Alistair Dieppe, 18 September 2020

Since the 2008 global financial crisis, improvements in many key correlates of productivity growth have slowed or gone into reverse, and labour reallocation to more productive sectors from less productive ones has also weakened. Furthermore, the pace of convergence of emerging market and developing economies to advanced-economy productivity levels has slowed. This column argues that the COVID-19 pandemic is likely to compound the slowdown, with profound implications for development outcomes. A comprehensive broad-based approach is necessary to rekindle productivity.

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. 

Jacques Bughin, Hans‐Helmut Kotz, Jan Mischke, 22 March 2018

One stark feature of the global economy in the 21st century is the ongoing slowdown of productivity growth. This column explores the key factors behind this trend for several countries around the world. Weak demand is found to be a critical driver of the slowdown by holding back investment and changing the structure of consumption baskets, and through economies of scale effects. Although digitisation offers a potential way back, its benefits will require a strengthening of aggregate demand.

Maurice Obstfeld, Romain Duval, 10 January 2018

The widespread and persistent productivity slowdown witnessed since the Global Crisis had already begun in advanced and low-income countries prior to the crisis. This column argues that the crisis amplified the slowdown by creating ‘productivity hysteresis’, and that monetary policy played an ambiguous role. Policymakers must now address the legacies of the crisis through innovation, education policies, and structural reforms.

Gene Grossman, Elhanan Helpman, Ezra Oberfield, Thomas Sampson, 11 November 2017

Many countries have experienced both a slowdown in aggregate productivity growth and a decline in labour’s share of national income in recent years. This column argues that the productivity slowdown may have caused the decline in labour’s income. Calibrating the authors’ model to US data suggests that a one percentage point decline in the productivity growth rate accounts for between half and all of the observed decline in the US labour share.

Kirill Shakhnov, 17 January 2015

The rapid growth of the US financial sector has driven policy debate on whether it is socially desirable. This column examines the trade-off between finance and entrepreneurship, and links the growth of finance to rising wealth inequality. Although financial intermediation helps allocate capital efficiently, people choosing a career in finance do not internalise the negative effect on the pool of talented entrepreneurs. This mechanism can explain the simultaneous growth of wealth inequality and finance in the US, and why more unequal countries have larger financial sectors.

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