GLOBAL PRODUCTIVITY
CHAPTER 1
BOX 1.1 Productivity: Conceptual considerations and measurement challenges (continued) FIGURE B1.1.1 Labor productivity decomposition and natural capital in EMDEs The decomposition of labor productivity without taking natural capital into account could be misleading, especially for resource-rich countries. However, because the bias in TFP can be either positive or negative depending on the relative growth rates of physical and natural capital, the difference becomes very small when aggregating the decomposition up for large country groups such as EMDEs. A. Decomposition without natural capital Percent 5
TFP Human capital
Capital deepening Labor productivity
B. Decomposition with natural capital Percent 5
4
4
3
3
2
2
1
1
0
0
-1
-1 1996-99
2000-04
2005-09
2010-14
TFP Human capital Labor productivity
1996-99
2000-04
Physical capital Natural capital
2005-09
2010-14
Source: World Bank. Note: Aggregate growth rates are GDP-weighted at constant 2010 prices and exchange rates. EMDE = emerging market and developing economy; TFP = total factor productivity. A. B. Sample consists of 74 EMDEs for the period 1996-2014.
in output (Brynjolfsson and McAfee 2014; Feldstein 2017). Overall, despite some evidence for mismeasurement, it is unlikely that a significant part of the broad-based slowdown in productivity growth since the global financial crisis can be explained by mismeasurement alone (Cerra and Saxena 2017; Syverson 2016). Where mismeasurement has been uncovered, it has been found to be present in larger, or equally significant, scale in earlier periods. Delayed adoption. A further view is that the wave of new digital technologies that have been developed can take extended periods of time to incorporate into production processes, suggesting that productivity is likely to pick up rapidly in the future. This view notes that the industrial revolution in the early nineteenth century and the electrification of production in the early twentieth century took decades to result in a material improvement in measured productivity, particularly TFP (David 1990). Current intangible investment in ICT technologies may, therefore, be undercounted in current national accounts and then subsequently overaccounted for as these technologies return higher production efficiency as they are incorporated into production on a broad basis (Brynjolfsson, Rock, and Syverson 2018).
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