and within the borders of the three countries.
Topic:
Economics, International Trade and Finance, Demand, and Productivity
Political Geography:
Europe, France, Spain, and Italy

33. What Do We Really Know about Productivity Differentials across Countries?

Author:
Jayati Ghosh
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper examines and critiques the most widely used measure of productivity (output per worker employed) and argues that this is a flawed, inadequate and even misleading measure of economic progress. In terms of cross-country comparisons and assessing trends over time, both the numerator (GDP or value added) and the denominator (number of workers or hours worked) have significant conceptual and measurement problems. These issues are considered in general, and also with regard to how they affect analyses of productivity differentials in the U.S. and India in the recent period.
Topic:
Political Economy, GDP, Employment, Economy, and Productivity
Political Geography:
South Asia, India, North America, and United States of America

34. The productivity paradox: policy lessons from MICROPROD

Author:
Gregory Claeys and Maria Demertzis
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Productivity growth in Europe has been on a downward trend for several decades. Given that productivity growth is a crucial source of output growth, particularly in an aging society like the European Union, it is crucial to understand what is driving this slowdown and what the potential consequences are for our economic model and for citizens’ welfare. Some explanations for this trend are global in nature, but there are also significant differences in country structures in Europe that have led to different outcomes and that need to be accounted for before policy prescriptions can be made. The objective of MICROPROD, an EU-wide research project that runs until the end of 2021, is to contribute to this research strand by using data from various European countries to study the microeconomic mechanisms behind this macroeconomic phenomenon. In particular, the aim is to understand the challenges posed to Europe by the fourth industrial revolution and its impact on productivity in the context of globalisation and digitalisation, and to recommend policies to address these challenges. MICROPROD researchers have so far delivered 20 papers on four broad issues relevant for today’s policy debates: the measurement and effects of intangible capital on productivity; the impact of globalisation, international trade and the integration of global value chains (GVCs) on productivity; factor allocation and allocative efficiency; and finally the social consequences of the two structural shocks Europe has faced in the last two decades: globalisation and technological progress. This Policy Contribution reviews the main conclusions of these 20 MICROPROD papers and how they inform policy debates. However, the mid-point of the three-year MICROPROD project also coincided with the start of the COVID-19 crisis, which might have accelerated some trends or possibly reversed others. We therefore discuss how some of the messages of MICROPROD research may contribute to our understanding of the current crisis and its aftermath.
Topic:
Globalization, Governance, European Union, Macroeconomics, Productivity, and Digitalization
Political Geography:
Europe

35. Productivity and the Pandemic: ShortTerm Disruptions and Long-Term Implications

Author:
Klaas de Vries, Abdul Erumban, and Bart van Ark
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
The Conference Board
Abstract:
This paper analyses quarterly estimates of productivity growth at industry level for three advanced economies, France, the United Kingdom, and the United States, for 2020. We use detailed industry-level data to distinguish reallocations of working hours between industries from pure within-industry productivity gains or losses. We find that all three countries showed positive growth rates of aggregate output per hour in 2020 over 2019. However, after removing the effects from the reallocation of hours between low and high productivity industries, only the US still performed positively in terms of withinindustry productivity growth. In contrast, the two European economies showed negative within-industry productivity growth rates in 2020. While above-average digital-intensive industries outperformed belowaverage ones in both France and the UK, the US showed higher productivity growth in both groups compared to the European countries. Industries with medium-intensive levels of shares of employees working from home prior to the pandemic made larger productivity gains in 2020 than industries with the highest pre-pandemic work-from-home shares. The paper also experiments with US data on employment at county level by allocating within-industry productivity contributions for 2020 to urban, sub-urban and rural areas, showing that the contributions to within-industry productivity growth from manufacturing and other production industries in urban and sub-urban areas increased during the pandemic. Overall, after taking into account the productivity collapse in the hospitality and culture sector during 2020, productivity growth shows no clear deviation from the slowing pre-pandemic productivity trend. Future trends in productivity growth will depend on whether the favourable productivity gains (or smaller losses) in industries with above-average digital intensity will outweigh negative effects from the pandemic, in particular scarring effects on labour markets and business dynamics.
Topic:
Labor Issues, Work Culture, Pandemic, COVID-19, Productivity, and Digitalization
Political Geography:
United Kingdom, Europe, France, and United States of America

36. How good are manufacturing jobs in Myanmar? Evidence from matched employer–employee data

Author:
Paolo Falco, Francesca Gioia, and Neda Trifković
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The quality of people’s jobs is a fundamental determinant of their well-being, and judging the state of a labour market on the basis of job quantity alone delivers a very partial picture. This study is an attempt to place the spotlight on the working conditions of workers in the Myanmar manufacturing sector. Using a model of job demands and job resources, we focus on the balance between different stress factors and the support workers get. We find that a large fraction of workers face severe pressures. In particular, nearly one half faces severe time pressure; nearly a quarter is exposed to health hazards, such as loud noises, carrying heavy loads, and operating in uncomfortable or painful positions. These factors are often not met with adequate support from the firm. Male workers and those with lower levels of education are most exposed to occupational risks. Contrary to the narrative that a trade-off might exist between firm competitiveness and job quality, we find that labour productivity is higher in firms where working conditions are better.
Topic:
Labor Issues, Employment, Manufacturing, Trade, and Productivity
Political Geography:
Southeast Asia and Myanmar

37. A Policy Matrix for Inclusive Prosperity

Author:
Dani Rodrik and Stefanie Stantcheva
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Economics for Inclusive Prosperity (EfIP)
Abstract:
One of the biggest challenges that countries face today is the very unequal distributions of opportunities, resources, income and wealth across people. Inclusive prosperity – whereby many people from different backgrounds can benefit from economic growth, new technologies, and the fruits of globalization – remains elusive. To address these issues, societies face choices among many different policies and institutional arrangements to try to ensure a proper supply of productive jobs and activities, as well as access to education, financial means, and other endowments that prepare individuals for their participation in the economy. In this paper we offer a simple, organizing framework to think about policies for inclusive prosperity. We provide a comprehensive taxonomy of policies, distinguishing among the types of inequality they address and the stages of the economy where the intervention takes place. The taxonomy clarifies the differences among contending approaches to equity and inclusion and can help analysts assess the impacts and implications of different policies and identify potential gaps.
Topic:
Economics, Labor Issues, Economic Inequality, Macroeconomics, Job Creation, Polarization, Productivity, Inclusion, Workforce, and Production
Political Geography:
United States

38. Sorting, Matching and Economic Complexity

Author:
Muhammad A. Yildirim
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Assignment models in trade predict that countries with higher productivity levels are assortatively matched to industries that make better use of these higher levels. Here, we assume that the driver of productivity differences is the differential distribution of factors among countries. Utilizing such a structure, we define and estimate the average factor level (AFL) for countries and products using only the information about the production patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo and Hausmann, 2009), providing an underlying economic rationale. We show that AFL is highly correlated with country-level characteristics and predictive of future economic growth.
Topic:
Economics, Economic Growth, Trade, Industry, and Productivity
Political Geography:
Global Focus

39. Learning-to-Export Effect as a Response to Export Opportunities: Micro-Evidence from Korean Manufacturing

Author:
Chin Hee Hahn and Yong-Seok Choi
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper aims to investigate whether empirical evidence supports the learning-to-export hypothesis, which has received little attention in the previous literature. By taking full advantage of plant–product level data from the Republic of Korea during 1990–1998, we find some evidence for the learning-to-export effect, especially for innovated product varieties with delayed exporters: their productivity, together with research and development and investment activity, was superior to their matched sample. On the other hand, this learning-to-export effect was not significantly pronounced for the industries protected by import tariffs. Thus, our empirical findings suggest that it would be desirable to implement some policy tools to promote the learning-to-export effect, while tariff protection cannot be justifiable for that purpose.
Topic:
Industrial Policy, International Trade and Finance, Tariffs, Manufacturing, and Productivity
Political Geography:
Asia and South Korea

40. Trade Reform and the Evolution of Agglomeration in Vietnamese Manufacturing

Author:
Đoàn Thi Thanh Ha and Hông Quỳnh Nguyen
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
It is well-documented that agglomeration contributes to productivity growth. However, concentrations of workers could also lead to increasing regional income disparities. Therefore, understanding the evolution of agglomeration is relevant for the formulation of industrial policy and inclusive growth. This study documents the extent, pattern, and determinants of agglomeration in Vietnamese manufacturing during 2002–2016, a period when substantial economic reform took place. Our major findings are three-fold. First, agglomeration, as measured by the Ellison–Glaeser index, has declined since the mid-2000s. Second, there exists significant sectoral heterogeneity in the level and trend of agglomeration. Third, we do not find a significant impact of trade and foreign direct investment on agglomeration per se. However, foreign direct investment in port districts does contribute to disagglomeration.
Topic:
International Trade and Finance, Reform, Manufacturing, and Productivity
Political Geography:
Asia and Vietnam