Productivity in the OECD: US up, others down

How does recent US productivity growth compare with the rest of the OECD? Pretty darn well, according to a new BIS working paper by Les Skoczylas and Bruno Tissot, Revisiting recent productivity developments across OECD countries. They conclude that the US performance stands out (though the Nordic countries have also seen a pick-up in labour productivity growth). The level of US labour productivity "appears the highest among the major industrial countries", and has been rising the fastest:

The level of US labour productivity appears to be the highest among the major industrial countries and has been rising the fastest in the recent past. There are, however, substantial uncertainties surrounding these international comparisons. But there is little doubt that the US performance has sharply improved in relative terms, as productivity growth has accelerated in the United States but decelerated in most other industrial economies. Indeed, only a few countries (mainly some Nordic countries) have also experienced a structural improvement in their productivity performance over recent years.

That, coupled with migration, means a higher potential growth rate for the United States:

In terms of growth rates, and according to the OECD, potential output might currently be growing by around 3-3¼% per year in the United States, compared to around 2½% in the United Kingdom, 2% in the euro area and 1% in Japan.

In terms of changes in growth rates, the United States has seen a clear improvement in its relative position: potential growth is still running at roughly the same pace as in the 1980s, while it has decelerated sharply in the euro area and even more so in Japan.

But what are the reasons behind this higher US productivity growth? The report makes some interesting speculations:

First, the improvement in US productivity does not appear to be the sole result of the reported greater use of IT equipment in the United States compared to other countries since the mid-1990s. The bulk of the US accumulation in IT equipment occurred in the 1990s, ie well after US TFP started to accelerate...

Second, there has been an acceleration in trend TFP in the United States since the 1970s, a period over which substantial structural reforms have been implemented...

Third, industrial countries have experienced substantial changes in trend productivity growth over the past few decades. If history is any guide, this suggests that the recent divergences could well not be maintained in the future...

Worth reading. The paper also presents some interesting views about the likely impact of structural reform on productivity growth, which I will return to in a subsequent post.

Comments

[Edward Hugh]

The BIS paper makes a very interesting read. Especially the GDP per capita and GDP per hour worked comparisons, and the points on Spain, Italy and Japan.

With ageing and rising dependency ratios, to maintain current levels of GDP per capita you need to boost GDP per hour worked by just enough to compensate for the change in dependency ratio. This clearly isn't happening, and the process is only just begining/about to begin. So I think the onus is firmly on those who hold the 'optimistic' view to explain how they justify holding it in the face of what we have so far seen.