Issues in Productivity Performance, U. S. versus Europe

Presentation Transcript

Issues in Productivity Performance, U. S. versus Europe Technical Panel on Assumptions and Methods, Social Security Advisory Board Washington, D.C., April 11, 2003

Why is European Experience Relevant? In anticipating U. S. forward for a long time, there could be an inclination to put unreasonable weight on the experience of the previous seven years Looking at Europe, or OECD all the more for the most part, gives a more extensive scope of experience and of potential outcomes

Comparing Europe and the U. S., Initial Cautions Depends on eras U. S. just amidst the pack for 1990-2000. Its "marvel" happened 1995-2000 Part of the U. S. Involvement in 1995-2000 was with regards to an unsustainable domain for large scale development and IT speculation.

Verdict Depends on Time Period

Convergence Predicts Europe Should Grow Faster Distinction between Output per Capita (YpC) and Productivity (YpH) Much of Europe has made up for lost time in YpH yet not in YpC Illustrated by OECD: European Union YpC at 68%, YpH at 93% Not much joining left for YpH

Why the Discrepancy amongst YpH and YpC? Generally equivalent extents Lower Hours per Employee Lower Employment per Capita Hours per Employee? Excursions, deliberate or incompletely political? Business per Capita Higher Unemployment Rate Lower Labor-Force Participation

Aggregation in U. S., Lack of Aggregation in Europe Puzzle is not disappointment in Europe, it's heterogeneity in Europe If you disaggregaged the U. S., you'd find comparable contrasts: Silicon Valley = Ireland + Finland New England = Denmark + Sweden Austin Texas = Australia Heartland = France or Germany

Further Distinctions: GDP versus NFPB Output, Employment versus Hours Standard U. S. Profitability Data: NFPB Output every hour Many universal correlations: GDP per Employee OECD Figure 1.2

ICT Penetration versus MFP Acceleration Handout Charts Figures 8 & 9 Very free relationship Good folks: N America, Nordic, Ireland, Australasia (what do they have in like manner, cool climate so they remain inside a considerable measure playing with their PCs?) Weather must be essential: Spain and Italy are dependably at the base

U. S. Scores Because of Shares Some nations (Finland, Japan, Korea) solid in ICT mfg however not in administrations U. S. has substantial shares no matter how you look at it, ICT mfg, telecom svcs, ICT svcs

Another Distinction among Sources of Growth Human capital, bodiless specialized change, epitomized specialized change OECD Table 1.3 U. S. Completely balanced MFP 0.75 for 1995-2000 Better than Germany/France/Italy/UK Worse than Canada/Australia/Finland

Disaggregated Analysis Van Ark, come back to Table 1 Big distinction lies in ICT utilizing businesses This is the place retailing comes in Other wellsprings of contrast in retailing between U. S. furthermore, Europe

Verdict Depends on Time Period

It's not recently new companies The greatest contrast in ICT utilize is the execution of U. S. retailing Big firms, Wal-Mart and Home Depot Role of Weak Land-utilize security Role of Product controls, esp. shop-shutting controls in Europe

Further Studies of the Differences in ICT Payoff Computer and web utilize have a greater result in U. S. than in Germany But perhaps there's a forgotten variable called "x-effectiveness" Makes firms more proficient Makes firms purchase a great deal of PCs Wal-Mart versus K-Mart

Broader Issues U. S. "Experimentation" Combines: Private Research Universities (Silicon Valley and Boston) Venture Capital Patent System

ICT Effects on Productivity Growth: the 3 Channels #1, traditional: capital extending #2, routine: quicker MFP development in the creation of PCs #3, more novel, "ICT as an instrument for imaginative movement" But the ICT is accessible all over the place, why is all the biotech business in SF, Boston, and San Diego?