Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter Klenow, Huiyu Li, 16 August 2017

Slowing growth of total factor productivity has led some to suggest that the world is running out of ideas for innovation. This column suggests that the way output is measured is vital to assessing this, and quantifies the role of imputation in output measurement bias. By differentiating between truly ‘new’ and incumbent products, it finds missing growth in the US economy. Accounting for this missing growth will allow statistical offices to improve their methodology and more readily recognise the ready availability of new ideas, but also has implications for optimal growth and inflation targeting policies.

Nicholas Crafts, Terence Mills, 17 July 2017

Estimates of trend total factor productivity growth in the US have been significantly reduced, contributing to fears that the slowdown is permanent. This column provides an historical perspective on the relationship between estimated trends in total factor productivity growth and subsequent outcomes. It argues that In the past, trend growth estimates have not been a good guide for future medium-term outcomes, and ‘techno-optimists’ should not be put off by time-series econometrics.

Enrico Perotti, 16 December 2016

Per-capita income in developed countries has stagnated, which most economists regard as a departure from the long-run trend. This column argues that zero long-term growth will be the new normal. In this zero-growth world, spending increases must always be balanced against spending reductions elsewhere or in the future, which creates a further problem: no politician could implement policy changes with such bleak outcomes.

Elisa Gamberoni, Claire Giordano, Paloma Lopez-Garcia, 13 December 2016

An efficient allocation of inputs across firms is a necessary condition to boost TFP growth. This column presents evidence that in large Eurozone economies, capital misallocation trended upwards in the period 2002-2012 while labour misallocation dynamics were flatter. Uncertainty and credit market frictions were strongly associated with the observed developments in capital misallocation, whereas the overall deregulation in the product and labour markets contributed to dampening input misallocation dynamics. 

Hisamitsu Saito, Toshiyuki Matsuura, 25 November 2016

Agglomeration’s impact on product quality has received much less attention than its impact on productivity, despite the importance of quality as a precondition for economic development. This column employs plant-product-level data from Japanese manufacturing to assess the effects of urban agglomeration on product quality. The findings suggest that state and municipal tax breaks, and other public efforts to attract enterprises, enhance economic competitiveness by improving product quality along with productivity.

Julián Messina, Oskar Nordström Skans, Mikael Carlsson, 23 October 2016

While standard microeconomic theory suggests that firms have no power over setting wages when markets are perfectly competitive, this view obviously clashes with the perceptions of the casual observer. This column uses data from Sweden to investigate the extent to which differences in firms’ pay are related to differences in physical productivity. It finds that firms that benefit from positive productivity shocks increase the wages of incumbent workers, and in particular firms among which there is substantial labour mobility. The evolution of productivity among such firms appears to be a crucial determinant of workers’ wages.

Keting Shen, Jing Wang, John Whalley, 05 January 2016

Many argue that China has had a higher total factor productivity growth rate than India and the US since the late 1970s. This column assesses changes in China’s technology gaps between both the US and India from 1979 to 2008 with a constant elasticity of substitution production framework. The calculations suggest that the technology gap between China and the US was significantly larger than that between India and the US for the period before 2008.

Mariacristina De Nardi, Giulio Fella, Fang Yang, 22 December 2015

Thomas Piketty’s "Capital in the Twenty-First Century" quantified the evolution of wealth inequality and concentration over time and across a number of countries. This column examines existing macroeconomic models of wealth inequality through the lenses of the facts and ideas in Piketty’s book. It further examines the importance of the mechanism that Piketty champions – post-tax rate of return on capital. Gaps in existing knowledge and directions for future research are identified. 

Koji Nomura, 18 December 2015

Though Asian economies have maintained stable growth since 2010, their overall economic performance has slowed down compared to the peak in the 2000s. This column discusses the recent productivity trends in the Asian region and argues that the reason for the slowdown has been the end of China’s economic boom. Asian countries must undertake initiatives for achieving sustainable improvement of TFP across the region.

Jan Lorenz, Fabrizio Zilibotti, Michael König, 19 November 2015

Received wisdom would make you think that you need lots of small firms that are innovating in order to push productivity in an economy. This column provides data suggesting that large firms with high productivity growth can act as technological leaders and supply the economy with a continuous stream of innovations. Overly strong patent protection can significantly reduce growth and increase inequality.

Kaoru Hosono, Daisuke Miyakawa, Miho Takizawa, 27 August 2015

‘Learning by exporting’ refers to productivity gains experienced by firms after they commence exporting. Such gains are argued to be due to access to new knowledge and resources. This column explores some of the preconditions for learning-by-exporting effects, using data on the overseas activities and affiliations of Japanese firms. Firms that enter markets in which they don’t have affiliates or subsidiaries are found to enjoy the most learning-by-exporting productivity gains. These findings have implications for the timing of new market entry.

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