© Copyright IBM Corporation 2007 Disclaimer (Optional location for any required disclaimer copy. To set disclaimer, or delete, go to View | Master | Slide Master) IBM Institute for Business Value IBM Global Business Services Estimates of Labour Productivity in Wholesale and Retail Trade: Dr. Mary Keeling, Global Centre for Economic Development Research, IBM Institute for Business Value Dr. Rita Buckley, Department of Economics, Kemmy Business School, University of Limerick CSO Business Statistics Seminar, 26 th February 2008
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Empirical estimates of productivity in wholesale and retail trade in Ireland: Why examine labour productivity in wholesale and retail trade? How we measure productivity in wholesale and retail trade Questions we are interested in answering 1. Within wholesale and retail trade, how have individual sub sectors performed over the period? 2. How does productivity vary according to firm size? 3. How does productivity vary for family vs non-family owned firms? 4. How does productivity vary for foreign vs domestically owned firms? Contents OR Agenda
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Wholesale and retail trade account for the majority of employment in services
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February They also account for a significant proportion of total enterprises in services
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Data requirements for measurement of productivity Nominal Output Prices Real Output Inputs Productivity Productivity = real output per unit of input Labour Productivity : The most extensively developed and widely used productivity measure because of its relevance to economic analyses and because, as a practical matter, labour is the most easily measured input
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February How should output be measured in wholesale and retail trade? Caution must be exercised when using value added figures especially for non-tradable services as - there are significant measurement issues that arise from the use of the value added method in relation to non-tradable services (Forfas, 2006) Value added conceptually less appropriate for estimating productivity - Output and purchased intermediate input data are more suitable for industry productivity analysis (Triplett and Bosworth, 2003) - There is a general shift away from emphasis on value added for output and productivity measurement in services (Bosworth, 2005)
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February How we measure the volume of output in wholesale and retail trade Volume of sales Volume of margin output The main part of the output consists of wholesale and retail trade margins The most widely used method of estimating the volume of margin output is to assume that the volume of margins follows the volume of sales The volume of sales is obtained by deflating sales by a sales price index For retail trade, this should be an index of retail sales prices, e.g. a CPI. For wholesale trade, the appropriate index would be a wholesale price index This is considered by Eurostat (2001) as an acceptable alternative (B) to the ideal method (A) Any other methods, in particular the deflation of margin output or VA directly by a sales price index, are classified by Eurostat (2001) as ‘C’ methods. Currently there are no estimates using ideal (A) or acceptable alternative (B) methods for Ireland Volume of margin output
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February For wholesale trade, relative productivity levels indicated by the Sales and VA measures of productivity are not always consistent
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February These inconsistencies are also evident for retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February There is even greater variance between the two measures for productivity growth in wholesale trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February …. As well as for retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February ‘Wholesale of food, beverages and tobacco’ is the most important sector in terms of employment and enterprise within wholesale trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February While retail sales in non-specialised stores accounts for the majority of employment, other retail sale of new goods in specialised stores accounts for most enterprises
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Within wholesale trade, sales volume indicates that the sector with the highest productivity level has not been constant between
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Whereas within retail trade, ‘Retail sale not in stores’ has consistently had the highest productivity level between
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February ‘Wholesale of machinery, equipment and supplies’ had the highest productivity growth over the period
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February ‘Retail sales in non-specialised stores’ had the highest productivity growth rate for the period
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Larger firms account for the marjority of employment and small firms account for the majority of enterprises in wholesale and retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February In wholesale trade, larger firms generally also have higher productivity levels, while for retail trade, smaller firms have higher productivity levels
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February But the highest productivity growth between was in smaller firms in wholesale trade and firms employing persons in retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Non-family owned firms account for the majority of enterprises and employment in wholesale trade, but family owned firms are relatively more important in retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February While non-family owned firms had the highest productivity levels in both wholesale and retail trade, family owned firms in both wholesale had higher productivity growth
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February Irish owned firms account for the majority of employment and enterprises in both wholesale and retail trade
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February But foreign firms had higher productivity levels and growth between
© Copyright IBM Corporation 2007 IBM Global Business Services CSO Business Statistics Seminar | 26 th February So what have we learned? Sales and VA measures of productivity are not always consistent in indicating the sectors within wholesale and retail trade that are the most productive, or where productivity is increasing the most Firm size matters for productivity levels and growth - In wholesale trade, larger firms generally have higher productivity levels, while for retail trade, smaller firms have higher productivity levels Family ownership matters for productivity levels and growth - While non-family owned firms had the highest productivity levels in both wholesale and retail trade, family owned firms in both wholesale had higher productivity growth Foreign ownership matters for productivity levels and growth - Foreign firms had higher productivity levels and growth between Next steps - Interaction between firms size, family ownership, foreign ownership, exporting - Analyse the contribution of each sub-sector within wholesale and retail trade to productivity growth - Set out the implications of the results for differentiating and targeting public policy