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The construction productivity debate and the measurement of service qualities

Ahmet Anil Sezer a & Jan Bröchner a a Department of Technology Management and Economics, Chalmers University of Technology, Göteborg SE-412 96, Sweden. Published online: 27 Sep 2013.

To cite this article: Ahmet Anil Sezer & Jan Br ö chner (2014) The construction productivity debate and the measurement of service qualities, Construction Management and Economics, 32:6, 565-574, DOI: 10.1080/01446193.2013.831464


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Construction Management and Economics , 2014 Vol. 32, No. 6, 565–574,

6, 565–574, The construction productivity debate and the measurement of

The construction productivity debate and the measurement of service qualities



Department of Technology Management and Economics, Chalmers University of Technology, Go¨teborg SE-412 96, Sweden

Received 30 November 2012; accepted 23 July 2013

Since the 1960s, researchers have provided short-term and long-term explanations for low productivity growth in the construction industry. In retrospect, the main challenge appears to be the measurement of changes in heterogeneous input and output qualities. The aim here is to review earlier construction productivity research and to compare it with more recent approaches to quality measurement used when analysing services productivity, ultimately intending to provide guidance for using performance data from construction projects. Relying on the EU KLEMS database, industries with similar patterns of productivity growth are identified, primarily the business services industry. In services productivity analyses, the attempts to introduce output quality measures reflecting customer satisfaction are particularly interesting, as this creates a link to productivity effects on clients. A conclusion is that it should be possible to use the increas- ing volume of performance indicator data collected for construction project benchmarking for extending the range of output quality variables. However, resource constraints imply that it is infeasible to base industry productivity statistics on project level data reflecting customer satisfaction and customer productivity effects.

Keywords: Business services, construction sector, productivity, quality.


According to official statistics, productivity in the construction industry grows more slowly or even much more slowly than in manufacturing. The difficulty of measuring changes in output and input qualities is one of several explanations for this phenomenon. However, it has long ago been recog- nized that the problems of measuring quality change when analysing productivity growth are not confined to the construction industry, and that they also affect the measurement of output throughout the services sector (Griliches, 1992, p. 7). Construction as an industry is traditionally assigned either to the second- ary sector along with manufacturing or to the tertiary sector. The development of the tertiary sector during recent decades and in particular the growth of the importance of business services makes it worthwhile to study the proximity of construction to these ser- vices, although some of the output from construction

firms (owner-occupied dwellings, repairs) is bought directly by households. However, there are many examples of business services providers also catering to household customers. There is a renewed interest in construction productivity issues, as when it is pro- posed to prioritize innovation projects according to their predicted effects on productivity (Goodrum et al ., 2011; Bro¨chner and Olofsson, 2012), and this is another argument for reconsidering the productivity debate in a quality measurement perspective. Since the 1960s, researchers have provided short-term and long-term explanations for low produc- tivity growth in the construction industry. In retrospect, the main challenge appears to be the measurement of changes in heterogeneous input and output qualities. Construction is not the only industry where the quality problem in measuring productivity is underestimated or evaded. It is easy to find a range of industries where the problems associated with quality measurements are present, including agriculture (Craig and Pardey, 1996)

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and services in general (Calabrese, 2012; Maroto- Sanchez, 2012). Therefore there is a potential for devel- oping better productivity measures. Thus, the aim here is to review earlier construction productivity research and to compare it with more recent approaches to quality measurement used when analysing services productivity, ultimately intending to provide guidance for using performance data from construction projects. The reasoning proceeds as follows. First, we review the long-running debate on growth rates for construc- tion productivity at the industry level, where we analyse determinants that have been proposed. Next, we consider the shift in interest towards site and task level productivity growth and attempts at reconciling these with aggregated, industry level figures. This leads to a search for industries with similar problems of qual- ity measurement, relying on the EU KLEMS database. Attempts at mapping the heterogeneity of business services outputs and inputs are brought in, and the related potential for data mining in construction benchmarking schemes is identified.

The construction productivity debate

Already before productivity measurement was introduced, a range of relevant issues were identified in the context of the 1930 US Census, where huge resources had been devoted to the collection of data on the construction industry (Morehouse, 1933). A number of definitional issues had to be addressed (Gill, 1933): whether to include only construction awarded through contracts, whether to include alterations and repairs, and whether there should be a minimum contract sum for inclusion. Also, when discussing the measurement of construction costs, there were prob- lems associated with construction inputs: equipment used and equipment rental, and how to deal with ‘higher grade materials going into buildings’, i.e. the input quality measurement problem was recognized. Three decades later, when comparing productivity growth in the construction industry to that in other industries, US economists initiated the debate of how to explain the low growth rates in construction. The debate on construction productivity has three main topics: the definition (delimitation) of ‘construc- tion’; the measurement of productivity; and the factors that explain productivity growth (Goodrum et al ., 2002). Moreover, important distinctions are made between labour productivity, which has attracted more interest among researchers (Yi and Chan, 2013), and total factor (multifactor) productiv- ity. The relation between productivity measures at various levels of aggregation has also been investigated, notably to explain why obvious increases

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in labour productivity at the construction project or site level fail to be reflected in industry level data. The definition of the construction industry has obvious consequences for the measurement of the outputs. While common usage among non-specialists tends to interpret ‘construction’ generously, including architectural and other related professional services and materials producers who sell their products to the construction industry, NACE and other international classifications do not consider them to be within the limits of the industry (Briscoe, 2006). As noted already in the interwar period, heterogeneity of output is one of the major obstacles in the deflation of construction prices. As a consequence of output heterogeneity in the construction industry, prices of inputs rather than outputs are used to estimate the value of construction. Pricing of inputs as an approach is obviously seen as worrisome; hence Kaplan (1959) suggested the use of intermediate outputs such as cubic yards of concrete foundation as a step towards direct measurement of heterogeneous outputs. Thus the problems of measuring the real output from the construction industry have been an obstacle to esti- mating its productivity. Dacy in his pioneering article (1965) mentioned that there had been little interest in studying the real output, productivity and price trends; he went on to identify determinants that increase con- struction productivity. Already here, we find included in his 1965 list: shifts in construction product mix, geo- graphical distribution (different design and building codes in different US states), increase in construction firm size in contract construction, introduction of new techniques, decline in average age of construction work- ers and increase in capital per worker. Stokes (1981) basically confirmed Dacy’s reasons for low rates of pro- ductivity growth in the construction industry. However, Stokes (1981) was additionally able to estimate that these determinants explained only 25% of the change in productivity growth, and that capital per worker was the major contributor to growth. Also in the 1980s, research appeared to show that errors in the measure- ment of real output did not understate productivity growth as much as it had been believed: Allen (1985) investigated the same productivity determinants and found that the capital–labour ratio and wrong deflators explained more than half of the low growth in construction industry productivity. Changes in the com- position of output and regional shifts appeared as clear explanations for the decline in total factor productivity when Schriver and Bowlby (1985) analysed data for US building projects. Furthermore, technological advances in design and construction, fluctuating demand for con- struction, the fragmented structure of the industry and the fragmentation of the construction process due to separation of design and construction were identified by

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Construction productivity

Ganesan (1984) as important factors that influence con- struction industry productivity. Summing up, we find that among the ideas brought forward was that short- or medium-term shifts between types of construction projects and between sizes of projects could explain variations in construc- tion productivity and that there were effects of the business cycle. A recent overview of how construction productivity has developed in New Zealand confirms the existence of these mechanisms, emphasizing that sharp falls in productivity went along with slumps in building activities (Abbott and Carson, 2012). Instead of the earlier focus on labour productivity which is less costly to measure but also less informative (Sudit, 1995), turning to total factor productivity was suggested already by Chau and Walker (1988). They categorized inputs as tangible and intangible, where tangible ones are labour and capital, intangible ones are expenditures on R&D, education, etc. Intangible inputs improve quality of tangible inputs, provide better organization and management and new technology. Although they distinguished between tangible and intangible inputs, they excluded intangible ones from their way of measuring total factor productivity; instead they treated intangible inputs only as factors that influ- ence productivity. Whereas a partial measure of productivity such as labour productivity suffers from the difficulty of repre- senting the skills heterogeneity of labour inputs (Schreyer, 2001), the problem of measuring a variety of input qualities and quality changes is felt even more strongly when estimating multifactor productiv- ity. To begin with, data on availability of quantities of capital and their utilization rates are incomplete (Sudit, 1995). Technological change can be advances in design and quality of new vintages of capital and intermediate inputs or it can be costless such as better management and organizational change or blueprints (Schreyer, 2001). Zhi et al . (2003) in their study of total factor productivity in Singapore developed a quality index for labour and used the proportion of precast concrete as a measure of quality of materials. Ruddock and Ruddock (2011) analyse the effects of inputs on construction productivity growth and iden- tify ICT capital as the fastest growing input while it has a modest share in overall input costs. Productivity growth might be explained by the level of investment in ICT; however problems arise due to the time lag for a new technology to reach its full potential.

Levels of analysis

The debate on construction productivity was domi- nated by economists and had its focus on industry


level productivity until the end of the 1980s. By 1990, engineering inspired analyses of construction productivity at lower levels (firm, project and activity or task) began to appear. Initially, there were few con- struction productivity studies relying on data from the establishment (firm) level; an early study by Albrikt- sen and Førsund (1990) found that there were large variations in efficiency among Norwegian builders, using a frontier approach and cross-sectional data for 1986. More recently, there have been a number of studies applying data envelopment analysis (DEA) to data from the firm level (Li et al ., 2013) or even for an international comparison based on financial data from construction companies (Horta et al ., 2013). When looking at different levels there soon emerged a need to explain the discrepancy between project (or activity) and industry level productivity growth. Basi- cally, data aggregated to the industry level show consistently lower values for productivity growth (Goodrum et al ., 2002). Thus construction practitio- ners who are actively involved in the construction process are often surprised by national statistics on the industry level, since they think that improvement of productivity is within their own span of control and that external conditions are less important (Rojas and Aramvareekul, 2003b). In a study on construc- tion labour productivity in the US between 1979 and 1998, the same authors (2003a) had revealed a differ- ence between what industry level and project level data suggest. They noted many problems associated with the raw data and interpretation of raw data at the industry level, which brings up the question: did construction labour productivity really decline? On the other hand there is at least one investigation (Allmon et al ., 2000) that suggests that construction management practices have had only a minor influ- ence on labour productivity, whereas real wages have been depressed over two decades, implying that the gap between construction and manufacturing wages had been reduced successively, and technological improvements emerged as major explanations of growth. These conclusions were drawn from looking into data for different types of construction activities at project level, thus giving signals of the productivity growth discrepancy between project and industry lev- els. However, a study of housing construction data from the Glasgow area led Langford et al . (2000) to conclude that use of quality assurance systems was associated with higher productivity at the project level. Many of the more recent investigations into construction labour productivity have concentrated on the construction project level, sometimes gathering data at task level on construction sites. Studying con- struction sites, it is possible to find productivity

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increases clearly associated with higher inputs of real capital. Improvements in equipment technology seem to have contributed to long-term improvements in labour productivity (Goodrum and Haas, 2002, 2004; Shen et al ., 2011; Chia et al., 2012). In retrospect, it seems that low growth rates, persisting over decades, should not or rather cannot be explained by productivity determinants that oper- ate only in the short or medium term. A decline in the average age of the workforce cannot go on forever. Similar problems affect other short-term explanations:

changes in geographical distribution, increase in firm sizes and shifts in construction product mix. Many such determinants have been proposed since the 1960s, but the general impression of previous research is that the effects of deficiencies in output quality measurement have been underestimated and remain important.

Comparing with other industries

Unlike studies of construction innovation, which often compare data with those from other industries, construction productivity research has mostly stayed within the limits of the industry. The introduction of the EU KLEMS database (Timmer et al ., 2010) has made it easier to perform comparative analyses at the industry level. KLEMS has influenced thinking on construction productivity in later years, beginning with Crawford and Vogl (2006) in their useful over- view when they discuss the contribution of total factor productivity to labour productivity growth in construction. Recently, Abdel-Wahab and Vogl (2011) have compared construction productivity internationally, while Ruddock and Ruddock (2011) have analysed UK construction industry data in the KLEMS database, however without adding to the set of explanatory factors identified by earlier research on construction productivity. However, the reliability of the KLEMS construction data is no better than the figures submitted by national authorities. This is less of a problem in using KLEMS for comparisons between industries, but when analysing construction productivity growth in one country, we must note that the growth in the UK of self-employment in construc- tion and of workers employed in firms not registered for VAT has led to the withdrawal of construction productivity data from government statistics (Daffin et al ., 2002). Statistics Denmark does publish labour productivity data for construction, broken down into sub-branches of construction of new buildings; repair and mainte- nance of buildings; and civil engineering; however, the development between 1966 and 2009 of civil

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engineering productivity in particular appears to be erratic and hardly a reliable basis for analysis. Industry comparisons of productivity growth accord- ing to the KLEMS database for the 1980–2005 period reveal a varied picture. Table 1 lists industries with labour productivity (LP, measured as value added (VA) per hour) and multifactor productivity (MFP) growth rates similar to construction, according to Timmer et al . (2010). Industries with LP and MFP growth rates similar to construction can be identified using data according to Timmer et al . (2010). Contri- butions of information and communications technol- ogy (ICT) capital (K) to aggregate labour productivity have also been included. In principle, similarities between construction and other industries ought to be due to common problems of measurement or to common underlying productivity factors. The pattern that emerges from these comparisons is varied. It is actually easier to understand why a number of industries fail to appear as adjacent to construction rather than to summarize what the neighbours in the table have in common. Neverthe- less, in the case of labour productivity growth, there is a relationship to business services. Evidently, construction remains far from most types of manufac- turing, as productivity data for eight industries never appear in proximity to construction: electrical equipment, rubber and plastics, wood products, non-metallic minerals, transport equipment, other machinery, textiles and footwear, other manufactur- ing. Note that important suppliers of inputs to construction are found here. The industry pattern related to contributions from deepening of ICT capital to aggregate labour produc- tivity reveals construction to be close to the retail trade, wholesale trade and other logistics dominated industries. During the 1995–2005 period, the industry with the greatest contribution of this nature was busi- ness services in both the EU and the US, and con- struction did not lag far behind. Contributions from deepening of non-ICT capital to aggregate labour productivity have been important for construction in this more recent period, particularly in the EU, whereas non-ICT capital deepening had played a greater role for business services in the earlier period, 1980–95. Also, there was a strong effect for construc- tion as to the contribution to aggregate labour productivity from changes in labour composition, at least in the EU during the 1995–2005 period. A possible explanation for construction appearing close to agriculture and mining is land as a produc- tion factor. Fresh results from a cross-sectional study of housing productivity in US metropolitan areas by Albouy and Ehrlich (2012) do not exclude the possi- bility of low productivity growth caused by successive

Construction productivity


Table 1 KLEMS data for construction, compared to other industries (derived from Timmer et al., 2010)

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Productivity definition, region and time period

Industry with slightly lower growth, difference or contribution

Industry with slightly higher growth, difference or contribution

LP (gross VA/h) EU 1980–2005

Business services

Petroleum refining

LP (gross VA/h) EU 1995–2005

Business services

Food and beverages

LP (gross VA/h) USA 1995–2005


Food and beverages

Difference in contributions to aggregate LP EU 1980–95 vs. 1995–2005



Difference in contributions to aggregate LP EU vs. USA 1995–2005



Difference in contributions of ICT K to aggregate LP EU vs. USA 1995–2005

Retail trade

Wholesale trade

Difference in contributions of non-ICT K to

Hotels and rest.

Retail trade

aggregate LP EU 1980–95 vs. 1995–2005 Contributions of non-ICT K to aggregate LP EU




Contributions of Labour composition change to



aggregate LP EU 1995–2005 MFP EU 1980–2005 MFP EU 1995–2005 Difference in MFP EU 1995–2005 vs. 1980–95 Difference in MFP contribution to LP EU

Food and beverages Other services Petroleum ref. Transport

Finance Automotive trade Paper, print and publ. Agriculture

1995–2005 vs. 1980–95 Difference in MFP contribution to LP EU vs. USA 1995–2005

Post and telecom


Notes : LP = labour productivity; MFP = multifactor productivity; VA = value added; K = capital.

moving of new construction to worse sites. Land is almost a non-renewable resource subject to depletion, as property development in a given area tends to begin by exploiting the best sites available, those with the most favourable location, access to amenities, as well as the best geotechnical characteristics. Craig and Pardey (1996) who studied productivity and quality in agriculture suggested the use of disaggregated data for categories of labour and land. There is an analogy with declining yield in the mining industry, and as shown by Topp et al . (2008) for productivity in the Australian mining industry, once depletion effects have been removed, productivity growth is evident. The similarities between construction and business services (and the dissimilarities) can be seen in relation to seven problems in the measurement of aggregate productivity. First, there is a problem related to productivity measurement problems at an aggregate level, over time in a heterogeneous industry. Heterogeneity is certainly a characteristic of both construction and business services as industries. The second problem associated with measuring construc- tion productivity is that construction has never sepa- rated the customer from the production process, and again, the presence of co-production in this sense is typical of many business services (Bettencourt et al .,

2002). A third problem is that a detailed division of labour overseen by management, planning and moni- toring production activities, has never been widely implemented in construction projects. This challenge of the ‘loosely coupled system’ (Dubois and Gadde, 2002) is shared by construction and many services. The fourth problem is heterogeneity of material and land inputs, which undeniably is of little impor- tance for business services productivity, although it contributes to the explanation why construction, mining and agriculture share patterns of productivity growth. The fifth, and best-known problem, is the heterogeneity of roads, infrastructure and buildings; it is difficult to claim that e.g. management consulting is characterized by a homogeneous output. A sixth problem arises from durability in connection with heterogeneity, and here, construction is an outlier in comparison with other industries. It is debatable how important the effect of durable output is, except for contributing to the amplitude of demand cycles. The final output measurement problem is again tied to the custom nature of construction output, in particular client preferences for timely delivery. As almost all services are produced and consumed without a time lag in between, the similarity with construction industry demand conditions is evident.

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Given the similarities found, it is instructive to see how those who study services productivity have dealt with the measurement of quality change and which determinants of productivity growth they have proposed. In the case of social and personal services, wholesale and retail trade, problems associated with reflecting quality changes into prices are evident (Wo¨lfl, 2003). Higher specialization, standardization, consoli- dation of business processes and a shift to higher value- adding services have been invoked as causes of both higher employment and higher productivity in business services (Sako, 2006). Fox and Smeets (2011) analyse Danish data from four manufacturing industries and four service industries, concluding that input quality plays a greater role in explaining productivity dispersion in services; but labour quality is not the strongest expla- nation for this. Instead, management quality, business strategy, the appropriate use of new technologies and heterogeneous production technologies are suggested as explanations.

Extending the range of construction output–input qualities

Although there has been progress in overcoming data deficiencies for non-manufacturing productivity, there are still negative trends that defy explanation (Harper et al., 2010). Recently, Dyer et al. (2012) have used an extended hedonic price index for the construction of single-family houses, but sample limitations result in dif- ficulties when it comes to analysing productivity effects. As we have seen, productivity measurement for most services is complicated because of quality change. Inklaar et al . (2008) highlight difficulties in determining quality adjusted deflators for ICT invest- ment which varies among countries. The current service productivity debate has been outlined by Maroto-Sanchez (2012) where the number of biases in productivity measurement is given under catego- ries: choice of inputs, choice of outputs and estima- tion of aggregate productivity growth. However there remains the suspicion that quality change is insuffi- cient as an explanation for slow or even negative trends in services productivity (Fernandez and Palazu- elos, 2012). The similarities between business services and construction are sufficient to make it worth considering more in detail at least one stream of the business services literature, the one that raises the issue of links between provider and client productivi- ties. The underlying heterogeneity of transactions and interaction with users leads to difficulties in standard- izing service output (Griliches, 1992, p. 7); there is little detail on the performance characteristics of pro- fessionals, and even less on the characteristics and training levels that matter for performance. It is not

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just interaction with users; consumers also may be considered to supply an input when a service takes place (Sherwood, 1994). Therefore it is reasonable to assume that the productivity of professional services is related to the productivity of whatever these services are intended to support as intermediate inputs, although this insight is hard to translate into data col- lection. Hitherto, the concept of client productivity has mainly been used in the context of management consulting services. For management consulting, Nachum (1999) has proposed that client input should be measured as labour resources that the client has used in the relationship with the consulting firm. One problem she noted is that the time that top manage- ment spends on a particular project is usually not accounted for. As for output measures, she proposed a combination of price (= turnover of the professional services firm) and improvement of the client firm’s competitive position, due to the services received. Here there is the obvious difficulty of identifying the effect of these services (Sherwood, 1994). Similar to construction outputs, there is a time dimension in that the effects do not emerge instantly and should ideally be measured over a period of time. From an empirical viewpoint, what is lacking is access to customer data that sometimes are available for comparatively standardized consumer services. In principle, it should be possible to analyse surveys of client satisfaction with business services along the lines of when data from customer satisfaction surveys are used for Malmquist productivity indices (Fixler and Zieschang, 1992; Fa¨re et al ., 2006). It is probable that client satisfaction with business process service qualities is strongly related to effects on client produc- tivity, and this could be linked into the more general idea of multi-criteria frameworks for measuring ser- vice performance, such as explained in the contexts of insurance and of business incubators by Djellal and Gallouj (2013). Turning again to the construction industry, there is not only the complication of the customer participating in the production process of construction, e.g. when approving technical and schedule changes at site meet- ings. Hidden under the contractual terminology of traditional design-bid-build versus design-build pro- jects (Ling et al ., 2004) is a three-party relationship of (1) construction clients; (2) providers of architectural and engineering services; and (3) construction contrac- tors. In design-bid-build projects, clients buy profes- sional services in order to specify their detailed requirements as a basis for competitive procurement of construction work. Under the design-build regime, it is the construction firm that buys at least the detailed design from architectural and engineering firms, although at an early stage of the project, the client will

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Construction productivity

often have bought some professional services before signing the construction contract. These are obviously not just simple cases of customer co-production; the presence of three co-producers as well as role shifts along the time axis of construction projects is a further challenge for productivity analysis. Another challenge is that of identifying the increase in customer productivity that is due to services bought. Taking an example from construction, the phenomenon that design and technologies affect the indoor climate of offices and the connection between climate and office worker productivity is increasingly recognized (Johansson, 2009). One possibility is to bring data from customer satisfaction surveys into the analysis of how provider and client productivity growth are related.

Construction benchmarking

Since the publication of Rethinking Construction , the UK government report (Egan, 1998), and inspired by survey practices that had evolved for the US automo- tive industry, schemes for benchmarking performance in construction projects have gained widespread popularity (Costa et al ., 2006; Rankin et al ., 2008). These client-oriented schemes, often promoted by public sector clients, can be said to imply new output quality measures for the project level, while reflecting elements taken from customer satisfaction surveys and the project success literature. The degree of contractor success in adhering to a given project sche- dule is a key performance indicator that is typical of such schemes. Introduction of the just-in-time princi- ple is an example of acknowledging that a supplier might exhibit lower productivity and the customer firm a higher productivity. Time precision, probably like cost precision and quality precision, is a service process quality that has rarely been analysed in the context of construction productivity, although it is likely that there is an implicit price for such qualities. Rankin et al . (2008) describe a benchmarking frame- work where cost and time predictability are used as indicators for Canadian pilot study projects; Willis and Rankin (2012) claim that their construction industry maturity model provides researchers and policy makers with an alternative to labour productiv- ity. Their performance model allows experts to assess the presence of key practices in cost and quality management, again being much closer to measuring cost and quality precision in relation to budgets and specifications rather than assessing output–input ratios. The three Housing Forum customer satisfaction surveys in the UK are examples of benchmarking


schemes that assess customer satisfaction (Housing Forum, 2004). Structured questionnaires were used for telephone interviews with purchasers of new houses. Customers rated their satisfaction in terms of quality, construction and finish, value for money and the service provided by the contractor. Results permit comparisons at firm and subsector levels. Obviously, customer satisfaction is a subjective matter. Thus Bakens et al . (2005) suggest the use of non-subjective measures such as the period between project comple- tion and the settling of final accounts which may reflect the alignment of client and supplier views of the project.


Construction presents the paradox of an old industry that has operated in ways that are similar to more recent business services, notably because builders have a complicated nexus of co-production relation- ships and their clients often show willingness to pay for service process qualities. It is obvious that produc- tivity measurement for construction shares many problems with business services, related to the hetero- geneity of outputs and inputs as well as the measure- ment of output and input qualities. The material presence of goods in construction processes is more obvious and differentiates them from professional ser- vices, but the immobility of production and product must be remembered, not least since it gives rise to consequences for the environment. Construction productivity researchers have been able to identify plausible short- or medium-term mechanisms that contribute to the dynamics of pro- ductivity growth. However, the persistently low or even negative rate of productivity growth reported for the construction industry can primarily be due to measurement errors. Industry productivity studies have made further progress based on the EU KLEMS database with its advantage of a more detailed accounting for inputs, recognizing differences in labour composition and in ICT capital. At the indus- try level, there remain the data difficulties of dealing with output heterogeneity and output quality change. Data from multi-criteria performance surveys could be used more widely to catch aspects of output qual- ity change, in conjunction with traditionally collected figures, provided that performance indicators are defined in a way that is consistent with traditional statistics and permits aggregation to higher levels. The absence of international classifications and conventions is a disadvantage as it presents an obsta- cle to comparisons between industries and between countries.

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Since long ago, construction has been characterized by a mix of pure services and pure goods productive activities, and in that sense it has not been a laggard industry but rather prefigured what is currently the sit- uation for advanced manufacturing firms. This is espe- cially so when manufacturers deliver project-based complex products closely adapted to customer requirements and integrated with service elements. Recognizing this integration is crucial for the develop- ment of government productivity and innovation poli- cies; the construction industry tends to suffer if there is a clear divide between goods and services initiatives.


The authors are grateful to FORMAS, The Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning, for financial support.


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