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.

Uri Alon, Eran Yashiv, 27 April 2020

Countries are facing stark choices between ending the lockdown to revive people’s lives and risking the ravages of the COVID-19 pandemic. This column proposes an exit strategy from lockdown based on a vulnerability in the coronavirus transmission mechanism, i.e. the latent period in which most infected people do not infect others. An optimal work/lockdown cycle based on this weak spot could minimise infection risks while greatly improving the painful trade-offs faced by policymakers.

Teresa Barbieri, Gaetano Basso, Sergio Scicchitano, 27 April 2020

Many countries are now designing exit strategies from the sectoral lockdowns put in place to contain the outbreak of Covid-19. This column provides new evidence from Italy on the degree of workplace risk of exposure to the virus. Unsurprisingly, the health sector is the most exposed to diseases and infections, while the services sector is the most risky in terms of physical proximity. These and other findings can help in deciding which activities to reopen first and where to reinforce security measures.

Filippo di Mauro, Chad Syverson, 16 April 2020

The world went into the COVID crisis in the midst of a 15-year-long productivity growth slowdown. This column considers the channels through which the crisis might shift the growth rates of productivity and output. Globalisation, labour mobility and small firms may all fall victim to the crisis if the world does not succeed in reopening borders, refraining from trade and currency wars and focusing on policies to boost productivity. On the upside, the broad adoption of new technologies – such as IT skills during the epidemic – and strong reallocation pressures may provide an independent boost on productivity as we come out of the crisis.

Masayuki Morikawa, 10 April 2020

Japan, similar to many countries hit by the COVID-19 shock, has experienced a sudden increase in people working from home. This column exploits the teleworking arrangements implemented at the author’s workplace to investigate the impact on productivity. In a survey, workers indicate that they are, on average, less productive at home than in the office. While some of the reasons for this, such as lack of familiarity with remote access software, will fade over time, other factors suggest that a productivity gap will remain.

Natalie Bau, Adrien Matray, 16 March 2020

The misallocation of inputs, and in particular capital, may explain the large disparities in productivity across countries. This column exploits a policy in India in the early 2000s to quantify the effects of foreign capital liberalisation on misallocation and aggregate manufacturing productivity. As a result of the liberalisation policies, capital-constrained firms expanded their assets by 60%, spent more on labour (+24%), and increased their revenue by 18% relative to non-constrained firms. The effects of liberalisation were largest in areas with less developed local banking sectors.

Ethan Ilzetzki, 11 March 2020

The UK has seen slow rates of productivity growth over the past decade, with output per hour and real wages no higher today than they were prior to the global financial crisis. This column reveals how nearly half of leading economists surveyed by the Centre for Macroeconomics point to low demand due to the financial crisis, austerity policies and Brexit as a major cause for this productivity slowdown. Despite this diagnosis, only a small minority of the panel believes that the solution lies in demand-side policy. Instead, a majority support promoting productivity growth through investments in education and worker training. Other policies, such as infrastructure investments, and tax and regulatory policies are also proposed. 

Tim Besley, Isabelle Roland, John Van Reenen, 09 March 2020

Since the Global Crisis, there has been a renewed awareness of how frictions in credit markets can damage economic efficiency due to a higher cost of capital and/or capital being misallocated away from its most productive uses. This column presents a new methodological approach for calculating the cost of credit frictions which can be implemented with relatively simple data in multiple contexts. It finds that credit market frictions explain half of the fall in UK productivity in the Great Recession and depress output by 28% on average.

Ben Broadbent, Federico Di Pace, Thomas Drechsel, Richard Harrison, Silvana Tenreyro, 26 February 2020

The UK economy has experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the EU. This column documents these macroeconomic adjustments systematically and demonstrates that the effects of the referendum result on the UK economy can be conceptualised as news about a future slowdown in tradable productivity growth.

Jennifer Castle, David Hendry, Andrew Martinez, 21 January 2020

Real wages and productivity in the UK have stagnated since 2007, whereas employment has risen considerably. Many commentators lament the consequent failure of `living standards’ to rise at historical rates. But real GDP per capita has grown by more than 20% since 2000 despite the Great Recession, so aggregate living standards have in fact risen. This column resolves the apparent paradox.

Karl Aiginger, 20 January 2020

The new president of the European Commission, Ursula von der Leyen, has announced a ‘European Green Deal’ and the Commission has asserted Europe’s need to develop a new growth model to achieve climate neutrality. However, the Commission’s limited view of ‘productivity’ ignores the fact that raising labour productivity can raise emissions and accelerate climate change. Instead, this column argues that a welfare-oriented Green Deal needs to focus on resource and energy productivity, not raising labour productivity.

Keisuke Kondo, 14 January 2020

Increasing productivity is a top priority challenge for the Japanese economy under the current population decline, and the idea of raising the minimum wage in order to spur productivity growth has piqued interest among policymakers. This column suggests two ways in which firms may respond to a minimum wage hike: some may carry out reforms to increase productivity in response to the hike, while other less-productive firms may exit the market. The overall effect on productivity will vary across countries and firms, since the relative strength of these two effects depends on a country’s firms’ characteristics and market structure.

Piritta Sorsa, Jens Arnold, Paula Garda, 13 January 2020

Economic growth in Latin America has been persistently lower and more erratic than the emerging economies of Asia, largely due to low productivity borne out of both weak competition and a large informal economy. This column analyses the various factors that have caused these conditions to exist in several Latin American countries, and how policies to counteract them have fared. For significant progress, a detailed strategy of simplifying regulations, easing administrative burdens, encouraging market entry, and reducing trade barriers is required to formalise workers and encourage market competition.

Antonin Bergeaud, Gilbert Cette, Rémy Lecat, 05 December 2019

In most advanced economies, both real long-term interest rates and productivity growth have decreased since the early 1990s. The column demonstrates how a circular relationship links these two indicators. Until there is a technology shock, the relationship will converge to an equilibrium in which growth and interest rates are both low.

Marco Buti, Philipp Jaeger, Karl Pichelmann, 03 December 2019

A full understanding of the political economy roots of the major economic, social, and political divides that have emerged in our societies is essential to devise the right policy responses and to properly calibrate them in an environment of possibly protracted economic weakness. This column summarises the proceedings of DG ECFIN’s Annual Research Conference 2019, which zoomed in on some of the most pertinent challenges economic policymakers face today: (i) bringing productivity to people and places; (ii) making markets work for all, not just the few; (iii) future-proofing fiscal policies when going green and digital; and (iv) safeguarding Europe’s role in the global economy.

Ufuk Akcigit, Yusuf Emre Akgündüz, Seyit Mümin Cilasun, Elif Ozcan-Tok, Fatih Yılmaz, 27 November 2019

Numerous empirical studies have shown a decrease in business dynamism in the US and other high-income countries in the last decades. This column investigates the case of the Turkish manufacturing sector. Results indicate that business dynamism in the sector has declined since 2012. Market concentration and exit rates have risen, and new business creation, the labour share in output and economic activities of young firms have fallen. Using an endogenous growth framework, it argues that the inability of follower firms to credibly challenge market leaders is a likely reason, brought on by a lack of access to finance.

Tsutomu Miyagawa, Takayuki Ishikawa, 13 November 2019

Following the Global Crisis, some countries increased expenditures on research and development (R&D) to address secular stagnation. This column investigates how successful this rise in R&D scale was in supporting productivity growth in Japan and other advanced economies. It argues that R&D efficiency has declined in many of these countries in the past decade, compared to the preceding ten years. This suggests that increasing R&D spending is not enough to foster growth, and that countries need to do more to support innovation and collaboration in carefully chosen sectors.

Sotiris Blanas, Gino Gancia, Tim Lee, 10 October 2019

Since the early 1980s, technology has reduced the demand for low and medium-skill workers, the young, and women, especially in manufacturing industries. The column investigates which technologies have had the largest effect, and on which types of worker. It finds that robots and software raised the demand for high-skill workers, older workers, and men, especially in service industries. 

Fabiano Schivardi, Tom Schmitz, 01 October 2019

Productivity growth in southern Europe has been lower than in other developed countries. The column argues that this has in large part been caused by slow adoption of information technology, compounded by inefficient management. Without improvements in management practices, increased IT spending will not close the productivity gap.

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