The Great Depression is considered one of the darkest times for the US economy, but some argue that the US economy experienced strong productivity growth over the period. This column reassesses this performance using improved measures of total factor productivity that allow for comparisons of productivity growth in the Depression era and in later decades. Contrary to Alvin Hansen’s gloomy prognosis of secular stagnation, the US economy was in a very strong position during the 1930s by today’s standards.
Gerben Bakker, Nicholas Crafts, Pieter Woltjer, 05 February 2016
Barry Eichengreen, Donghyun Park, Kwanho Shin, 17 September 2015
Productivity growth is slowing around the world. The question is what lies behind this trend and whether it can be arrested. This column takes a historical perspective on total factor productivity growth slowdowns. International factors that heighten the risk of TFP slumps include global interest rate shocks, global oil price shocks and rising global risk aversion. Country-specific factors working in the same direction include low educational attainment, weak political systems, and overly high levels of investment. Investing in education, political development and rebalancing can mitigate the risk of TFP slumps but are unlikely to eliminate them entirely.
João Pessoa, John Van Reenen, 28 June 2014
The fall in productivity in the UK following the Great Recession was particularly bad, whereas the hit to jobs was less severe. This column discusses recent research exploring this puzzle. Although the mystery has not been fully solved, an important part of the explanation lies in the flexibility of wages combined with very low investment.
Carlo Altomonte, Tommaso Aquilante, Gábor Békés, Gianmarco Ottaviano, 21 March 2014
Internationalisation and innovation policies are frequently considered to be key drivers of growth. This column documents a strong positive association between internationalisation, innovation, and productivity at the firm-level across seven European countries. This association continues to hold after controlling for country, size, industrial sector, and firm specific characteristics, with some evidence of causality running from innovation to internationalisation. The analysis suggests that policymakers should coordinate, if not integrate, innovation and internationalisation policies in order to boost productivity and growth.
M. Ayhan Kose, Eswar Prasad, Marco Terrones, 05 January 2009
There is a vast empirical literature analysing the impact of financial openness on economic growth but far less attention has been paid to its effects on productivity growth. This is surprising given the strong evidence that productivity growth is the main driver of long-term economic growth. This column argues that financial openness in fact has a positive impact on productivity growth, although the effects are subtle.
Karolina Ekholm, Andreas Moxnes, Karen-Helene Ulltveit-Moe, 30 August 2008
Exporting industries loathe real exchange rate appreciations that hurt their ability to sell abroad. But this column says that such shocks are also good news, as they may trigger industry restructuring and spur productivity growth.
Ian Dew-Becker, Robert J. Gordon, 15 April 2008
Europe’s jobs outlook has brightened over the past decade. Recent research suggests that about half the rise in job creation is due to labour market reforms, but much of the rest is due to changing social norms concerning female and immigrant labour force participation. But what’s good for European job creation seems to be bad for labour productivity growth – a trade-off that European policymakers must be willing to acknowledge and address.
Francesco Daveri , Cecilia Jona-Lasinio, 29 November 2007
The public debate on offshoring has created more heat than light to date, but researchers are beginning to get a picture of its real economic impact. New evidence from Italy, based on firm-level data and a direct measure of offshoring, shows that offshoring of parts and components boosts domestic productivity while offshoring of services does not.