Morris Davis, Andra Ghent, Jesse Gregory, 18 April 2021

The COVID-19 pandemic has prompted a radical shift in how much people work from home. This column argues that, through learning and technology adoption effects, this enforced shift has boosted the productivity of working from home, which will lead to higher lifetime incomes for the working population. While these productivity gains would likely have happened eventually, the pandemic accelerated this process.

Gaurav Khanna, Wenquan Liang, Ahmed Mushfiq Mobarak, Ran Song, 08 April 2021

Why do workers remain in low-productivity areas when they could experience wage gains elsewhere? While the literature has proposed a few explanations, including the high cost and risky nature of migration, this column uses the case of China to examine instead the role that pollution plays. It finds that severe pollution can induce workers to relocate from productive to unproductive regions, suggesting that pollution control, coupled with policies facilitating migration, has the potential to bring about extra economic gains in developing countries.

Francesca Carta, Francesco D'Amuri, Till von Wachter, 16 March 2021

Population ageing reduces labour supply and burdens pension systems. At the same time, delaying the statutory retirement age may have an impact on firms’ productivity and risks crowding out younger workers. This column exploits an unexpected pension reform in Italy in 2012 which sharply increased the full retirement age for workers aged 55 or above to show that such concerns may not be warranted. A rise in employment of older workers led to an increase in value added while holding labour costs constant. Employment in other age classes also increased. This suggests older workers are valuable to employers and that pension reforms postponing retirement can remove a constraint rather than placing a burden on firms.

Masayuki Morikawa, 12 March 2021

Working from home has become much more prevalent across advanced economies during the Covid-19 pandemic. This column uses survey data from Japan to explore how widely working from home has been adopted across industries and how productive employees are at home. It finds that the overall contribution of working from home to labour input is surprisingly small. Even where firms adopted the practice, many employees did not exploit it; and even those who did work from home did not necessarily do so throughout the week. The firm survey responses suggest that across industries, the average productivity of employees when working from home relative to at the workplace is 68.3%, which is similar to the findings from an employee survey. The results suggest that there is room for improvement to make working from home more feasible.

Xinshen Diao, Mia Ellis, Margaret McMillan, Dani Rodrik, 01 March 2021

Before Covid-19 struck, many economies in sub-Saharan Africa were expanding rapidly – faster than at any time since independence. Yet African growth accelerations were anomalous when viewed from the perspective of comparative development patterns; structural changes were accompanied by declining within-sector productivity growth in modern sectors. This column explores this anomaly in the context of African manufacturing using newly created firm-level panel data for Tanzania and Ethiopia. In both countries, there is a sharp dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. These patterns appear to be related to technological advances in global manufacturing which are making it more capital intensive.

Florin Maican, Matilda Orth, Mark Roberts, Van Anh Vuong, 26 January 2021

Firms’ incentives to undertake innovation investments can be affected by their activities in domestic and international markets. This column uses a structural framework to estimate the returns to innovation investments and analyse the impact of trade on those returns. It shows that a firm’s R&D investments raise its future productivity in both domestic and export markets, with a larger impact in the export market. Furthermore, it shows that public efforts to stimulate innovation investments can be offset by trade restrictions limiting access to world markets. These findings are important for policymakers to recognise when fostering innovation. 

Nicholas Bloom, Philip Bunn, Paul Mizen, Pawel Smietanka, Gregory Thwaites, 18 January 2021

The Covid-19 shock has had asymmetric effects across sectors of the economy, with those sectors that involve the most social contact in consumption bearing the brunt. This column uses data from the Decision Maker Panel business survey data to assess how the spread of Covid-19 and measures to contain it are likely to affect productivity. It estimates total factor productivity in the UK private sector is likely to be lower than it would have been, by up to 5% in 2020 Q4, falling back to a 1% reduction in the medium term. Firms anticipate a large reduction in ‘within-firm’ productivity, primarily because measures to contain Covid-19 are expected to increase intermediate costs. Since the pandemic disproportionally affected firms in low-productivity sectors, and the least productive firms within these sectors, these become a smaller part of the economy and therefore a positive ‘between-firm’ reallocation effect partially offsets the negative ‘within-firm’ effect.

Andrés Rodríguez-Pose, Roberto Ganau, Kristina Maslauskaite, Monica Brezzi, 15 December 2020

Does institutional quality mitigate the negative returns of credit rationing on labour productivity? Using data on a large sample of manufacturing firms in 11 European countries, this column demonstrates that this is indeed the case, especially for micro, small, and medium-sized firms. The negative effects of credit constraints on productivity are mitigated in those areas of Europe with high-quality governance. ‘Good’ regional institutions not only drive firm-level productivity but also, and in a more indirect way, reduce the negative productivity returns of credit constraints.

Xavi Cirera, Diego Comin, Marcio Cruz, Kyung Min Lee, 29 November 2020

Understanding how firms use technology in production is key for studying productivity and labour market outcomes. This column introduces a new approach to measure technology adoption at the business function level – the Firm-level Adoption of Technology survey. Using representative data from three countries, it finds a larger variance in technology sophistication within firms compared with across firms, and greater variance across firms than across countries or regions. Furthermore, a development accounting exercise suggests cross-firm technology differences account for one-third of the cross-firm productivity gap. 

Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens, 13 October 2020

Aggregate firm concentration has increased in Europe in the last decade. Using firm-level data, this column shows that concentration is positively associated with productivity at the sector level. As a result, rising concentration should not be viewed as conclusive evidence of a weak competitive environment and need not necessarily be a cause for concern. Rather, rising concentration may be a reflection of more efficient market processes. This has important consequences for industrial and antitrust policy, which must carefully evaluate the costs and benefits of increasing concentration.

Sebastian Doerr, Dalia Marin, Davide Suverato, Thierry Verdier, 19 August 2020

A well-established observation in the trade literature is that conglomerate firms are more productive than single-product firms, but this appears to be at odds with findings in the finance literature that multi-segment firms trade at a discount and have lower Tobin’s Q than single-product firms, because internal capital markets misallocate funds across divisions within firms. This column develops a novel theory of misallocation within firms (rather than between firms) due to managers' empire building. Introducing an internal capital market into a two-factor model of multi-segment firms, it shows that more open markets impose discipline on competition for capital within firms, which explains why exporters exhibit a lower conglomerate discount than non-exporters. Testing the model with data on US companies, the authors establish that import competition reduces mis-allocation within firms. A one standard deviation increase in Chinese imports lowers the conglomerate discount by 32% and over-reporting of costs by up to 15%.

Eiichi Tomiura, Banri Ito, Byeongwoo Kang, 12 August 2020

Cross-border data flows are increasingly critical for modern firms, and the regulation of data poses a distinctly novel challenge for policymakers in the 21st century. This column presents survey data from Japan, investigating exactly which type of firm are most likely to be affected by regulations surrounding the international exchange of data. The results of the study suggest that new technologies such as Artificial Intelligence and 3D printers are usually adopted by the most productive and innovative firms, and that hampering these firms with regulation may create harmful effects for the wider economy.

Charles Goodhart, Dimitri Tsomocos, Xuan Wang, 07 August 2020

A sizeable proportion of enterprises, especially SMEs, in receipt of financial assistance from the government will fail to repay. This column asks whether, and to what extent, it may be beneficial to apply a screening mechanism to deter those mostly likely to fail to repay from seeking financial assistance in the first place. The answer largely turns on the relative weights attached for the objectives of stabilisation as compared with allocative efficiency.

Daniel Gallardo Albarrán, Robert Inklaar, 31 July 2020

Modern economic growth has improved the lives of millions in an unprecedented way, but its unequal progression across the globe has resulted in high income inequality. Most of the cross-country differences in income levels are typically attributed to differences in productivity rather than to physical or human capital accumulation. This column argues that this has not always been the case: physical capital accounted for a much larger fraction of income variation at the beginning of the 20th century. More generally, the results of the study call for a reevaluation of the long-term determinants of relative economic performance over time.

Alex Bartik, Zoe Cullen, Edward Glaeser, Michael Luca, Christopher Stanton, 19 July 2020

The COVID-19 crisis has necessitated a rise in remote working, but many challenges to its broader adoption remain. This column uses survey data from thousands of small businesses representing a wide set of industries, firm sizes, and regions across the US to understand how businesses are adjusting to the crisis. It finds that transition to remote working is uneven, with businesses in industries with higher income and better educated employees more likely to transition to remote working. Productivity effects are also uneven, with many firms becoming less productive as a result of the transition.

Filippo di Mauro, 10 July 2020

In the recovery from Covid-19 we urgently need to boost productivity. But which policies move the needle? Filippo di Mauro tells Tim Phillips about what CompNet's firm-level productivity data tells us about both the problem and the solution.

Felix Kersting, Iris Wohnsiedler, Nikolaus Wolf, 11 July 2020

Max Weber famously hypothesised that the Protestant work ethic fostered modern economic development. Does religion matter for economic success? This column revisits Weber’s hypothesis in the context of 19th-century Prussia. Protestantism did not matter for savings, literacy rates, or income levels across Prussian counties after 1870. Instead, there are large differences between ethnic groups, likely due to ethnic discrimination. Nationalism must be taken into account to understand Weber’s writings.

Kaoru Hosono, Miho Takizawa, Kenta Yamanouchi, 21 June 2020

How do firms grow as they age after establishment? What drives high growth rates for young firms? Using a large dataset from Japan for the period from 1995 to 2015, this column argues that the accumulation of intangible capital plays a significant role in the growth of physical productivity, which, in turn, accounts for a major part of sales growth as firms age. Of the three types of intangible capital – organisational capital, software, and R&D stocks – organisational capital explains a large part of the sales growth.

Alexia Delfino, Raffaella Sadun, 04 May 2020

As businesses emerge from lockdown, they will face the challenge of adopting new health and safety standards while maintaining profitability and productivity. Effective management will be crucial in aligning these private and social interests. This column explores how structured management training programmes – modelled after support given to European firms under the Marshall Plan – can help firms operate safely and productively in the Covid-19 era. It outlines several principles policymakers should follow in the design and implementation of these training programmes.

Liudmila Alekseeva, José Azar, Mireia Gine, Sampsa Samila, Bledi Taska, 03 May 2020

Artificial intelligence will transform job tasks and occupations. This column uses data from US online job postings during 2010–2019 to show how absolute and relative demand for AI-related skills has grown across all industry sectors and occupation groups. Jobs requiring AI skills command, on average, an 11% wage premium compared to similar jobs that do not require AI knowledge. However, AI is at least as much a managerial challenge as it is a technological challenge. Real productivity gains will come only when there are managers who can use AI to create and capture value.

Pages

Events

CEPR Policy Research