Paul Schreyer OECD Statistics Directorate Canberra 20 November 2012 1 Productivity outputinput Issues Identifying measuring and aggregating inputs and outputs Level of ID: 633694
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Slide1
Recent developments in productivity measurement
Paul SchreyerOECD Statistics DirectorateCanberra, 20 November 2012
1Slide2
Productivity = output/input
Issues:Identifying, measuring and aggregating inputs and outputsLevel of measurement (economy,
industry
, firm)Academic community dealing with productivity measurement and analysisWorld KLEMS networkNSOs: no clear trend
Introduction
2Slide3
Bringing nature into
the productivity pictureThe firm level: productivity
measurement with micro-data No claim for comprehensive presentation of recent developments This presentation
3Slide4
Bringing
nature
into
the productivity picture4Slide5
Typical inputs: labour, produced capital, intermediate inputs
Often neglected: non-produced natural assets:Mineral resourcesSoil/landTimberAquatic resourcesWater
Bringing
nature into the picture – input side (1)5Slide6
Why important?Assessing
contribution of natural assets to economic growthMeasuring productivity correctly
Policy implication:
is growth driven by MFP or by natural assetsNote: without measurement, direction of bias unknown Bringing nature into the picture – input side (2)
6Slide7
Volume index of subsoil
asset removals, Australia, 1989=100
Source: OECD
calculations, based on ABS data.7Slide8
Effect of including
natural resource input on measured productivity growth:Traditional MFP > adjusted
MFP if :
natural resource input growth > traditional input growth i.e., total input growth has been understatedi.e., traditional MFP growth has been overstatedAnd vice versaNo unambiguous direction
8Slide9
Norway – Difference between adjusted and traditional MFP growth
Traditional
MFP
over-statedTraditional MFP under-statedSource: OECD, work in progroess.9Slide10
Capture changing
marginal extraction costs (which may be increasing)Capturing changing
quality in the resource itself eg declining soil quality failing to do so will overstate measured contribution of
natural resource to output and understate
MFP
Challenge:
quality
of
natural
resource
input
10Slide11
Study by Productivity Commission (Topp
, Soames, Parham, Bloch 2008):Similar in spirit except that mining output is adjusted for declining yieldsUnderlying rate of productivity growth is around 2.5 per cent p. a., compared with stagnant standard MFP (1974 to 2007)Natural resource input has grown
less
quickly than other inputs, so MFP was understated by traditional measure Effects on productivity measures: Australia’s mining industry
11Slide12
Production processes
often accompanied by undesirable outputs, e.g., emissionsFrom producer and MFP measurement perspective:Relevant in
presence
of environmental policies:explicit price (e.g., tax) orimplicit price (marginal abatement costs due to regulation)Are traditional MFP measures over-or understated?Bringing
nature into the picture – output
side
(1)
12Slide13
Example:Given
inputs (labour, capital,…)Rising traditional outputConstant emissionsadjusted MFP > traditional MFP
Productivity
growth was required to keep emissions at bayAgain, no unambiguous effect on measured productivity (1)
13Slide14
But overstatement of
traditional MFP if emissions grow quicker than traditional outputFor many
pollutants (NOx, Sox, CO2,…) relative decoupling in many OECD countries Understatement of traditional MFP Again, no unambiguous effect on measured productivity
(2)
14Slide15
Producer perspective =
private valuationmarginal abatement cost for producer Welfare perspective = social valuation
marginal
cost to society = producer costs + consumer costs + externalitiesBoth perspectives meaningful but should not be mixed upIf productivity measurement is based on producer theory, producer perspective
is called for
Private
and social
valuation
15Slide16
As part of green growth
indicator workMFP adjustment with natural asset inputs
MFP
adjustment with undesirable outputsIndex of natural resourcesOECD work in this area…
16Slide17
System of Integrated
Environmental and Economic AccountsAdopted at UN level in 2012Consistent accounting
for
environment-economy interactionBasis for indicator workUnifying element: balance sheetsStocks, additions, removalsPhysical and monetary valuationMajor task ahead: implementation
Important international development
: SEEA
17Slide18
The
firm level: productivity measurement with micro-data
18Slide19
Drawbacks
No prices, capital proxy, employees, incomplete sector coverage, short time-spansAvantagesEntry, exit, reallocationWithin-firm cycle/growthUnderstanding/measuring both firm-level levers and environmental factors driving growth
Firm-level measurement
19Slide20
Huge productivity
dispersionEven within very narrowly defined industriesFirm size
plays
an important roleBut how accurately are outputs measured?Stylised facts from micro estimates (1)20Slide21
UK: Labour productivity by firm size
21
Source: J.
Saleheen, Bank of England 2012Slide22
Reallocation or
resources to high-productivity producers importantCompetition—consumers can easily switch suppliersLabor and capital market flexibilitySummary measure of reallocation: correlation between productivity and market share
Stylised
facts from micro estimates (2)22Slide23
Correlation between Productivity and Market Share
Source:
Ch.
Syverson November 201223Slide24
Large volumes of dataConfidentiality
issuesSmall countriesNarrowly defined industriesNo international standards – reduced comparability
NSOs
have taken up issue Firm-level measurement requires dealing with…24Slide25
Conclusions
25Slide26
Nature of productivity
implies cumulation of measurement challengesQuality of source data (national accounts, firm-level data)
key
Integrating productivity measurement into official statistics important but not yet widespreadConclusions (1)26Slide27
Tricky output
measurement in particular in:Financial servicesHealth, education, general administrationUndesirable
outputs
Tricky input measurement:Hours worked by industry and by skillsR&D capital (new in national accounts)Natural capitalIntangibles Conclusions (2)
27Slide28
Thank
you!28