No. 46 Spring 2024 – Symposium on International Productivity Growth: The Role of Intangibles
The International Productivity Monitor (IPM) is the joint flagship publication of the Centre for the Study of Living Standards (CSLS) in Canada and The Productivity Institute.
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Number 46, Spring 2024
Editors’ Overview Andrew Sharpe (Centre for the Studies of Living Standards) and Bart van Ark (The Productivity Institute, The University of Manchester)
- The 46th issue of the International Productivity Monitor contains five articles. The issue features a symposium of three articles on international productivity performance
with a particular focus on the role of intangible capital. Two additional articles discuss the reasons for the recent fall in GDP per capita in Canada and the relationship between productivity and managerial quality.
Symposium on International Productivity Growth: The Role of Intangibles
Intangible Capital, TFP Growth and Green Shoots in New Productivity Data Filippo Bontadini (LUISS University), Carol Corrado (Georgetown University), Jonathan Haskel (Imperial College Business School), Massimiliano Iomm (ISTATA, Cecilia Jona-Lasinio (LUISS Business School), and Tsutomu Miyagawa (Gakushuin University)
- This article undertakes a comparative analysis of recent productivity growth in European economies, Japan, the United Kingdom, and the United States using the EU KLEMS & INTANProd database. The influence of intangible capital on productivity growth and insights from combining long historical time series for TFP with the current estimates in EU KLEMS & INTANProd are central features of our analysis. Our comparative analysis of growth decompositions before and after the productivity slowdown suggests that productivity growth in the 2014-2019 period in advanced economies has been relatively strong, consistent with a slew of the newer digital technologies (cloud, big data, AI) gaining wider use. Recent research finds that mechanisms governing knowledge diffusion are weaker recently than in the past—implying that advanced economies are not experiencing their full potential for productivity growth. Unless policies or voluntary industry data sharing restore the strength of prior mechanisms, and/or create new platforms for technology extension, the potential for spillovers to amplify intangible investment-induced innovations.
- Online appendix
Are Intangibles Running out of Steam? Bart van Ark (The University of Manchester), Klaas de Vries (Statistics Netherlands) and Abdul Erumban (University of Groningen)
- This article looks at the role of intangibles in explaining the slowdown in productivity growth for (the average of) nine EU countries, the United Kingdom and the United Statesfrom 2011 to 2019 compared to the period before the Global Financial Crisis (GFC). Using the 2023 version of the EUKLEMS-INTANProd industry-level database, we find that while intangible investment continues to increase as a share of nominal GDP, the growth rate of the intangibles capital stock has moderately slowed in real terms. The contribution of intangible capital deepening to labour productivity growth has remained positive though not strong enough to offset the effects of the large decline in tangible capital deepening. We also find a relatively strong slowdown in labour productivity growth for the most intangible- intensive industries, especially in the United Kingdom and the United States. Preliminary econometric analysis suggests little evidence of strong TFP spillovers from intangible capital deepening, there is mixed evidence of interaction effects for business innovation-related intangibles and ICT and non-ICT intangibles. While intangibles have not run out of steam, we conclude that the impact of intangibles on productivity growth has become more complex, especially as business innovation-related investments seem highly dependent to other types of capital. We advocate for policies focused on broad-based investment in both tangible and intangible assets to facilitate the diffusion of new technologies and knowledge.
- Online appendix
Cracking the Productivity Code: An International Comparison of UK Productivity John Van Reenen (LSE and MIT) and Xuyi Yang (University of Cambridge and POID)
- We examine the growth and level of UK productivity compared to France, Germany and the United States. There has been a marked slowdown in labour productivity growth: comparing the dozen years before and after the Global Financial Crisis. The average annual growth of the UK’s real value added per hour in the market economy has fallen from 2.5 per cent to 0.5 per cent. Just over half of this two-percentage point slowdown is due to slower TFP growth, which is broadly similar in magnitude across countries. Britain experienced a much larger slowdown in the growth of capital intensity than other countries and it is this (alongside a smaller contribution from slow skills growth) which accounts for the particularly severe ‘productivity puzzle’. The level of UK labour productivity is also low compared to peers, especially the United States. In 2019, lower tangible and intangible capital intensity accounted for about half of this gap. These findings suggest that UK policy should focus on the problem of chronic under-investment.
- Online appendix
End of symposium
Additional articles
Accounting for the Decline of Canada’s Real GDP Per Capita since Mid-2022 Philip Smith (Statistics Canada)
- Real GDP per capita has been falling in Canada since mid-2022, while the number of non-permanent residents has been rising sharply. This article discusses how these two developments are linked. The paper identifies six factors currently influencing real GDP per capita: (1) labour productivity; (2) average hours worked per job; (3) the employment rate of the working-age population; (4) the ratio of the working-age population to the permanent resident population (where working-age includes NPRs in that age class); (5) the share of permanent residents in the total population; and (6) the relative rate of growth of the government and non-profit sectors compared to that of the business sector. The relative importance of each of these factors is assessed via a multiplicative decomposition and the analysis indicates the share of permanent residents in the total population is currently the single most important factor.
Employment, Output and Productivity Adjustment During the Great Recession: The Role of Managerial Quality Gilbert Cette (NEOMA Business School), Jimmy Lopez (University of Burgundy), Jacques Mairesse (Maastrich University) and Giuseppe Nicoletti (LUISS Lab of European Economics)
- This study investigates empirically how differences in managerial practices shaped the macroeconomic recovery from the 2008 Great Recession. We build a country-industry panel over the 2007-2015 period for eighteen industries in nine OECD countries, using an indicator of management quality at the country level based on the categorical scores of managerial practices collected at the firm level by Bloom et al. (2012) and an indicator measuring the industry level shocks caused by the 2008 economic crisis. We then rely on the local projection method pioneered by Jordà (2005) to estimate the impact of the shocks on post-2009 macro developments at different levels of managerial quality. We find that both production and employment were more resilient in countries where management quality is higher, resulting in no significant cumulative impact of management quality on productivity over the recovery. The effects of management on production and employment resilience are stronger for industries deeply affected by the 2008 crisis and go along with wage moderation and a slight increase in the labour share.
