1. Productivity and GDP per capita growth: A long-term perspective
Secular Stagnation and Growth Measurement Conference
Banque de France – January 16, 2017
Antonin Bergeaud, Gilbert Cette, Remy Lecat
Banque de France and AMSE

2. Productivity and GDP per capita growth: A long-term perspective
Underlying papers:
From Antonin Bergeaud, Gilbert Cette and Remy Lecat
- (2016): “Productivity trends in advanced countries between 1980 and 2012”, The Review of Income and Wealth, Vol. 62(3), September, pp
(2016): “The role of production factor quality and technology diffusion in the 20th century productivity growth”, Cliometrica, Forthcoming
(2015): « GDP per capita over the 20th century in advanced countries », Banque de France, Working Paper n° 549, April.

3. Productivity and GDP per capita growth: A long-term perspective Outline
Introduction - TFP: A measure of our ignorance
TFP growth changes from 1890 to 2015
Factors of TFP growth
2.1. What have we done?
2.2. The data
2.3. The results
4. Concluding remarks
4.1. Takeaways
4.2. A more complete story

4. 1. Introduction - TFP: A measure of our ignorance
20th century: a period of exceptional growth
What drives the evolution of growth? Abundant literature.
See among others Aghion and Howitt (1998, 2006, 2009)
Bergeaud, Cette and Lecat (2015): usual growth accounting methodology
GDP growth =
Labour productivity growth
= TFP growth + Capital deepening contribution +
Number of worked hours growth
= Employment growth + Hours per worker growth

5. 1. Introduction - TFP: A measure of our ignorance
GDP annual growth (in %) and contributions (in pp) – Whole economy
Source: Bergeaud, Cette and Lecat (2015)
Main GDP growth driver: Productivity growth. And within productivity: TFP growth
Since WW2, growth decrease in the four main economic areas except for in US and UK thanks to ICT
Main factor of this growth decrease: TFP slowdown. Risk of Secular Stagnation?

6. 1. Introduction - TFP: A measure of our ignorance
TFP: lion’s share of labour productivity and GDP per capita growth since 1890
But TFP = residual, once only two inputs are used: capital and labour
TFP encompasses the role of all the other inputs and measurement errors
Such inputs are for example human capital, institutions, technology...
Two questions raised in the paper
1st question: What are the main TFP growth changes from 1890 to 2015?
2nd question: What are the main TFP growth drivers?
Data used:
Described in Bergeaud, Cette and Lecat (2016)
Many sources from historians and economists
Own capital evaluation through permanent inventory model
Details on sources and productivity indicators available in free access at:

7. 2. TFP growth changes from 1890 to 2015
Average annual growth rate of TFP (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
US: one big wave over the XXth Century, pause during Great Depression, small wave between , huge slowdown from the mid 2000s

8. 2. TFP growth changes from 1890 to 2015
Average annual growth rate of TFP (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
US: one big wave over the XXth Century, pause during Great Depression, small wave between , huge slowdown from the mid 2000s
Euro Area: delay for the big wave, no small wave, huge slowdown from the mid 2000s

9. 2. TFP growth changes from 1890 to 2015
Average annual growth rate of TFP (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
US: one big wave over the XXth Century, pause during Great Depression, small wave between
Other countries: delay for the big wave, no small wave except for the UK
Huge slowdown from the mid 2000s in all areas: Risk of Secular Stagnation?

10. 2. TFP growth changes from 1890 to 2015
Average annual growth rate of TFP (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
US: one big wave over the XXth Century, pause during Great Depression, small wave between ,
Other countries: delay for the big wave, no small wave except for the UK
Huge slowdown from the mid 2000s in the all areas : Risk of Secular Stagnation?

11. 2. TFP growth changes from 1890 to 2015
Abundant related literature
Main factors of growth over the long-run and their impact: widely studied subject
Some examples (among others):
On all aspects, Aghion and Howitt (1998), and their following publications
Education - Madsen (2014): education explains 0.48 points of the 1.87% average growth in GDP per capita; Wide related literature estimating the return of education on growth over the long run (Barro and Lee, 1992, 2010; Morisson and Murtin, 2010; Cohen and Soto, 2007; …)
Institutions – Barro (xxxx): important role; Prados (2015): new database on economic freedom and institutions over the long run
Technology - Comin and Mestieri (2013) and Comin and Hobijn (2010): importance of technology adoption to explain divergence between economies; Madsen (2010): importance of technology spillovers using patent data …
Large uncertainties on TFP growth factor contributions and future scenarios…

12. 3. Factors of TFP growth 3.1. What have we done?
Analysis of TFP growth over the period in 17 advanced economies:
G7 countries + Spain, Netherlands, Belgium, Finland, Portugal, Australia, Sweden, Norway, Switzerland and Denmark
We reconstituted a Euro Area using 8 countries: DEU, FRA, ITA, ESP, NDL, BEL, FIN, POR (93% of the 2010 EA GDP)
Large focus on the comparison between 4 main areas: USA, Euro Area, UK and Japan
1st Step: Usual measurement of TFP with capital and labor as inputs.
2nd Step: Measurement of TFP’ = TFP purged from the impact of …
… human capital
… age of capital influence
Econometric IV approach
3rd Step: Measurement of TFP’’ = TFP’ minus the impact of …
… 2nd industrial revolution GPT innovation (electricity)
… 3rd industrial revolution GPT innovation (ICT)

13. 3. Factors of TFP growth 3.2. The data
Average age of capital equipment (In years) - Whole economy Source: Bergeaud, Cette and Lecat (2014)

14. 3. Factors of TFP growth 3.2. The data
Average years of studies of the working age population (In years) Whole economy Source: Van Leewen and Van Leewen-Li (2014)

15. 3. Factors of TFP growth 3.2. The data
Electricity production per capita - Whole economy Source: Bergeaud, Cette, Lecat (2015)

16. 3. Factors of TFP growth 3.2. The data
ICT share in capital equipment – Current value (In %) Source: Bergeaud, Cette, Lecat (2016)

17. 3. Factors of TFP growth 3.3. Results
Average annual growth rate of TFP, TFP’ and TFP’’ in the United States (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)

18. 3. Factors of TFP growth 3.3. Results
Average annual growth rate of TFP, TFP’ and TFP’’ in the United States (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
Among factor quality indicators: education levels have the largest contribution to growth, age of capital has a significant, albeit limited role

19. 3. Factors of TFP growth 3.3. Results
Average annual growth rate of TFP, TFP’ and TFP’’ in the United States (In %)
Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016)
Among factor quality indicators: education levels have the largest contribution to growth, age of capital has a significant, albeit limited role
Among technology shocks, electricity has the largest contribution; ICT contribution is limited
All adjustments proposed amount to less than half of TFP growth

20. 4. Concluding remarks 4.1. Takeaways
TFP growth waves: main driver of LP and GDP growth waves
TFP growth waves and recent TFP growth decline only partly explained by factor quality adjustment and by technology impact measurement
Difficult diagnosis concerning the supply side Risk of Secular Stagnation
Factor quality measurement and technology shock measurement are still problematic
Mismeasurement of price decline of capital goods =>
Mismeasurement of capital-deepening and consequently of TFP

21. 4. Concluding remarks 4.2. A more complete story
Long-term productivity slowdown could be related to other factors
For example real interest rates, see following Graph
See Cette, Fernald and Mojon (2016)
Research program at the Banque de France:
Circular relation between TFP growth and real interest rates?
Real interest rates + factor quality + (institutions, technology) => TFP growth
TFP growth + other factors (demography …) => GDP growth => real interest rates
Without technology shocks and adapted institutions, risk of Secular Stagnation
A part of TFP growth will remain unexplained, at least from externalities (“manna from heaven”)

22. 4. Concluding remarks Real long-term interest rate (In %)
10-year sovereign bonds Source: Jordà- Schularick-Taylor Macrohistory Database