Comment on “Labour Productivity: Are Diverging Trends between Developed Countries Durable?”
Michel Fouquin (CEPII)
December 5, 2008
Kyoji Fukao
Hitotsubashi University and RIETI
1
Main Findings of the Paper
• Many European countries and Japan experienced a significant slowdown of their labour productivity (LP) growth in the 1990s. In contrast, the US experienced an acceleration in LP growth.
• The slowdown of LP growth in Europe was mainly caused by a slowdown of multi‐factor productivity (MFP) growth, not by a slowdown of capital accumulation, such as ICT investment.
• It seems that the slowdown of MFP growth was partly caused by the creation of new jobs in Europe. (Adjustment costs, costs of training workers, etc.)
2
Can we apply the same logic to Japan’s case?
Figure 2-1 Growth Accounting for the Market Sector in Japan, the US, and the Major EU Economies
1995-05
1980-95
10.0
10.0
8.0
8.0
6.0
6.0
annual average, %
4.0
4.0
Contribution of
capital input
growth
US 80-95
Italy 80-95
UK 80-95
France 80-95
Germany 80-95
Korea 80-95
US 95-05
-2.0
Italy 95-05
-2.0
UK 95-05
Gross value added
growth
France 95-05
0.0
Germany 95-05
0.0
Korea 95-05
Contribution of
labor input growth
Japan 95-05
2.0
2.0
Japan 80-95
annual average, %
Contribution of
TFP growth
3
Source: EU KLEMS Database, March 2008.
Figure 3. Contribution of Capital Input Growth: Japan, the US and the Major EU Economies
1995-04
2.0
1.8
1.8
1.6
1.6
1.4
1.4
0.8
0.0
US 80-95
0.0
Italy 80-95
0.2
UK 80-95
0.2
France 80-95
0.4
US 95-04
0.6
0.4
Germany 80-95
Contribution of
capital input
growth
Italy 95-04
0.6
1.0
UK 95-04
0.8
of which: ICT
capital
France 95-04
1.0
1.2
Germany 95-04
1.2
of which: NonICT capital
Japan 95-04
annual average, %
2.0
Japan 80-95
annual average, %
1980-95
4
Source: EU KLEMS Database, March 2007.
Figure 2. Contribution of Labor Input Growth: Japan, the US and the Major EU Economies
1995-04
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
-0.6
-0.8
0.2
-0.4
-0.6
US 95-04
-0.2
Italy 95-04
0.0
UK 95-04
US 80-95
Italy 80-95
UK 80-95
-0.4
France 80-95
-0.2
Germany 80-95
0.0
of which: Total
hours worked
France 95-04
0.2
0.4
Germany 95-04
0.4
of which: Labor
composition
Japan 95-04
annual average, %
1.4
Japan 80-95
annual average, %
1980-95
Contribution of
labor input
growth
-0.8
5
Can we apply the same logic to Japan’s case?
• The slowdown of LP growth in Japan was caused not only by a slowdown of MFP growth but also by a slowdown of capital accumulation. The cause of this seems to be the continuous decline of the rate of return to capital.
• In the case of Japan, we can not explain the slowdown of MFP growth by the creation of new jobs. Probably, we can partly explain the stagnation of MFP by low ICT and intangible investment.
6
Can we apply the same logic to Japan’s case?
The gross rate of return to capital in Japan (and Korea) declined continuously from the 1970s.
7
• It seems that Japan did not experience an “ICT revolution,”
partly because of the stagnation of ICT investment. Figure 3-2 ICT Investment/GDP Ratio in the Major Developed Countries
14
12
Japan
Korea
10
US
UK
%
8
6
France
Germany
Italy
4
2
0
Source: EU KLEMS Database March 2008, JIP Database 2008, KIP Database
8
Intangible Investment in Japan
• The intangible investment/output ratio in Japan is much smaller than that in the US.
Japan
%
%
US
26
24
24
22
22
Intangible
Investment
20
20
Tangible
Investment
18
16
Intangible
Investment
18
Tangible
Investment
16
14
12
12
10
10
8
8
6
6
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2004
14
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
26
Sources: Japan: Fukao et al., US: Corrado, Hulten and Sichel (2006).
9
Japan invests a lot in R&D but very little in economic competencies. Intangible investment by category : share in total intangible investment
100%
90%
80%
Computerized
information
70%
60%
Science and
engineering R&D
50%
40%
Other innovative
property
30%
Brand equity
20%
Firm-specific
resources
10%
0%
Japan,
2000-05
US, 19982000
UK, 2004
Sources: Japan: Authors‘ calculations, US: Corrado, Hulten and Sichel
(2006), UK: Marrano and Haskel (2006).
10
The intangible investment/GDP ratios of European countries are even lower than that of Japan.
11
Japan’s MFP growth has recovered since 2000.
In the 2000s, the most important source of Japan’s economic growth 12
was MFP growth.