Productivity Productivity Erik Veldhuizen

Outline Introduction The Dutch growth accounts Productivity Outline Introduction Factors of production Labour productivity The Dutch growth accounts Productivity growth Inputs Multifactor productivity Expanding the Dutch growth accounts Additional asset types Labour characteristics Results and concluding remarks

Productivity 1. Introduction

Productivity Factors of production Factors of production: Primary factors that enable production (land, labour, machinery) Other inputs also called intermediate inputs: energy, materials and services

Productivity: total output per unit input Labour productivity Productivity: total output per unit input The ratio of output versus input is a measure of efficiency Labour productivity level= measure of output / measure of labour input Measure of output: gross domestic product (GDP) or gross value added (GVA) Measure of labour input: for example the total number of hours worked of all persons employed

Productivity Labour productivity Labour productivity change = Volume change of output / volume change of input Measures increase or decrease of labour productivity Output volume change by each unit of labour input Comparison between countries or sectors Often used for wage bargaining

Labour productivity (exercise)   Constant prices Current prices (t-1) Production (P) 220 200 Intermediate use (E,M,S) 110 100 Energy (E) 22 20 Materials (M) 33 30 Services (S) 55 50 Value added Capital (K) 15 Labour (L) 64 60 Profits 24 25

Labour productivity (exercise) Calculate labour productivity change: volume change of output (VA) / volume change of input

Labour productivity gives a limited view in explaining economic growth Substitution of labour is not taken into account Other single-factor productivity measures: For example capital productivity or energy efficiency The Dutch growth accounts

2. The Dutch growth accounts Productivity 2. The Dutch growth accounts

Project Capital Stock Measurement The EU-KLEMS project Productivity Why growth accounting? Project Capital Stock Measurement The EU-KLEMS project Financed by the European Commission (related to the Lisbon agenda) Coordinated by the University of Groningen, Dutch data delivered by the Netherlands Bureau for Economic Policy Analysis (CPB) and Statistics Netherlands ►At the same time Statistics Netherlands started the productivity program

Includes substitutions of an input for another input Productivity Why growth accounting? Includes substitutions of an input for another input The individual contributions of the different inputs to output growth can be explored For example energy use or ICT investments Gives a more comprehensive explanation of the sources of growth Can be used to compare countries or sectors within a country

Multifactor productivity Productivity growth: output growth / input growth Inputs: Capital (K), Labour (L), Energy (E), Materials (M), Services (S) Different productivity models: Value added as output measure with inputs Capital (K) and Labour (L) Gross output as output measure with inputs Capital (K), Labour (L) and intermediate consumption (E, M, S) Productivity calculation using the combined inputs (labour, capital and intermediate consumption) leads to multifactor productivity

Inputs are valued as the sum of costs Capital (K): Productivity Inputs (1/2) Inputs are valued as the sum of costs Capital (K): Volume: Productive capital stock Costs: User costs of capital  rentals + depreciation + holding gains / losses Labour (L): Volume: Hours worked Costs: compensation of employees (from supply and use tables and labour accounts) and labour income of self-employed persons (estimated)

Inputs (2/2) Intermediate consumption (E,M,S): Values from use-table Productivity Inputs (2/2) Intermediate consumption (E,M,S): Values from use-table

Multifactor productivity (exercise)   Constant prices Current prices (t-1) Production (P) 220 200 Intermediate use (E,M,S) 110 100 Energy (E) 22 20 Materials (M) 33 30 Services (S) 55 50 Value added Capital (K) 15 Labour (L) 64 60 Profits 24 25

Multifactor productivity (exercise) Calculate gross output based multifactor productivity change: volume change of production / volume change input

Multifactor productivity (exercise) Calculate value added based multifactor productivity change: volume change of value added / volume change input

3. Expanding the Dutch growth accounts Productivity 3. Expanding the Dutch growth accounts

The Dutch growth accounts Productivity The Dutch growth accounts First published in 2007 Time-series from 1995 onwards Exogenous and endogenous model Y-KLEMS and VA-KL 33 industries (SBI 2008, NACE rev.2) Extended with additional asset types

Total factor productivity Total factor productivity (TFP) measures the residual growth that cannot be explained by the change of the total inputs used in the production process. It is often interpreted as pure technological progress. TFP assumes that all inputs are accounted for. In practice this is not the case. It includes therefore all things that are not measureable.

Including additional asset types Productivity Including additional asset types Efforts to include more factors of production: Regular growth accounts Land Mineral reserves Inventories Extended growth accounts Intellectual property products Computerized information Innovative property Economic competences

Including labour characteristics Productivity Including labour characteristics Labour input is not homogenous and therefore productivity measures should take into account the composition, or quality of the workforce Efforts to include labour characteristics: Age Gender Educational level Proxy for skills and work experience

4. Results and concluding remarks Productivity 4. Results and concluding remarks

Productivity Results (1/3)

Productivity Results (2/3)

Productivity Results (3/3) Including intellectual property products in the Dutch growth accounts

Concluding remarks Data: Analysis: Productivity Concluding remarks Data: Independent input and output measures are necessary Quality tool for National accounts data Analysis: Business cycles and structural effects Interpreting outcomes of different productivity models Effects of competition, innovation and ICT

Productivity Questions? End Questions?