Alan Benson, Danielle Li, Kelly Shue, 24 April 2019

The Peter Principle states that organisations promote people who are good at their jobs until they reach their ‘level of incompetence’, implying that all managers are incompetent. This column examines data on worker- and manager-level performance for almost 40,000 sales workers across 131 firms and finds evidence that firms systematically promote the best salespeople, even though these workers end up becoming worse managers, and even though there are other observable dimensions of sales worker performance that better predict managerial quality. 

Christian Krekel, George Ward, Jan-Emmanuel De Neve, 21 April 2019

A growing number of companies place a high priority on the wellbeing of their workers, assuming that happier workers will lead to improved productivity. This column examines this link based on a meta-analysis of independent studies accumulated by Gallup, covering the wellbeing and productivity of nearly 2 million employees and the performance of over 80,000 business units, originating from 230 independent organisations across 49 industries in 73 countries. The results suggest a strong positive correlation between employee wellbeing, productivity, and firm performance.

Tadashi Ito, Yukiko Saito, 16 April 2019

Small and medium-sized firms can enjoy the benefits of trade liberalisation by exporting their goods or importing inputs through intermediaries. Using firm-level data from Japan, this column finds that firms in regional areas are smaller than those in metropolitan areas and are less likely to participate in indirect or direct trade. Direct and indirect exports and imports represent a large share of regional economies, and indirect exporters in regional areas are likely to become direct exporters. In addition, both newly started direct export/import firms and newly started indirect export/import firms tend to grow faster.

Tito Boeri, Andrea Ichino, Enrico Moretti, Johanna Posch, 13 April 2019

In many European countries, wages are determined by collective bargaining agreements intended to improve wages and reduce inequality. This column compares the impact of different wage bargaining models in Italy, which has limited geographical wage differences in nominal terms and almost no relationship between local productivity and local nominal wages, and Germany, which has a tighter link between local wages and local productivity. The Italian system is successful at reducing nominal wage inequality, but creates costly geographic imbalances. If Italy were to adopt the German system, aggregate employment and earnings would increase by 11.04% and 7.45%, respectively. 

Ann Harrison, Marshall W. Meyer, Will Wang, Linda Zhao, Minyuan Zhao, 07 April 2019

The conventional wisdom that privatisation of state-owned enterprises reduces their dependence on the state and yields positive economic benefits has not always been borne out by empirical work. Using a comprehensive dataset from China, this column shows that privatised SOEs continue to benefit from government support in the form of low-interest loans and subsidies relative to private enterprises that have never been state-owned. Although there are clear improvements in performance post-privatisation, privatised SOEs continue to significantly under-perform compared to private firms.

Dan Andrews, Filippos Petroulakis, 04 April 2019

Europe’s productivity problem is partly due to the rise of zombie firms that crowd out growth opportunities for others. This column explores the tendency for weak banks to evergreen loans to zombie firms to avoid realising losses on their balance sheet. Measures to strengthen bank balance sheets will be enhanced by insolvency regimes that encourage corporate restructuring.

Bruno Merlevede, Victoria Purice, 29 March 2019

Supplying inputs to multinational firms has been shown to increase the productivity of domestic firms, while borders have been shown to substantially reduce trade activities. This column investigates whether spillover effects from multinationals on local firms occur when firms are separated by a national border. Using data for seven Central and Eastern European countries and their neighbours, it finds that cross-border spillovers only occur after EU integration, and that participation in the Schengen Area magnifies these effects. The results bear testimony to successful EU integration and warn about potential productivity costs to local firms should border controls be reinstated.

Semih Akcomak, Bastiaan Overvest, 22 March 2019

The European Commission plans to spend about €120 billion on research and innovation under mission-oriented programmes between 2021 and 2027. This column shows that planned spending is small both relative to the total R&D spending of individual EU countries and relative to previous missions. In addition, there is a lack of clarity on how missions will be determined, designed and governed. Experiences in other countries suggest that the Commission should find new ways of increasing funding to missions and increase clarity on the implementation of mission-oriented policies.

Çağatay Bircan, 31 January 2019

Evidence is mixed on the effects of multinational activity on productivity and competitiveness in host economies. This column provides new evidence that multinationals’ productivity effects may be previously under-estimated. Results suggest that ownership structure of multinationals and foreign acquisitions play an important role in driving aggregate productivity growth.

James Harrigan, Ariell Reshef, Farid Toubal, 23 January 2019

Economists have studied the nexus between labour demand, globalisation, and technology adoption for decades, but quantifying the relative importance of these factors is challenging. Using firm-level data from France, this column proposes a new measure of productivity based on the number of workers in technology-related occupations. It finds large effects of importing, ICT, and R&D on the relative demand for skilled workers through their effects on productivity. Interestingly, the demand for both skilled and unskilled workers rises when firms hire ‘techies’ or engage in offshoring.

Nicholas Bloom, Scarlet Chen, Paul Mizen, 16 November 2018

The majority of businesses in the UK report that Brexit is a source of uncertainty. This column uses survey responses from around 3,000 businesses to evaluate the level and impact of this uncertainty. It finds that Brexit uncertainty has already reduced growth in investment by 6 percentage points and employment by 1.5 percentage points, and is likely to reduce future UK productivity by half of a percentage point.

Martina F. Ferracane, Janez Kren, Erik van der Marel, 25 October 2018

Countries are increasingly imposing new data policies which restrict both the domestic use of data and the flow of data across borders. This column uses an index of data policy restrictiveness for 64 major economies to demonstrate that restrictions that apply to the cross-border movement of data have an inhibiting effect on trade in services and, to a lesser extent, on the productivity of local companies and industries. Policies targeting the use of data, on the other hand, are found to have a comparably larger effect on productivity.

Pedro Bento, Diego Restuccia, 22 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

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