Recent Productivity Growth in the OECD: Sectoral Patterns and Effect of Innovation

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Recent Productivity Growth in the OECD Sectoral
Patterns and Effect of Innovation

• - Comments
• Peter Vikström
• Saltsjöbaden 2009-10-15

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Main Findings

• Slow down in productivity growth among major OECD
  countries
• Convergence to the bottom
• Diminishing contribution of ICT-capital to
  productivity growth
• The slowdown in the rate of innovation explains
  lower rates of trend productivity growth
• Recovery in innovation rates necessary to
  recover productivity growth after the crisis

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Questions to address

• Empirical issues
• Break in trend productivity growth?
• Has the overall rate of innovation declined?
• What are the prospects for future productivity
  growth?
• The role and future prospects of ICT as a
  General Purpose Technology (GPT)

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Empirical issues

• The paper is rich in empirical data solid basis
  for the analysis
• Changes in productivity growth
• Selection of countries
• Definition of trend vs cyclical changes
• Sectoral perspective contribution of sectoral
  changes to the downturn
• Changes in the rate of innovation
• Hard to capture the extent of non-product
  innovations
• Is it possible to identify lower rates of
  innovation on the sectoral level? (the
  construction sector)
• The 1999 data for trademarks seems to be an
  extreme observation, especially for services
  comparisons between sub-periods must be made with
  caution
• Need for econometric testing of trend breaks and
  the relation between innovation rates and
  productivity growth
• Contribution of ICT-capital Is the potential of
  ICT-investments realised in all countries?

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ICT capital as a share of total capital
Source Lundgren, Edquist and Wallgren (2007), p57
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The future of ICT as an engine of growth

• Historically, General Purpose Technologies (GPT)
  have been important for sustained growth
• Major innovations that change fundamental
  technological conditions Steam, Electricity,
  ICT?
• The core of development blocks complementary
  innovations andinvestments
• What is the life span for ICT as a GPT?
• If core ICT-investments have lost their momentum
  and impact on growth, there is a need for
  spin-off innovations
• What are the prospects for ICT as a base for new
  innovations in other areas?
• What effects will the penetration of ICT in
  society have on future productivity growth

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MFP growth in Swedish manufacturing industry
1870-1990
Source Lindmark Vikström (2001)
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Conclusions

• Important topic What will drive post-crisis
  productivity growth?
• Where will the new wave of innovation come from?
• The future role of ICT
• Will a new GPT evolve?
• The conclusions suggested in the paper call for
  further empirical analysis
• The need for detailed growth accounting and
  innovation data is central especially on the
  sectoral level
• Important that OECD and other inititives such as
  the EU-KLEMS can provide timely data