1
Renaud Bourlès (Université de la Méditerranée)Gilbert Cette (Banque de France and Université de la Méditerranée)
Trends in “structural” productivity levels in the major industrialized
countries
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Hourly labour productivity
% of the US level *
Average annual hours worked
In hours per worker
Employment rate
Canada 76.1 1736 72.5
France 103.1 1520 62.4
Germany 91.0 1443 65.5
Ireland 101.8 1642 65.5
Italy 78.4 1585 57.4
Japan 70.2 1789 68.7
Netherlands 95.4 1357 72.0
Norway 122.4 1364 75.6
Spain 78.9 1744 62.0
United Kingdom 85.5 1668 72.7
United States 100 1824 71.2
Hourly labour productivity, hours worked and employment rate in 2004
sources : OECD ; * PPP 2000
1. Introduction (1)
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• Thus estimating returns to hours worked and employment rate allows us to calculate “structural hourly productivity” :
– for the US : productivity level assuming hours worked and the employment rate are constant
– for the other main industrialized countries : productivity levels assuming hours worked and the employment rate are the same as in the US
1. Introduction (2)
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2. The estimates (1)
• re-estimation of the relationship used in Bourlès and Cette (2005) caused by the re-basing of European countries’ national account
The under brackets figures are the standard deviations
• Time period : 1992-2001 ; Data used issued from OECD and Gröningen databases
• Panel reduced to the 14 most advanced OECD countries for the results to be stable
• using of the instrumental variables method to correct for errors of measurement and simultaneity bias
)009.0()220.0()046.0()227.0()186.0()239.0(023.0ITPR.676.0CUR.106.0h.558.0ER.569.0ph.318.0ph 1
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2. The estimates (2)
In the short run In the long run
…∆ER : 1 point -0.57 -0.43
…∆h : 1% -0.56 -0.42
…∆CUR : 1 point 0.11 0.08
…∆ITPR : 1 point 0.68 0.51
On hourly productivity, in %, effects of
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The Long run effects are …
• …very similar to those in Bourlès and Cette (2005) : -0.38 and -0.46
• … close to those found by Gust & Marquez,(2002, 2004) or Belorgey, Lecat & Maury (2004)
with the AR term having the opposite sign
learning-by-doing effect
• …close to Malinvaud (1973) for hours worked elasticity
2. The estimates (3)
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US productivity level assuming hours worked and the employment rate are constant (benchmark 1970)
• compare change in such « structural » productivity level with those in « observed » productivity provides us an original interpretation of change in US productivity in terms of change in hours worked and the employment rate
3. Main Results (1)3.1. US « structural » productivity (1)
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3. Main Results (2)3.1. US « structural » productivity (2)
0
0.5
1
1.5
2
2.5
3
1970-1975 1975-1980 1980-1990 1990-1995 1995-2000 2000-2004
"observed" productivity "structural" productivity
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The effects of the first oil crisis on US productivityAverage annual growth rate of… 1970-
19751975-1980
… « observed » productivity 2.08 1.11
effect of changes in of the employment rate 0.08 -0.35
effect of changes in hours worked 0.29 0.11
… « structural » productivity 1.71 1.36
3. Main Results (3)3.1. US « structural » productivity (3)
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Recent change in US productivity levelAverage annual growth rate of… 1995-2000 2000-2004
… « observed » productivity 2.49 2.54
effect of changes in of the employment rate -0.13 0.31
effect of changes in hours worked 0.07 0.19
… « structural » productivity 2.56 2.04
3. Main Results (4)3.1. US « structural » productivity (4)
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« Structural » hourly productivity levels for the other main industrialized countries
productivity levels assuming hours worked and the employment rate are the same as in the United States, expressed as a percentage of the US level.
• comparing the trends in such « structural » productivity level with those in « observed » productivity provides us an original interpretation of other industrialized countries’ catch-up with US productivity levels.
3. Main Results (5)3.2. Other countries - levels (1)
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3. Main Results (6)3.2. Other countries - levels (2)
60
70
80
90
100
110
… 'observed' … 'structural'
Levels of hourly productivity…% of the US level - 2004
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« Structural » productivity levels in 2004“Observed” productivity
% of the US level
Effect of differences… “Structural” productivity
% of the US level… in hours
worked… in the
employment rate
Canada 76.1 -2.1 +0.6 74.6
France 103.1 -7.0 -3.8 92.3
Germany 91.0 -8.8 -2.5 79.7
Ireland 101.8 -4.2 -2.5 95.1
Italy 78.4 -5.5 -6.0 66.9
Japan 70.2 -0.8 -1.1 68.3
Netherlands 95.4 -10.8 +0.3 84.9
Norway 122.4 -10.7 +1.9 113.6
Spain 78.9 -1.8 -4.0 73.1
United Kingdom 85.5 -3.6 +0.6 82.5
United States 100 0 0 100
3. Main Results (7)3.2. Other countries - levels (3)
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Same results than in Bourlès and Cette (2005) :• The very high levels of relative “observed” productivity are
generally attributable to lower hours worked and employment rates.
• in 2004, in all the countries, relative “structural” productivity was lower than “observed” productivity
• while the “observed” productivity level is similar to (over 95%) or even higher than the US level in Germany, France, Ireland, Norway and The Netherlands, the “structural” level is also very high in only two small countries with specific features : Ireland and Norway
• Apart from those two special cases, the fact that “structural” hourly productivity levels are higher in the United States than elsewhere shows that the United States is indeed setting the “technical frontier”
3. Main Results (8)3.2. Other countries - levels (4)
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R2 = 0,461R² = 0,740 excluding Italy
65
70
75
80
85
90
95
100
105
-12 -10 -8 -6 -4 -2 0
"Observed" relative level of hourly productivity
Gap between "structural" and "observed" hourly productivity
3. Main Results (9)3.2. Other countries - levels (5)In 2004
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Catch-up phenomena : the illustrative case of Spain
3. Main Results (10)3.2. Other countries – Evolutions (1)
Levels of hourly productivity…% of the US level
55
60
65
70
75
80
85
90
95
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
… 'observed' … 'structural'
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The particular case of France
3. Main Results (11)3.2. Other countries – Evolutions (2)
Levels of hourly productivity…% of the US level
70
75
80
85
90
95
100
105
110
… 'observed' … 'structural'
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3. Main Results (12)3.2. Other countries – Evolutions (3)
The particular case of NetherlandsLevels of hourly productivity…% of the US level
75
80
85
90
95
100
105
110
115
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
…'Observed' … 'Structural'
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40
45
50
55
60
65
70
75
80
85
90
95
100
105
40 45 50 55 60 65 70 75 80 85 90 95 100 105
Japan
Spain
Italy
United Kingdom
United States
Franc
NetherlandCanada
"Observed" productivity
"Structural" productivity
“Observed” and “structural” productivity evolution from 1970 to 2004 - % of the US level
3. Main Results (13)3.2. Other countries – Evolutions (4)
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4. Conclusion• Original interpretation of changes in US
productivity :– The effects of first oil crisis on “structural”
productivity was not as big as thought– Since 2000, US “structural” productivity growth
seems to decrease
• Other industrialized countries’ catch-up with US productivity levels is partially due to changes in hours worked and the employment rate.
