Labor Productivity

Definition

• Labor productivity :

• Productivity per hour-worked:

LY

LHY

Definition

Importance of labor productivity:

GDP per-capita =

Productivity per hour worked x

Total hours worked x

Participation rate x

Share of adult population to be able to work

Definition

• Factors influencing on productivity growth:

• Capital deepening

• Labor quality

• Total factor productivity

US vs EU

US productivity growth

Source: D. Jorgenson et al. (2008)

US sources of productivity

• From 1995-2000 : ICT

• From 2000 on : Capital deepening

EU: empirical evidence

Source: van Ark et al. (2008)

EU: empirical evidence

Source:R. Inklaar et al.. (2008)

EU: empirical evidence

Source: van Ark et al. (2008)

EU: empirical evidence

Source: van Ark et al. (2008)

EU

• 1950 -1973 : Catching-up period. Technology imitation and new institutions

•1973-1995: Productivity slowdown. Reduction: labor force participation rate and working hours

•1995-2006: Europe’s falling behind. Slower ICT diffusion

EU vs US: sources of prod. growth

Source: van Ark et al. (2008)

EU vs US: sources of prod. growth

Source: van Ark et al. (2008)

The puzzle of service sector

Source: van Ark et al. (2008)

The puzzle of service sector

Source: van Ark et al. (2008)

The puzzle of service sector

Source: R. Inklaar. (2008)

The puzzle of service sector

Source: R. Inklaar. (2008)

The puzzle of service sector

Source: R. Inklaar. (2008)

Strategies for the EU

• Find mechanism to exploit service innovations

• Emphasis on human resources

• Services: less standardized and more customized production.