STIMULATING

PRODUCTIVITY GROWTH:
THE ROLE OF PUBLIC
POLICY

Christian Kastrop
Policy Studies Branch, Economics Department OECD

International Conference on Productivity and Inclusive

Growth
Santiago | 5 December 2016
I. Productivity: now more than ever
 Weak labour productivity underpins
the collapse in OECD potential growth
Contribution to potential per capita output growth (% pts unless otherwise noted)
2.5 2.5
Capital per worker MFP
Potential employment rate Active population rate
Potential per capita growth (%)
2.0 2.0

1.5 1.5

1.0 1.0

0.5 0.5

0.0 0.0

Pre-crisis: MFP story Post-crisis: K story

-0.5 -0.5
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: OECD Economic Outlook 2016, Volume 1.
II. Productivity: what’s wrong?
 The breakdown of the diffusion
machine
Average of MFPR across each 2-digit sector (log, 2001=0)

Frontier

Frontier

Laggards Laggards

Source: Andrews, D. C. Criscuolo and P. Gal (2016), “The Global Productivity Slowdown, Technology Divergence
and Public Policy: a Firm Level Perspective”, forthcoming.
 Misallocated resources, especially
skills, constrains productivity

Skill mismatch, particularly over-skilling, is harmful for productivity because it

constrains the ability of innovative firms to attract skilled workers and grow
Source: Adalet McGowan, M and D. Andrews (2015), “Labour market mismatch and labour productivity:
evidence from PIAAC data ” OECD Economics Department Working Paper, No. 1209.
III. Productivity: role of policy
 Policies shape the diffusion of new
innovations from the global frontier
Estimated frontier spillover (% pa) associated with a 2% point increase in MFP
growth at the global productivity frontier

Entry and Exit Innovation policies

Source: Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From the Global Productivity
Frontier: Industry Level Evidence”, OECD Economics Department Working Papers, No, 1238.
 Skill misallocation is policy-induced
Probability of mismatch Belgium
0.34

Maximum
(ITA) Minimum
0.30 Maximum
(ITA)
Maximum (BEL) Maximum Minimum
Maximum Maximum
Maximum (FRA) (SWE) Maximum (AUT) (ITA)
(AUT)
Maximum (DEU) Maximum (NLD )
0.26
(POL) (SVK)

0.22

(FIN)
(NLD ) (KOR)
Minimum (KOR)
Minimum (CAN) (DNK) Minimum (DNK)
0.18 (NOR) (CAN) Minimum
(USA) Minimum Minimum Maximum
Minimum Minimum (FIN)
Minimum (USA) Maximum
Minimum
0.14
legislation…
Product market

Employment

Employment protection

Rent control

collective bargaining

Managerial quality
Cost of closing

Tenant-landlord
Transaction costs

of housing supply
a building permit
Cost of obtaining

lifelong learning
Responsiveness
protection

(temporary workers)

Participation in
a business

regulations

Coverage rate of
regulation

agreements
legislation

Framework policies Housing policies Other policies

Source: Adalet McGowan, M and D. Andrews (2015), “Skill mismatch and public policy in OECD countries”
OECD Economics Department Working Paper, No. 1210.
IV. Productivity: what’s next?
 Some key areas for future work

• GFP projects:
– Monetary policy, credit allocation and productivity
– GVCs and productivity

• Zombie firms, exit policies and productivity

• Productivity dispersion and wage inequality
• Productivity in the non-market sector