Pedro Bento, Diego Restuccia, 21 October 2018

One way to adjudicate among existing productivity theories for why productivity varies across countries is to examine differences in average establishment size. Using new data covering firms in both manufacturing and services in 127 countries, this column shows that average establishment size increases with the level of development across countries, but the ratio of size between manufacturing and services does not vary systematically with income per capita. Misallocation is therefore an important driver of establishment size and aggregate productivity differences between rich and poor countries.

Costas Arkolakis, Natalia Ramondo, Andres Rodríguez-Clare, Stephen Yeaple, 08 October 2018

One consequence of the last decades of globalisation is that, thanks to multinational firms, goods are increasingly being produced far from where ideas are created. Using general equilibrium modelling, this column analyses the welfare and distributional effects of the recent wave of protectionism. Central to the results is the flexibility that multinational firms have in locating their innovation and production activities around the globe.

Giuseppe Berlingieri, Sara Calligaris, Chiara Criscuolo, 19 September 2018

The evidence that bigger firms pay higher wages and have higher productivity is mainly based on manufacturing, which nowadays accounts for a small share of the economy. Drawing on a unique micro-aggregated dataset, this column reveals that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger – the most productive firms at the top are not necessarily the largest ones in terms of employment, but they do pay the best. This increases the likelihood of productivity and wage gains being shared with fewer workers, a further challenge to achieving inclusive growth in the new service economy.

Gilbert Cette, Jimmy Lopez, Jacques Mairesse, 13 September 2018

Although many product and labour market reforms have been implemented in OECD countries during the last two decades, further reforms are still frequently promoted to increase competitiveness, restore economic growth, and improve workers’ purchasing power. This column uses new cross-country and cross-industry measures to explore how deregulation affects these markets. The results confirm that product market deregulation may reduce rent creation, but that labour market deregulation may have two opposing effects on rent sharing – a negative impact on wages and a positive impact on hours worked.

Gert Bijnens, Jozef Konings, 19 July 2018

Evidence from the US indicates that business dynamism is declining, and that this affects overall productivity growth. This column explores business dynamism in Belgium between 1985 and 2014. The results show remarkable similarities to those from the US, suggesting that these changes are likely due to global trends such as the rise of information and communication technology.

Ryan Decker, John Haltiwanger, Ron Jarmin, Javier Miranda, 12 July 2018

Job reallocation is an important determinant of productivity. This column uses US data to show that a decline in the degree of job reallocation in response to shocks is behind the overall fall in the rate of reallocation over the past decades. Weakening responsiveness became a drag on aggregate productivity for high-tech businesses in the 2000s, but in other sectors the problem dates back to the 1980s. 

Simon Wren-Lewis, 03 July 2018

Lucia Foster, Cheryl Grim, John Haltiwanger, Zoltan Wolf, 17 June 2018

Measuring innovative activity itself, rather than proxies such as R&D expenditures or patent volumes, is difficult. This column shows how patterns of economic activity can be used to measure increased innovative activity within firms. This ‘searching for black holes’ approach can be used to better understand the connection between innovation and productivity dispersion and growth.

Antonio Fatás, 16 June 2018

Dave Donaldson, 11 June 2018

Examples of geographical clustering in industries, such as Silicon Valley, suggest that firms have potentially positive external effects on other firms' productivities. Dave Donaldson discusses his research on the extent to which this is taking place, the strength of these economies of scale - for firms, workers, and consumers - and the role the government can play to foster this. This video was recorded at the 2018 RES Conference.

Georg Duernecker, Berthold Herrendorf, Akos Valentinyi, 16 May 2018

Baumol argued that structural change may lead to a productivity slowdown due to a reallocation of production to service industries with low productivity growth. This column uses a new framework to estimate the effects of Baumol’s disease on future productivity growth in the US. The results suggest that future structural change will not reduce productivity much further thanks to substitutability within the broader service sector.

Giordano Mion, 04 May 2018

Ten years on from the Global Crisis, productivity growth in the UK lags behind that in economies such as France and Germany. Giordano Mion shares his work on why this 'productivity puzzle' exists. The production capacity of manufacturers has not fallen much since 2008, but demand has faltered. This video was recorded at the 2018 RES Conference.

Pauline Charnoz, Claire Lelarge, Corentin Trevien, 22 April 2018

Research has shown that lower communication costs can act as a centralising force, prompting workers tend to rely more on the help of others and to specialise on a narrower set of tasks. This column reveals how reduced travel times resulting from a new high-speed rail transport in France fostered functional specialisation across different units of firms and greater centralisation. The findings highlight the mechanisms determining the level and distribution of productivity in an economy, and their redistributive impact both between and within firms

Finn Tarp, 16 April 2018

In economies like Viet Nam, policy agendas are increasingly data-driven. In this video, Finn Tarp shares five key policy goals for the country, based on data-rich household surveys. A combination of all five, including increasing productivty and innovation in and out of the agricultural sector, are needed to promote long-term growth.

John Van Reenen, 23 March 2018

Competition can foster productivity by eliminating unproductive firms out of the market. John Van Reenen discusses the impact of management quality on productivity - and how this is influenced by market forces. This video was published by the CORE Project.

Gianluca Benigno, Luca Fornaro, 15 March 2018

Existing research offers little guidance to policymakers who want to understand the interactions between economic fluctuations, growth, and stabilisation policies. This column introduces a Keynesian growth framework that provides a theory of long-run growth, built on a Keynesian approach to economic fluctuations. In the model, pessimistic expectations about future growth can give rise to stagnation traps. It suggests that monetary policy during a stagnation trap is hindered by credibility issues.

Jonathan Haskel, Stian Westlake, 31 May 2018

Many economists have suggested that slowing technical innovation is behind the secular stagnation and slowdown in total factor productivity growth that have plagued many advanced economies since the Global Crisis. This column, first published in January 2018, argues that the recent rise of the intangible economy could play an important role. An assessment of measurement trends and the properties of intangible investment across the globe suggests that total factor productivity growth will continue to be low until governments design the institutions an intangible economy needs, and until its commercial, legal, and ethical norms are worked out.

Emek Basker, Timothy S. Simcoe, 18 January 2018

ICT fuelled rapid growth in US retail during the 1990s and 2000s. This column maps the adoption of universal product codes and scanners to show that the barcode was one of the main drivers of this growth. Companies adopting barcodes employed 10% more employees, delivered a wider range of products, and were more likely to procure from abroad.

Atsushi Ohyama, 14 December 2017

The length of time industries prosper varies significantly. This column examines why some industries grow and prosper for a long period of time through the lens of submarket creation and destruction. Using data from the Japanese Census of Manufacture, it shows that the creation and the destruction of products allow an industry to continue attracting new entrants, that start-up and spinoff firms are more likely to enter a newly created submarket than incumbent firms, and that new entry is encouraged when unrealised business opportunities are reallocated smoothly.

Ricardo Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas, 13 December 2017

The US has seen a fall in real interest rates but stable real returns on productive capital in the last few decades. This column argues that these divergent trends are inherently interlinked, and arise from a combination of a rise in the capital risk premium, an increase in monopoly rents from mark-ups, and capital-biased technical change. With these secular trends unlikely to reverse anytime soon, we are likely to live in a prolonged era of low interest rates, high capital risk premia, and low labour share.

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