1. Productivity
Productivity
Erik Veldhuizen

2. 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

3. Productivity
1. Introduction

4. 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

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 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

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)
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

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

9. 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

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

11. 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

12. 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

13. 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

14. 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)

15. 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

16. 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

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

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

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

20. 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

21. 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.

22. 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

23. 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

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

25. Productivity
Results (1/3)

26. Productivity
Results (2/3)

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

28. 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

29. Productivity Questions?
End
Questions?