Presentation on theme: "Productivity and Globalization"— Presentation transcript:
1 Productivity and Globalization Eric BartelsmanVrije Universiteit Amsterdam and Tinbergen InstituteEPC 2006, HelsinkiAugust 31, 2006This work is partially funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".
3 Introduction Why are we here What is Globalization What is Productivity
4 Why are we here? Trade and Industry Policy makers Research community Your job, your futureThreats and opportunitiesPolicy makersPolitics of globalizationInnovation policyFramework/LisbonResearch communityFun new results?
5 What is Globalization?Increasing intensity of international ‘interactions’Goods, servicesCapital, labor(Culture, Value Systems)Relentless turmoil brought on by owners of capital in order to increase profits by circumventing rules of law and decency
7 Globalization of Goods and Service Flows Location DecisionEconomic EnvironmentWagesInfrastruction (phys/legal)RegulationTransportation CostsBulk/valueObsolescenceTime sensitivityDomestic outsourcingGlobal outsourcingMarketSpecializationIntl’ TradeControlCaptive GlobalizationControl DecisionShared servicesTransaction costs‘Coaseian’ span of controlMarket structureReputational issuesWithin FirmFDIOffshoringDomesticGlobalLocationsource: derived from MGI 2005
8 What is Productivity? Output per unit of input E.g. GDP per hour workedReal quality adjusted production per unit of aggregate input (KLEMS)Increases in productivity are bound only by our own imagination….subject to optimal accumulation of physical and human capital and hard resource constraintsProductivity improvements may ‘buy’ goods, leisure, environment etc…
9 Long run productivity growth CommodityTime to earn 1885 (hours)Time to earn 2000 (hours)Productivity multiple1-speed Bicycle2607.236.1Office chair242.012.0Hair brush168.0Silver Spoon2634.00.8Source: Brad DeLong,
10 Growth Accounting – USA Growth rateSectoral growth contributionSectoral contribution to accelerationvsSectoral ProductionTFPICTNon-farm Private Business22.214.171.124-0.6Non High-Tech2.01.70.41.4-0.4Manufacturing0.60.00.3-0.1Construction0.90.1Distr and Trade3.10.7-0,1FIRE126.96.36.199-0.2Pers. Services2.1High-tech3.2Source: Corrado, Lengermann, Bartelsman, Beaulieu; 2006
11 Unanswered questionsWhy has ICT-capital not contributed as much in EU?Why do EU firms invest less in ICTDoes ICT contribution depend on characteristics of firms?Why is US TFP growth now broad based.Is TFP growth high in all firms?Does it depend on firm characteristic?
17 Drivers of the productivity frontier InnovationR&DExperimentation with business concepts and processesIncentives for increased innovationIPR (but see Boldrin and Levine)Subsidy to cover wedge social and private returnAvailability of ‘innovation inputs’Rapid scale expansion of new goods/services/business concepts. (Because knowledge and other intangible assets are non-rival in production, return goes up)
18 Productivity growth below the frontier Reallocation from low to high productivity firmsflexibility in product marketslow hiring/firing costslow entry/exit barriersDiffusion of existing technologyMarket pressureHuman capitalNational innovation system
24 Productivity growth below the frontier Convergence to which frontier? National or Global?Bartelsman, Haskel and Martin, 2006Both frontiers matterPull from Global frontier declines with distance to frontierPull from National frontier does not
25 Baseline results (1) (2) (3) DTFN only DTFG only DTFN & DTFG DTFN 0.3200.211(39.25)(8.13)DTFG0.2870.101(39.66)(4.68)RD_sales0.5810.4580.542(1.53)(1.20)(1.43)MNE Dummy0.0720.073(15.87)(15.76)(16.02)ΔAGit-1-0.0610.103-0.004(1.97)(3.31)(0.11)Observations27582R-squared0.18Robust t statistics in parentheses
26 Varying Convergence Speeds DTF top vs botDTFN0.204(7.92)DTFG _top0.181(6.62)DTFG _bot0.115(5.30)RD_sales0.549(1.45)MNE dummy0.073(16.00)ΔAGit-0.007(0.22)
27 ConclusionsDrivers of productivity are different for firms at the ‘technology frontier’ and behind the frontierAt frontier: leveraging intangible assets matters: potential scale is importantInside frontier:adoption of technologyresource reallocation