1. Productivity
Productivity
Erik Veldhuizen

2. Productivity

3. Outline Introduction The Dutch growth accounts Results
Productivity
Outline
Introduction
Labour productivity
The Dutch growth accounts
Productivity growth
Inputs
Multifactor productivity
Results
Expanding the Dutch growth accounts
Additional asset types
Labour characteristics
Concluding remarks

4. Productivity
1. Introduction

5. Productivity: total output per unit input
Labour productivity
Productivity: total output per unit input
The ratio of output versus input is a measure of performance
Labour productivity level= measure of output / measure of labour input
Measure of output: for example value added (VA)
Measure of labour input: for example the total number of hours worked of all persons employed

6. 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

7. Labour productivity (exercise)
Constant prices
Current prices (t-1)
Gross output (Y)
220
200
Intermediate use (E,M,S)
112
100
Energy (E) 22 20
Materials (M) 33 30
Services (S) 57 50
Value added
108
Capital (K) 15
Labour (L) 64 60
Profits 25

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

9. Labour productivity (exercise)
Calculate labour productivity change: volume change of output (VA) / volume change of input
Value added: 108 / 100 = 1.08 (+8%)
Labour: 64/60 = (+6.7%)
Labour productivity index = 1.08 / =
Labour productivity change = +1.3%
What does this mean? Did we produce more efficiently?

10. 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

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

12. 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

13. 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

14. 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

15. 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)

16. 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

17. Multifactor productivity (exercise)
Constant prices
Current prices (t-1)
Gross output (Y)
220
200
Intermediate use (E,M,S)
112
100
Energy (E) 22 20
Materials (M) 33 30
Services (S) 57 50
Value added
108
Capital (K) 15
Labour (L) 64 60
Profits 25

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

19. Multifactor productivity (exercise)
Calculate gross output based multifactor productivity change: volume change of production / volume change input
Gross output volume change: 220 / 200 = 1.1 (+10%)
KLEMS-input volume change: 198/175 = (+13.1%)
Multifactor productivity index: 1.1/ = 0.972
Mfp-change = -2.8%
What does this mean?

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

21. Multifactor productivity (exercise)
Calculate value added based multifactor productivity change: volume change of value added / volume change input
Value added volume change: 108 / 100 = 1.08 (+8%)
KL-input volume change: 86/75 = (+14.7%)
Multifactor productivity index: 1.08/ = 0.942
MFP-change = -5.8%
What does this mean?

22. Growth accounting (example)
Productivity
Growth accounting (example)
Calculate the individual contributions of all inputs to gross output growth and derive multifactor productivity as a residual
Contribution to growth: input cost share x volume change of input
Input cost shares are based on current prices in t-1

23. Growth accounting (example)
Productivity
Growth accounting (example)
Constant prices
Current prices (t-1)
Gross output (Y)
220
200
Intermediate use (E,M,S)
112
100
Energy (E) 22 20
Materials (M) 33 30
Services (S) 57 50
Value added
108
Capital (K) 15
Labour (L) 64 60
Profits 25

24. Growth accounting (example)
Productivity
Growth accounting (example)
KLEMS-input
cost share
Volume change
Gross output (Y)
220/200 = +10%
Intermediate use (E,M,S)
100/175 = 57%
112/100 = +12%
Energy (E)
20/175 = 11%
22/20 = +10%
Materials (M)
30/175 = 17%
33/30 = +10%
Services (S)
50/175 = 29%
57/50 = +14%
Value added
108/100 = +8%
Capital (K)
15/175 = 9%
22/15 = +47%
Labour (L)
100/175 = 34%

25. Growth accounting (example)
Productivity
Growth accounting (example)
Contributions to
gross output growth
Gross output (Y)
10.0 %
Intermediate use (E,M,S)
.57 * 12% = 6.9%
Energy (E)
.11 * 10% = 1.1%
Materials (M)
.17 * 10% = 1.7%
Services (S)
.29 * 14% = 4.1%
Capital (K)
.09 * 47% = 4.0%
Labour (L)
.34 * 12% = 2.3%
Multifactor productivity
-3.2 %

26. 3. Results and concluding remarks
Productivity
3. Results and concluding remarks

27. 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

28. Productivity
Results

29. 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

30. 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

31. 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
Effects of competition, innovation and ICT

32. Productivity Questions?
End
Questions?