Hyunbae Chun, Kyoji Fukao, Hyeog Ug Kwon, Jungsoo Park, 06 September 2021

In many developed countries, real wage growth has lagged behind labour productivity growth in recent decades. This column uses data from Japan and Korea to study the relationship between labour productivity growth, real wage growth, and labour’s terms of trade, defined as the ratio of the consumer price index to the GDP deflator. It shows that the main reason for the real wage-labour productivity growth gap is a large decline in labour’s terms of trade. Raising real wages in the future will require policies to support the business environment and develop high value-added sectors. 

Maarten Dossche, Andrea Giovanni Gazzani, Vivien Lewis, 30 August 2021

Labour productivity is more procyclical in OECD countries with lower employment volatility. To capture this new stylised fact, this column proposes a business cycle model with employment adjustment costs, variable hours, and labour effort. In the model with variable effort, it shows that greater labour market frictions are associated with procyclical labour productivity as well as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the data. Labour market deregulation has a greater effect on labour productivity cyclicality and employment volatility when effort can vary. 

Seán Kenny, Jason Lennard, Kevin O'Rourke, 11 August 2021

Economic historians have not reached a consensus on whether Ireland deindustrialised in the 19th century, although nationalists have argued that the 1800 union with Great Britain exposed Irish industry to the full force of competition. This column constructs a new annual index of industrial production in Ireland between 1840 and 1913. Despite a shrinking industrial labour force, Irish industry expanded by 1.4% a year on average in this period due to the productivity growth of those that remained. However, Ireland’s performance was still dismal by international standards.

Ian Goldin, Pantelis Koutroumpis, François Lafond, Julian Winkler, 31 May 2021

Labour productivity is a key determinant in improving living standards. But in recent years, productivity has stagnated, if not declined, in many countries around the world. This column re-evaluates the various reasons as to why this might be, applying three criteria to the existing explanations for the slowdown. It finds that the slowdown in productivity can be attributed to numerous factors, ranging from mismeasurement to changes in trade patterns.

Ester Faia, Sébastien Laffitte, Maximilian Mayer, Gianmarco Ottaviano, 17 June 2020

Understanding the effects of automation and offshoring on labour markets and growth has been a significant topic of interest. This column argues that automation and offshoring fundamentally affect the matching between firms and workers and do so in contrasting ways. It predicts that automation will increase firms’ and workers’ job selectivity and decrease employment, while offshoring will have the opposite effect. Empirical evidence as well as a quantitative model support this hypothesis and provide a mechanism of technological change typically missed in standard neoclassical reasoning.

Francesco Fasani, Tommaso Frattini, Luigi Minale, 09 June 2020

The COVID-19 pandemic has brought to light how much societies rely on migrants for key labour while highlighting the vulnerabilities of already weaker groups. Easing the socio-economic integration of migrants is beneficial to both migrants and host countries; yet, many European countries ban asylum seekers from legal employment upon arrival. This column examines the effect of such employment bans. The bans have large and lasting negative effects on refugees’ future labour-market integration and constitute an economic loss for the host country. Allowing early labour market access is an easily implementable and financially costless policy that effectively accelerates refugee integration.

David Martínez Turégano, 30 March 2020

The large differences in labour productivity across EU countries go a long way towards explaining their divergent living standards. To help explain variations in labour productivity, this column focuses on firm size and finds an overall positive relation between firm size and labour productivity. Countries with a distribution skewed to smaller firms – particularly in Southern Europe – show significantly depressed productivity performance. Improving judicial and government efficiency could help stimulate productivity growth in these member states.

Michal Gradzewicz, 26 March 2020

Capital investment at firm level can have both short-run and long-run effects on labour productivity. This column uses evidence from Poland to explore the relationship further. It is clear that different types and sizes of firms, from various sectors, demonstrate a range of trends. What is notable is that the impact of ‘learning by doing’ runs deep and affects the initial decision process of the capital investment itself. 

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.

Anna Stansbury, Lawrence H. Summers, 20 February 2018

Since 1973, there has been divergence between labour productivity and the typical worker’s pay in the US as productivity has continued to grow strongly and growth in average compensation has slowed substantially. This column explores the causes and implications of this trend. Productivity growth appears to have continued to push workers’ wages up, with other factors to blame for the divergence. The evidence casts doubt on the idea that rapid technological progress is the primary driver here, suggesting rather that institutional and structural factors are to blame.

Florence Jaumotte, Ksenia Koloskova, Sweta C. Saxena, 12 January 2017

Rapidly ageing populations, the refugee crisis, and growing anti-immigration rhetoric have brought immigration issues to the forefront recently. Using a panel of 18 countries, this column explores the long-term effects of migration on receiving advanced economies’ GDP per capita and labour productivity. Both high- and low-skilled migrants are found to raise productivity and GDP, and these gains appear to be broadly shared across the population. 

Dale Jorgenson, Mun S. Ho, Jon Samuels, 01 November 2016

There has been speculation that the low employment rates for younger and less-educated workers in the US reflect a ‘new normal’. This column uses detailed new US data to project output, productivity, and employment rates over the next decade. The results indicate that US economic growth will continue to recover from the Great Recession through the resumption of growth in productivity and labour input. The recovery of employment rates for less-educated and younger workers will make an important contribution to future economic growth.

Timo Boppart, Per Krusell, 21 May 2016

The rise of automation and, more generally, IT-driven structural change in the labour market have made policymakers and researchers worry about ‘disappearing jobs’ and a dire future for employment. This column examines data from several countries to get a long-term view of labour supply. To the extent that productivity improvements continue, hours worked will indeed likely fall. But this will not necessarily be a bad thing and jobs will not necessarily disappear.

Kevin Daly, Tim Munday, 28 November 2015

The fallout from the Global Crisis and its aftermath has been deeply damaging for European output. This column uses a growth accounting framework to explore the pre-Crisis and post-Crisis growth dynamics of several European countries. The weakness of post-Crisis real GDP in the Eurozone manifested itself in a decline in employment and average hours worked. However, decomposing growth for the Eurozone as a whole conceals significant differences across European countries, in both real GDP growth and its factor inputs.

Kaoru Hosono, Daisuke Miyakawa, Miho Takizawa, 27 August 2015

‘Learning by exporting’ refers to productivity gains experienced by firms after they commence exporting. Such gains are argued to be due to access to new knowledge and resources. This column explores some of the preconditions for learning-by-exporting effects, using data on the overseas activities and affiliations of Japanese firms. Firms that enter markets in which they don’t have affiliates or subsidiaries are found to enjoy the most learning-by-exporting productivity gains. These findings have implications for the timing of new market entry.

Guy Michaels, Georg Graetz, 18 March 2015

Robots may be dangerous not only to the action heroes of cinema, but also to the average manufacturing worker. This column analyses the effect robots have had in 14 industries across 17 developed countries from 1993 to 2007. Industrial robots increase labour productivity, total factor productivity, and wages. While they don’t significantly change total hours worked, they may be a threat to low- and middle-skilled workers.

Juan Antolin-Diaz, Thomas Drechsel, Ivan Petrella, 17 February 2015

Evidence of a decline in long-run growth is accumulating. However, many important questions remain unanswered. The analysis in column employs recent econometric techniques to provide an answer to some of the pertinent questions. The findings indicate that the weakness of the current recovery in the G7 is associated with a decline in the long-run growth rate of labour productivity.

Alex Bryson, John Forth, Lucy Stokes, 17 November 2014

It is generally agreed that firms can improve their employees’ wellbeing through improvements in job quality – but is it in their economic interests to do so? This column reports research showing that satisfied employees and higher productivity go together. Analysis of the British Workplace Employment Relations Survey finds that employee job satisfaction is positively associated with workplace financial performance, labour productivity, and the quality of output and service.

Charles Goodhart, Philipp Erfurth, 04 November 2014

Most of the world is now at the point where the support ratio is becoming adverse, and the growth of the global workforce is slowing. This column argues that these changes will have profound and negative effects on economic growth. This implies that negative real interest rates are not the new normal, but rather an extreme artefact of a series of trends, several of which are coming to an end. By 2025, real interest rates should have returned to their historical equilibrium value of around 2.5–3%.

Katherine Eriksson, Leah Boustan, Ran Abramitzky, 18 February 2010

The Age of Mass Migration (1850-1913) was one of the largest migration episodes in history. Unlike today, during this era the US maintained an open border. This column suggests that, unhindered by entry restrictions, Europeans migrants to the US during this period were more likely to be workers with lower-productivity and poorer economic prospects.

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