MEASURING MULTI-FACTOR PRODUCTIVITY BY INDUSTRY: METHODOLOGY AND FIRST RESULTS FROM THE OECD PRODUCTIVITY DATABASE

MEASURING MULTI-FACTOR PRODUCTIVITY BY INDUSTRY: METHODOLOGY AND FIRST RESULTS FROM THE OECD PRODUCTIVITY DATABASE Beno Arnaud, Julen Dupon, Seung-Hee Koh, Paul Schreyer Table of conens Inroducon... 2 II) Measurng labour and capal npus and mul-facor producvy a he ndusry level... 3 II.1) Labour npu (oal hours worked)... 3 II.2) Labour remuneraon and labour shares... 4 II.3) Capal npu... 4 a. Esmang deprecaon raes... 5 b. Measurng nal capal socks... 5 c. Esmang ne capal socks... 6 d. Measurng he user cos of capal by ndusry... 6 II.4) Esmang mul-facor producvy growh... 7 III) Frs resuls... 8 III.1). Labour producvy and mul-facor producvy... 8 III.2) Descrpve growh accouns... 12 III.3) Comparson of MFP beween PDB and EU KLEMS... 13 IV) How o access PDB and PDB?... 14 Conclusons and furher progress... 14 Annex 1. Ls of varables ncluded n he OECD Producvy daabase by ndusry and relaed ndcaors from STAN... 15 Annex 2. Ls of ndusral acves, accordng o STAN, based on ISIC Rev.3... 16 Annex 3. Coverage of labour producvy and mul-facor producvy daa n PDB... 17 REFERENCES... 18 1

MEASURING MULTI-FACTOR PRODUCTIVITY BY INDUSTRY: METHODOLOGY AND FIRST RESULTS FROM THE OECD PRODUCTIVITY DATABASE Inroducon Snce 2003, he OECD Producvy daabase 1 (hereafer PDB) has provded me seres of producvy measures and her componens for nernaonal comparsons and producvy analyss. In parcular, he PDB offers measures of Mul-facor producvy (MFP) ha compares he evoluon of oupu wh he evoluon of combned labour and capal npus. These MFP seres have been consruced a he level of enre economes. Whle useful for many purposes, here has also been ncreasng neres n ndusry-level producvy MFP measures. Such ndusry-level nformaon exss bu only for labour producvy, he rao beween oupu and labour npu. A jon projec beween he OECD Drecorae for Scence, Technology and Indusry and he OECD Sascs Drecorae was launched n 2008 wh he am of developng MFP measures by ndusry. These new producvy measures by ndusry (PDB) should comply wh he followng crera: Frs, here should be full compably wh he ndusry-level daa ha he OECD comples n s STrucural ANalyss daabase (STAN). Indeed, measures of oupu and labour npu requred o consruc ndusry-level MFP seres, should be drecly sourced from STAN. Second, here should be regular updaes so as o make he new MFP daa aracve o hose researchers nsde and ousde he OECD who pu a parcular premum on melness. STAN ensures melness hrough a rollng updae (as opposed o updaes a fxed nervals) ha follows as closely as possble counres release calendars of ndusry-level naonal accouns daa. PDB wll also be managed wh a rollng updae procedure. Thrd, he mehodology for PDB seres should reflec he sandards pu forward n he OECD Manuals on Measurng Producvy (2001) and Measurng Capal (2009). These recommendaons have been followed for he producvy measures a he oal economy level n he PDB. The man mssng ngreden for MFP compuaons by ndusry was a measure of capal npu by ndusry. Consequenly, a he hear of he projec presened here s he consrucon of a new seres of capal measures by ndusry usng a common mehodology for all counres. In erms of he frs and second creron menoned above, he projec has been successful. Wh regard o he hrd creron, daa consrans mposed a devaon from recommended pracce. More specfcally, nformaon on nvesmen by ndusry and by ype of asse s no generally avalable and a smplfed mehod had o be used o measure capal npus. In essence, capal socks were measured raher han capal servces. The former ake no accoun of dfferences n he relave producvy of dfferen ypes of asses, he laer does and consues he concepually preferable measure of capal npu. Ths defcency wll be recfed as more 1 hp://www.oecd.org/sascs/producvy 2

dealed ndusry-level source daa becomes avalable. For he me beng, however, he PDB measures have o rely on he smplfed sock approach. One consequence of hs smplfcaon s ha ndusry-level daa are no drecly comparable wh he economy-wde MFP daa ha are based on a measure of capal servces. However, whn PDB, conssen aggregae producvy measures are beng presened allowng for nsance for a de-composon of aggregae producvy growh no conrbuons by dfferen ndusres. Boh PDB and PDB cover abou weny counres alhough some dfferences n coverage reman: some counres ha are unavalable n PDB are covered n PDB (Czech Republc, Greece, Iceland, Norway and Poland) whle some resuls are avalable n PDB level bu no n PDB (Ausrala, Japan, New Zealand, Porugal and Swzerland). Fnally, an mporan feaure of boh PDB and PDB s ha no assumpon s made wh regard o perfec compeon and consan reurns o scale used n growh accounng. Ths offers neresng analycal opporunes o measure and sudy dfferences n reurns o scale and mark-ups across ndusres and counres. Ths paper presens a some deal he mehodology and daa sources used n he PDB. There are also frs resuls on labour producvy and MFP by ndusry, and growh accouns. Fnally, he documen ndcaes how o access PDB and PDB seres. II) Measurng labour and capal npus and mul-facor producvy a he ndusry level II.1) Labour npu (oal hours worked) Hours acually worked by all persons engaged s he concepually preferred measure of unadjused 2 labour npu (L) for esmang producvy, bu Naonal Sascal Offces ofen do no publsh hese daa by ndusry. Where avalable (and publshed n he STAN daabase - see OECD Producvy daabase by ndusry daa coverage n annex 3), oal hours worked (HRSN) have been used as he labour npu measure. When HRSN was mssng, he hours worked of employees (HRSE) were used as proxy. In he absence of nformaon abou hours worked by ndusry, hours worked a he level of he oal economy (from he OECD Producvy daabase) were allocaed o ndusres usng he srucure of he followng varables (by order of prory): full-me equvalen jobs (FTEN), full-me equvalen employees (FTEE), oal employmen (EMPN) and number of employees (EMPE). 3 2 The labour npu measure s unadjused for dfferences n sklls and educaon. An adjused labour npu measure (see Jorgenson, Gollop and Fraumen 1987) reflecs hese elemens of labour qualy. 3 These esmaes have been compled by he OECD for he purpose o esmae labour npu for MFP calculaons only. There are no publcly avalable when MFP esmaes by ndusry are no avalable. 3

Hours worked all persons engaged (HRSN) Ausra Canada Czech Republc Denmark Esona Fnland France Germany Greece Hungary Israel Ialy Korea Neherlands Norway Slovaka Span Sweden Table 1. Varables used for allocang economy-wde hours worked o ndusres Hours worked employees (HRSE) Full-me equvalen jobs (FTEN) Source: OECD STAN Daabase for Indusry Analyss II.2) Labour remuneraon and labour shares Full-me equvalen employees (FTEE) New Zealand Porugal Uned Saes Toal employmen (EMPN) Ausrala Belgum Iceland Ireland Japan Luxembourg Mexco Poland Slovena Swzerland Uned Kngdom Number of employees (EMPE) Naonal accouns provde nformaon on he remuneraon of employees. However, for he self-employed, only oal ncome measures are avalable from he naonal accouns ( mxed ncome ) and hese comprse boh labour and capal ncome accrung o he self-employed. Labour ncome of he self-employed was approxmaed as he average remuneraon per employee mulpled by he number of self-employed. Average remuneraon per employee s measured as compensaon of employees as defned n he Sysem of Naonal Accouns, ncludng all coss for employers such as her conrbuons o he employee s socal secury. The share of labour n oal coss by ndusry was hen compued as follows: Labour share ALPHA= EMPN ( WL.( )) EMPE EMPN ( WL.( ) RK ) EMPE wh WL referrng o he compensaon of employees (LABR n STAN), EMPN o oal employmen, EMPE o he number of employees and RK he remuneraon of capal, descrbed below. II.3) Capal npu An ncreasng number of naonal sascal offces n OECD counres are publshng capal measures by ndusry, usually gross capal socks and/or ne capal socks. The dfference beween hese wo conceps s deprecaon ha s refleced n ne capal socks bu no n gross capal socks. However, nernaonal comparably of he naonal daa s unceran, due o dfferences n mehodology and level of deal 4. For he purpose a hand, herefore, he OECD compued a seres of ne capal socks by ndusry, usng he same assumpons across counres abou deprecaon paerns and he same level of asse deal. (1) 4 Furher nformaon on avalably of capal measures n OECD daabases s avalable on nerne a he followng address: hp://www.oecd.org/daaoecd/47/13/37542921.pdf. 4

I s of noe ha neher gross nor ne capal socks are he concepually correc measure of capal npu. Capal npu s bes capured by a measure of capal servces ha weghs dfferen asses wh her margnal conrbuon o oupu. Whle measures of capal servces have been consruced for he OECD s oal economy producvy measures, he lack of comprehensve nformaon on nvesmen crossclassfed by asse and by ndusry hampers he compuaon of capal servces measures a he ndusry level. Recourse had herefore o be aken o a smple measure of he ne capal sock. From comparsons a he oal economy level would appear ha n mos cases measures of capal servces growh qucker han he ne capal sock. In oher words, usng he ne capal sock as a subsue for a measure of capal servces s lkely o enal an underesmaon of conrbuon of capal o economc growh, and by mplcaon an overesmaon of MFP. Ths needs o be kep n mnd when usng and nerpreng he new se of ndusry-level MFP fgures. a. Esmang deprecaon raes Deprecaon s he loss of value of an asse due o ageng and he rae of deprecaon s asse-specfc and ndusry-specfc. In he absence of asse- and ndusry-specfc daa on capal, no asse- and ndusryspecfc deprecaon raes can be appled. However, raher han applyng he same average deprecaon rae across ndusres, an elemen of ndusry-specfc asse composon was nroduced by he use of deprecaon raes by ndusry and by asse (hardware and offce equpmen, communcaon equpmen, oher machnery and equpmen, ranspor equpmen, non resdenal srucures, sofware, and land and resdenal real esae) from he EU-KLEMS 5 daabase. Thus, despe he fac ha PDB does no conan capal servces, hese ndusry-specfc deprecaon raes do capure some of he overall srucure of capal by ype of asse. They vary by counry, ndusry and me. b. Measurng nal capal socks Anoher ssue wh capal daa s he measuremen of he nal capal sock. Is choce can sgnfcanly nfluence growh raes of he ensung capal sock. There are several approaches o measurng an nal capal sock K o. A he whole economy level, OECD esmaes he nal sock usng long-erm seres of nvesmen ha are cumulaed based on he perpeual nvenory mehod. For he purpose a hand, he objecve was o rely as far as possble on naonal nformaon on ne capal socks for early years as avalable n he STAN 6 daabase. When hs nformaon was mssng (Canada, Greece, Ireland, Korea and he Uned Saes), he nal capal sock was approxmaed followng a smple procedure (Kohl 1982) ha s based on he average growh of volume nvesmen over he perod 1960-1983 7. Wh geomerc deprecaon paerns, he ne sock a he begnnng of he benchmark year 0 can be approxmaed by he cumulave deprecaed nvesmen of prevous years: K 0 = [I 0-1 + (1-δ)I 0-2 + (1-δ) 2 I 0-3 + ] (2) Call he long-run growh rae of nvesmen θ. By defnon, one has I =I -1 (1+ θ). Ths relaon can be nsered no he expresson above 5 Deprecaon raes by ndusry and by asse avalable n he EUKLEMS daabase are no counry specfc and he US ones have probably been used as proxy for oher counres. 6 1970 for Ausrala, Belgum (for mos of ndusres), Denmark, Norway, Span and he Uned Kngdom; 1975 for Fnland (for mos of ndusres); 1976 for Ausra (for mos of ndusres); 1978 for France; 1980 for Ialy, 1990 for Iceland, 1991 for Germany (for mos of ndusres) and he Neherlands (for mos of ndusres), 1993 for Sweden, 1995 for Czech republc and Israel, 2000 for Esona and Poland. 7 Long-run growh raes of volume nvesmen (volume nvesmen me-seres avalable n STAN are backward exrapolaed o 1960 usng volume nvesmen me-seres from ANA daabase). 5

[I 0-1 + (1-δ)I 0-2 + (1-δ) 2 I 0-3 + ] = I 0-1 [1 + (1-δ)(1+ θ) + (1-δ) 2 (1+ θ) 2 + ] = I 0-1 (1+ θ) / (δ+ θ) (3) = I 0 / (δ+θ) Then, gven an esmae of θ (whch could be based on he long-run relaonshp beween he growh of GDP and nvesmen) and an esmae of he average rae of deprecaon, expresson (3) provdes an esmae for he nal capal sock. c. Esmang ne capal socks Bascally, ne capal sock s esmaed by cumulang gross fxed capal formaon (GFCF) year by year and by neng ou deprecaon and reremen. Ths s he Perpeual Invenory Mehod (PIM). Ne capal socks by ndusry are compued wh geomerc raes. Geomerc raes encompass boh deprecaon and reremen (see OECD 2009 for a full dscusson). For each ndusry, he ne capal sock a he begnnng of perod, K, has been compued as follows: K = I -1 + (1-δ )I -2 + (1-δ ) 2 I -3 + + (1-δ ) T-1 I -T-2 + (1-δ ) T K 0 (4) where T represens he vnage of capal. Table 2 shows dfferen capal measures avalable n OECD daabases (Producvy daabase, STAN and PDB). Noeworhy, he capal acquson and sock measures esmaed by each naonal sascal offce n he OECD counres have been ncorporaed n STAN, whou descrbng he composon of asses. Table 2. OECD Measuremen of capal npu OECD Producvy daabase STAN daabase PDB daabase EUKLEMS daabase Capal servces Yes No No Yes Capal socks measuremen Harmonsed Dfferen among Harmonsed Harmonsed mehod framework counres framework framework Asse coverage 7 ypes of asses No No 9 ypes of asses Indusry coverage No (and excludes Yes (classfcaons Yes (STAN resdenal are harmonsed classfcaon) Yes (ISIC Rev.3) srucures) among counres) 8 Perods From 1985 From 1970 From 1985 From 1970 Coverage Toal non resdenal Toal nvesmen Toal non Toal nvesmen nvesmen resdenal nvesmen Deprecaon raes Harmonsed mehod No explc nformaon Harmonsed mehod Harmonsed mehod Rae of reurn Exogenous No Exogenous Endogenous Asse prce changes Ex ane Ex pos Ex ane Ex pos Age effcency profle Hyperbolc No Geomerc Geomerc Harmonzed prce ndex Yes 1 No No Yes 1 1) For IT hardware, communcaon equpmen and sofware d. Measurng he user cos of capal by ndusry The measuremen of capal remuneraon n he PDB s based on a smlar framework as he one used n he Producvy daabase: measures he user cos of capal n each ndusry as he produc of un user 8 The common ndusry classfcaon across counres s no se n he curren sudy. See OECD Capal Manual (OECD 2009) for he dscusson on he ndusry classfcaon n measurng capal and he recommended knd-ofacvy classfcaon. 6

cos and he ne capal sock. Un user coss are composed of a real rae of reurn and he rae of deprecaon. The real rae of reurn has been chosen n s ex ane formulaon, as a long-run consan rae ha s counry specfc and sourced from he OECD Producvy daabase (see able 3 below). Table 3. Exogenous real raes of reurn Ausrala 4.6% France 3.8% Mexco 4.0% Ausra 2.2% Uned Kngdom 4.0% Neherlands 4.0% Belgum 4.0% Greece 4.0% Norway 4.0% Canada 4.8% Hungary 4.0% New Zealand 4.0% Swzerland 4.0% Ireland 4.0% Poland 4.0% Czech Republc 4.0% Iceland 4.0% Porugal 4.6% Germany 4.2% Ialy 4.1% Slovaka 4.0% Denmark 4.8% Japan 2.3% Sweden 3.8% Span 4.3% Korea 4.0% Turkey 4.0% Fnland 3.4% Luxembourg 4.0% Uned Saes 3.6% Source: OECD Producvy daabase r * as he neres rae, Wh P k, as he nvesmen deflaor as avalable from he STAN daabase, deprecaon rae and K as he ne capal sock, he user cos of capal for ndusry s gven as R k, P.(r * ) K (5) as he An alernave way o compue capal compensaon would have been o use an endogenous rae of reurn equang he oal remuneraon of capal o he sum of he gross operang surplus and he capal componen of mxed ncome. Then, he value of capal servces would compleely exhaus capal ncome and he user cos would have been nerpreed as he margnal revenue of each un of capal servces. However, he user cos could also be nerpreed as he margnal cos assocaed wh each un of capal servces and hs s n lne wh he mehod appled for PDB. Noe ha he assumpon ha capal remuneraon equals non-labour ncome mples assumng consan reurns o scale of he underlyng producon or cos funcon and margnal cos prcng on oupu markes,.e. perfec compeon. If here are non-consan reurns o scale, mperfec compeon on oupu markes, or unobserved asses, only par of he profs correspond o paymen for capal servces. II.4) Esmang mul-facor producvy growh One drawback of he smplfed approach oulned above s ha neglecs capal servces and s herefore no he preferred measure for capal npu and producvy calculaons. 9 Ths has o be kep n mnd when usng he smplfed mul-facor producvy measures for each ndusry ha were compued as follows: 9 Ne capal sock and capal servces could dffers unless he unrealsc case apples where he prces of all ypes of asses move a he same rae and each ype of asse deprecaes a he same rae. 7

where w L u MFP ln(q ) ln( L ) ( 1 ) ln( K ) (6) L 1 s he share of labour n oal coss n ndusry, 0. 5( ) s average w K over wo perods, (1-α ) s he share of capal n oal coss, STAN (VALK), above. L he labour npu from STAN (HRSN), and Q s value-added a consan prces from K he capal npu compued as descrbed An mporan feaure of hs projec s o allow for he possbly of mperfec compeon and nonconsan reurns o scale a he ndusry level. In he suaon of mperfec compeon, ndependen nformaon on he prce of capal s needed because unlke n he suaon where oal coss equal oal revenues, he remuneraon of capal does no correspond o he resdual non labour ncome whch ncludes a prof-margn above and beyond he paymen of capal npu. As a consequence, he shares of capal and labour n oupu valued a margnal coss no longer measure he elascy of oupu wh respec o npus and sgnfcan markups and non consan reurn o scale generae dfferences beween Solow resdual as usually defned and Mul-facor producvy growh. As shown n Hall (1990), a way of overcomng he mperfec compeon bas s o calculae he Solow resdual usng cos shares raher he revenue shares because, unlke he suaon where oal coss equal oal revenues, he remuneraon of capal s no smply a resdual non labour ncome. Usng cos shares raher han revenue shares correcs for a possble mark-up of prces over margnal coss and was used n he OECD Producvy daabase for he oal economy. In a furher sage, mark-ups and reurns o scale can be compued alhough hese requre paramerc mehods. Evdence on mark-up prcng n manufacurng and servces ndusres was prevously esmaed for nsance n Olvera Marns e al. (1996) and Olvera Marns and Scarpea (1999). III) Frs resuls III.1). Labour producvy and mul-facor producvy The mehodology descrbed n he prevous secon governs he prncples we observed for he complaon of varables and hus governs he consrucon of PDB. MFP s defned for a gven ndvdual ndusry as a quany change n value added oupu dvded by a quany change n combned labour and capal npu. A sngle facor producvy, such as labour producvy, s defned as a quany change of value added oupu dvded by a quany change n a labour npu. The PDB conans sx varables a he ndusry level for 19 OECD 10 counres from 1990 onwards: - producves: mul-facor producvy and labour producvy, rae of growh for 2 consecuve years - oupu: real value added, rae of growh for 2 consecuve years - npus : labour npu and capal npu, rae of growh for 2 consecuve years - relave npu mporance: labour share n oal cos 10 To dae, daa for 19 counres s avalable: Ausra, Belgum, Canada, Czech Republc, Denmark, Fnland, France, Germany, Iceland, Ireland, Ialy, Korea, he Neherlands, Norway, Poland, Span, Sweden, Uned Kngdom, and he Uned Saes. Daa for oher counres wll be added n he producvy by ndusry daabase as hey become avalable n he STAN daabase. 8

The publc release of he PDB covers 14 ndusres seleced from he curren verson of STAN based on ISIC Rev. 3 11 : 9 ndusres a he mos aggregaed level possble dsngushng caegores, 2 dealed secors for machnery and ranspor equpmen n he manufacurng, 2 oher dealed secors n he wholesale and real rade-resaurans and hoels, and fnally he oal ndusry. The publc secors, such as publc admnsraon, educaon, ec., consung communy, socal and personal servces s no consdered for publcaon a hs me. For he sake of readably, he daa s resrced o he 14 ndusres excludng real esae acves for whch he esmaes are nearly compled akng no consderaon whch secors researchers and analyss are frequenly lookng for. Value-added based mul-facor producvy and labour producvy changes are presened n Table A and Table B respecvely. These ables llusrae he comparave levels of producvy as average annual growh raes over he perod from 1990 o 2009 or he closes years comparable 12, allowng he comparson of producvy growh across counres and across ndusres. Overall, he change n producvy s hgher n manufacurng han n fnancal and busness servces. In parcular, he Uned Saes and Sweden are marked by a sharp hgh growh of her producvy n he machnery and equpmen (11% of annual growh). Mos counres show negave or slow producvy n consrucon and n he hoels and resauran secors. Dependng on he ndusres or counres, he MFP year coverage s no dencal o ha of labour producvy, snce he former requres daa of labour and capal composon whch seres are dfferen. 11 Daa based on ISIC Rev. 4 wll be ncluded n PDB when an ISIC Rev.4 verson of STAN wll be made avalable. 12 The year coverage dffers among counres, ndusres and varables. For a gven counry, he sarng year or endng year avalable for he me seres s no he same among ndusres. Deals on year coverage of mul-facor producvy and labour producvy are avalable n Annex 3. 9

Table 4. Labour producvy, average annual percen change, 1990-2009 (or closes years avalable) AUT BEL CAN CZE DEU DNK ESP FIN FRA GBR IRL ISL ITA KOR NLD NOR POL SWE USA CTOTALX TOTAL (excludng real esae acves) 1.5 1.2 1.3 3.5 1.8 1.2 1.1 2.2 1.7 2.4 2.7 0.9 5.1 1.3 1.7 4.4 2.1 1.9 C01T05 AGRICULTURE, HUNTING, FORESTRY 3.0-3.9 2.9 4.0 3.3 5.0 3.2 4.7 3.8 2.0 0.6 3.1 3.3 5.5 1.4 5.4 2.3 3.8 3.4 AND FISHING C10T14 MINING AND QUARRYING 4.0 3.9-0.3 0.9 0.3 4.0 0.7 2.5 3.6 2.0 5.0 0.8-0.1 2.2 0.1-0.2 C15T37 MANUFACTURING 2.8 2.6 2.4 6.3 2.2 2.1 0.8 5.2 3.5 3.4 7.2 4.4 0.8 8.9 2.4 1.6 8.2 4.6 4.6 C29T33 Machnery and equpmen 2.3 2.5 3.3 9.2 4.1 2.8 0.3 7.8 4.2 0.3 0.5 3.2 10.3 11.6 C34T35 Transpor equpmen 3.0 2.2 3.0 11.7 3.2-2.4-0.9 1.0 2.1 3.2-0.6-1.9 0.5 2.4 2.5 C40T41 ELECTRICITY GAS AND, WATER 3.9 1.8 0.1 1.8 4.0 1.4 1.9 4.2 3.8 5.3 3.8 2.5 5.3 3.1 3.2 2.7-0.9 1.8 SUPPLY C45 CONSTRUCTION 0.4 1.1 0.5-0.9-0.6-1.7 0.6 0.0 0.5 1.7 0.0 0.0-1.2 2.6-0.1-0.6 2.4 0.3-1.2 C50T55 WHOLESALE AND RETAIL TRADE - 0.9-1.0 1.9 5.6 1.2 1.3 0.2 0.7 1.5 2.0 3.1 0.6 3.5 2.7 4.5 2.8 3.1 2.8 RESTAURANTS AND HOTELS C50T52 Wholesale and real rade - repars 1.2-1.0 2.2 8.0 1.6 1.9 0.8 0.7 1.8 2.2 3.1 0.8 4.1 2.4 5.0 2.8 3.5 3.6 C55 Hoels and resaurans -0.1-1.2 0.1-8.7-0.9-3.2-1.0 0.9 0.2 1.0 3.4-0.1 2.2-1.3 1.3 2.9 0.5 0.2 C65T74X FINANCE, INSURANCE AND 1.5 4.6 1.1 1.6 2.6 1.1 2.0 0.0 0.1 6.2 4.8 1.8 4.0 1.0-0.6 6.2-0.6 1.5 BUSINESS SERVICES C10T41 INDUSTRY INCLUDING ENERGY 3.0 2.6 2.2 5.3 2.4 2.1 1.2 5.1 3.6 3.5 8.5 4.6 1.0 8.9 2.2 1.9 6.7 4.1 4.2 C50T74X BUSINESS SECTOR SERVICES 1.4 1.5 1.7 3.7 2.2 1.5 0.9 1.4 1.4 4.3 4.8 1.4 5.1 1.8 2.5 4.1 1.8 2.4 (excludng real esae acves) Noe: year coverage dffers beween counres (see deals n Annex 3); Source : OECD Producvy by ndusry daabase, 2011 10

Table 5. Mul-facor producvy, average annual percen change, 1990-2009 (or closes years avalable) AUT BEL CAN CZE DEU DNK ESP FIN FRA GBR IRL ISL ITA KOR NLD NOR POL SWE USA CTOTALX TOTAL (excludng real esae acves) 1.2 1.0 4.1 1.2 0.7 0.3 1.8 1.2 4.0 1.6 1.9 2.2 1.2 C01T05 AGRICULTURE, HUNTING, FORESTRY 2.1-1.9 2.3 2.8 3.0 0.0 2.4 3.2 2.3 0.2-5.1 2.5 2.3 4.0 0.6 5.3 4.2 4.3 2.7 AND FISHING C10T14 MINING AND QUARRYING 2.8 2.2-1.7 0.1-3.3 1.8 1.5 1.0-0.6 5.9 0.3 0.6-3.3-3.6-1.1 C15T37 MANUFACTURING 2.3 1.8 1.8 6.3 1.2 2.1 0.7 4.3 2.8 3.5 5.2 3.1 0.7 6.9 2.6 1.4 5.3 4.8 3.5 C29T33 Machnery and equpmen 1.8 2.0 2.6 8.4 3.9 3.0 1.0 7.1 4.8 0.9 3.3 2.7 10.8 10.1 C34T35 Transpor equpmen 3.1 0.9 2.1 9.9 2.1 0.0 1.2 0.6 0.9 3.1-1.4 3.5 0.1 2.8 1.5 C40T41 ELECTRICITY GAS AND, WATER 3.3 1.3-0.4 5.0 2.8-0.2 0.3 2.0 3.0 1.0 0.5 0.5 2.9 3.2 3.3 2.9 0.4 0.0 SUPPLY C45 CONSTRUCTION 0.3 0.6 0.3-2.0-0.8-1.6-1.5-0.3 0.3-0.1-1.7 0.0-1.4 2.1-0.1-1.2 0.1-1.2-1.6 C50T55 WHOLESALE AND RETAIL TRADE - 0.9-1.4 1.3 4.3 1.0 0.9-0.3 0.5 1.2 2.4 4.8 0.4 2.7 3.0 5.3 0.7 2.9 2.4 RESTAURANTS AND HOTELS C50T52 Wholesale and real rade - repars 1.2-1.4 1.6 5.8 1.4 1.3 0.6 0.5 1.6 2.8 4.9 0.7 3.6 5.9 0.8 3.1 3.1 C55 Hoels and resaurans 0.1-1.3-0.1-5.9-0.5-2.2-1.8 0.7-0.1 0.9 4.1-0.5-1.1 1.4-0.7 1.2 0.0 C65T74X FINANCE, INSURANCE AND 0.6 0.2 1.4 0.7 0.5 2.3-0.4-0.6 6.3 3.2 0.7 1.0 0.2 0.4 BUSINESS SERVICES C10T41 INDUSTRY INCLUDING ENERGY 2.5 1.8 1.0 6.1 1.3 1.7 0.8 4.2 2.8 5.4 2.6 0.7 6.6 2.4 1.4 4.3 4.3 3.0 C50T74X BUSINESS SECTOR SERVICES 0.9 1.3 3.4 1.1 1.4 0.4 1.1 0.9 3.7 1.9 3.7 2.2 1.5 (excludng real esae acves) Noe: year coverage dffers beween counres (see deals n Annex 3); Source : OECD Producvy by ndusry daabase, 2011 11

III.2) Descrpve growh accouns The semnal paper by Solow (1957) defned MFP growh as a resdual and provded a decomposon of economc growh beween conrbuons of facor npu (capal and labour) and growh n MFP allowng he denfcaon of he sources of growh, as descrbed above n equaon 6. More dsaggregaed producvy esmaes han whole economy daa can help o compare conrbuons o growh n value-added for an ndvdual secor across counres and/or o undersand whch secors are responsble for he changes n he sources of growh n a specfc counry. Indeed, he fgure presens growh accounng componens n manufacurng ndusres across counres and shows dfferen rends across counres n growh n MFP and n conrbuons of facor npus o growh n value-added. The fgure 1 suggess a negave conrbuon of labour npu o he growh n value-added n manufacurng ndusres n mos counres over he years from 2000 o 2009 whle he growh n MFP conrbued sgnfcanly o he growh n value-added n mos counres over he same perod. Durng hs weny-years perod, he conrbuon of capal o growh n value-added was less sgnfcan excep n Czech Republc, Korea and Ireland. Fgure 1. Conrbuons o growh n value-added n manufacurng ndusres 8.0% Conrbuons o growh n value-added n Manufacurng ndusres (ISIC Rev.3, 15-37, conrbuon n %, 2000-2009 or laes year avalable) 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Conrbuon of capal npu Conrbuon of labour npu MFP growh Source: OECD Producvy by ndusry daabase, June 2011. As regards he US, he conrbuon of labour npu accouned negavely on he growh n value-added n manufacurng ndusres over he years from 2000 o 2009, whle MFP growh had a sgnfcan posve mpac on growh n value-added. The comparson of growh accounng componens across US ndusres would be helpful for undersandng f hese producvy rends also concerns oher secors of he US economy. As confrmed n he fgure 2, labour npu conrbued negavely o growh n value added n he US manufacurng ndusres, especally machnery and equpmen and ranspor equpmen, and growh n MFP n hese secors conrbued posvely o he gross n valueadded over he pas weny years. In he same me, an mporan drver n he declne of MFP growh n he US s he consrucon secor. 12

Fgure 2. Conrbuons o growh n value-added by ndusry n he Uned Saes Source: OECD Producvy by ndusry daabase, June 2011. Lookng for possble explanaons of hese rends n producvy would requre more dealed nformaon, n parcular on qualy changes n npus and oupus. In he absence of such adjusmens, as hs s he case a hs sage for he seres avalable n PDB, more rapd growh n value-added due o a rse n sklls of he labour force or due o he rse n effcency of capal npu s capured by he MFP resdual and no arbued o he conrbuon of he correspondng facor, labour or capal. Ths should be kep n mnd when nerpreang componens of growh n value-added from PDB. However, PDB allows nernaonal comparsons of producvy by ndusry and a prelmnary denfcaon of producvy rends by ndusry. III.3) Comparson of MFP beween PDB and EU KLEMS The esmaes of MFP can be frufully compared o ha of EU-KLEMS daaabase albe he dfference n mehodology makes mpossble o do so a hs sage. Due o he lack of requred seres, he PDB s populaed wh a smplfed approach. Focusng on he npu, PDB uses he sandard measures of labour npu (hour worked) and of capal npu (ne capal socks) whle EU-KLEMS adoped expermenal measures of qualy adjused labour servces and capal servces, whch ake no accoun he volume of labour and capal bu also he change n composon of labour and capal over me. To measure he labour servces, furher varous characerscs of labour force such as gender, age and educaonal aanmen are aken n consderaon a he ndusry level. The combned npu s weghed wh he cos shares of each npu n he oal cos for he PDB raher han n he revenue shares for he EU-KLEMS. The measure of capal servces s descrbed n deals above. The coverage of esmaes n PDB and EU-KLEMS daabases allows he comparson of he ndusrylevel MFP for 13 counres (Ausra, Belgum, Denmark, Germany, Fnland, France, Ireland, Ialy, he Neherlands, Span, Sweden, he Uned Kngdom and he Uned Saes). Table C compares average 13

annual growh n MFP beween PDB and EU-KLEMS n manufacurng and servces for he perod from 1990 o 2007 13. A frs glance, he PDB provdes hgher esmaes han EU-KLEMS. The producvy from he PDB shows beer performance han EU-KLEMS n wo secors, n parcular he producvy from he EU-KLEMS has declned or sagnaed. Table 6. Mul-facor producvy n manufacurng (C1537) and servces (C65T74X) average annual percen change, 1990*-2007 AUT BEL DEU DNK ESP FIN FRA GBR IRL ITA NLD SWE USA C15T37 PDB 3.37 2.30 2.82 2.14 0.69 5.64 2.80 4.07 4.74 0.78 3.14 5.91 4.01 EU KLEMS 3.88 1.00 2.10 1.00-0.42 4.42 1.93 3.18-0.31 0.41 2.02 4.30 2.37 C65T74X PDB 2.05 4.50 4.62 2.11 3.12 1.95 1.20 6.41 1.16 4.08 2.66 5.66 0.21 EU KLEMS -1.46-0.38-0.87-0.68 0.46-0.50-0.23 0.38 0.00-0.04-0.23-0.31-0.05 * Noe : C15T37-1996 for Ausra, Belgum, Neherlands, Span, 1995 for Germany, 1997 for Denmark, Sweden, 2000 for Uned Kngdom; C65T74-2001 for Span 2002 for Neherlands Source: OECD Producvy daabase by ndusry 2011, EU KLEMS producvy and growh accouns daabase 2009 IV) How o access PDB and PDB? PDB and PDB are freely avalable on OECD.Sa (selec producvy and hen he daase producvy by ndusry refers o OECD PDB whle oher daases refer o OECD PDB). The daabase wll be updaed on an ongong bass and expanded o enhanced counry and secor coverage as soon as new nformaon s avalable n he OECD STAN daabase. Feedback on he daa or mehodology as well as on he accessbly of he daabases s mos welcome a he followng address: producvy.conac@oecd.org. Conclusons and furher progress The esmaes presened n hs frs release of he PDB are a sarng pon and subjec o furher mprovemen. PDB s nended o be updaed regularly and expanded o enhance counry and secor coverage. I s well recognsed ha, absen sold nformaon on nvesmen by ndusry crossclassfed by asse, he capal measures used here are only proxes o sae of he ar mehodology. Ths affecs measures of producvy growh bu s hoped o a degree ha preserves basc usefulness of he esmaes. As measures of capal servces end o grow faser han measures of capal socks, he bas mplc n our esmaes s lkely o be upward alhough s sze wll vary beween counres, ndusres and over me. Labour npu measures can also be mproved by esmang labour composon or labour qualy 14 usng nformaon on sklls, age, and gender by ndusry. However, more daa developmen work wll be needed before mplemenaon of labour qualy measures. In addon, basc daa on hours worked should also be mproved alongsde wh he mplemenaon of labour qualy adjusmens. Fnally, he PDB wll have o move o ISIC Rev.4 as counres wll progressvely swch over o he new classfcaon. 13 The year 2007 s he laes year avalable n EU KLEMS November 2009 daabase, whch has no been updaed snce. 14 See Jorgenson e al. 2005. 14

Annex 1. Ls of varables ncluded n he OECD Producvy daabase by ndusry and relaed ndcaors from STAN Varable Descrpon of varable Source ALPHA Share of labour cos n oal facor coss PDB K Growh n capal npu PDB L Growh n labour npu PDB LP Growh n labour producvy PDB MFP Growh n Mul-facor producvy PDB Q Growh n value-added PDB CPNK Ne capal sock, volumes STAN EMPE Number of employees STAN EMPN Number of persons engaged (oal employmen) STAN FTEE Full-me equvalens - employees STAN FTEN Full-me equvalens - oal engaged STAN GFCF Gross fxed capal formaon, curren prces STAN GFCK Gross fxed capal formaon, volumes STAN GFCP Gross Fxed Capal Formaon, deflaors STAN HRSE Hours worked - employees STAN HRSN Hours worked - oal engaged STAN LABR Labour coss (compensaon of employees) STAN VALU Value added, curren prces STAN VALK Value added, volumes STAN 15

Annex 2. Ls of ndusral acves, accordng o STAN, based on ISIC Rev.3 Code CTOTALX C01T05 C10T14 C15T37 C29T33 C34T35 C40T41 C45 C50T55 C50T52 C55 C65T74X C10T41 C50T74X Descrpon TOTAL (excludng real esae acves) AGRICULTURE, HUNTING, FORESTRY AND FISHING MINING AND QUARRYING MANUFACTURING Machnery and equpmen Transpor equpmen ELECTRICITY GAS AND, WATER SUPPLY CONSTRUCTION WHOLESALE AND RETAIL TRADE - RESTAURANTS AND HOTELS Wholesale and real rade - repars Hoels and resaurans FINANCE, INSURANCE AND BUSINESS SERVICES INDUSTRY INCLUDING ENERGY BUSINESS SECTOR SERVICES (excludng real esae acves) 16

Annex 3. Coverage of labour producvy and mul-facor producvy daa n PDB Labour producvy (LP) AUT BEL CAN CZE DEU DNK ESP FIN FRA GBR IRL ISL ITA KOR NLD NOR POL SWE USA CTOTALX TOTAL (excludng real esae acves) 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 95-08 92-08 90-09 93-09 02-09 90-09 96-08 94-09 90-09 C01T05 AGRICULTURE, HUNTING, FORESTRY AND FISHING 96-09 96-09 90-07 96-08 92-09 90-09 96-09 90-09 90-07 90-08 96-09 92-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C10T14 MINING AND QUARRYING 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C15T37 MANUFACTURING 96-09 96-09 90-07 96-08 92-09 90-09 96-09 90-09 90-07 90-08 96-07 92-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C29T33 Machnery and equpmen 96-09 96-09 90-07 96-08 03-08 90-09 01-09 90-09 90-08 90-09 02-09 90-09 94-09 90-09 C34T35 Transpor equpmen 96-09 96-09 90-07 96-08 03-08 90-09 01-09 90-09 90-07 90-08 90-09 02-09 90-09 94-09 90-09 C40T41 ELECTRICITY GAS AND, WATER SUPPLY 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 90-08 92-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C45 CONSTRUCTION 96-09 96-09 90-07 96-08 92-09 90-09 96-09 90-09 90-07 90-08 96-09 92-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C50T55 WHOLESALE AND RETAIL TRADE - RESTAURANTS AND HOTELS 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 90-08 92-08 90-09 93-09 96-09 90-09 96-08 94-09 90-09 C50T52 Wholesale and real rade - repars 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 95-08 92-08 90-09 93-09 02-09 90-09 96-08 94-09 90-09 C55 Hoels and resaurans 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 95-08 92-08 90-09 93-09 02-09 90-09 96-08 94-09 90-09 C65T74X FINANCE, INSURANCE AND BUSINESS SERVICES 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 95-08 92-08 90-09 93-09 02-09 90-09 96-08 94-09 90-09 C10T41 INDUSTRY INCLUDING ENERGY 96-09 96-09 90-07 96-08 92-09 90-09 96-09 90-09 90-07 90-08 96-09 92-08 90-09 93-09 96-09 90-09 96-08 90-09 90-09 C50T74X BUSINESS SECTOR SERVICES (excludng real esae acves) 96-09 96-09 90-07 96-08 92-09 90-09 01-09 90-09 90-07 95-08 92-08 90-09 93-09 02-09 90-09 96-08 94-09 90-09 Mul-facor producvy (MFP) AUT BEL CAN CZE DEU DNK ESP FIN FRA GBR IRL ISL ITA KOR NLD NOR POL SWE USA CTOTALX TOTAL (excludng real esae acves) 96-09 98-05 99-08 95-09 97-07 01-07 90-09 90-07 93-06 02-08 90-07 97-08 90-09 C01T05 AGRICULTURE, HUNTING, FORESTRY AND FISHING 96-09 96-09 90-07 99-08 95-09 97-07 96-07 90-09 90-07 00-08 99-08 94-08 90-09 93-06 96-08 90-07 01-06 97-08 90-09 C10T14 MINING AND QUARRYING 96-09 96-09 90-07 99-08 95-09 97-07 01-07 90-09 90-07 93-06 96-08 90-07 01-06 97-08 90-09 C15T37 MANUFACTURING 96-09 96-09 90-07 99-08 95-09 97-07 96-07 90-09 90-06 00-08 99-07 94-08 90-07 93-06 96-08 90-07 01-06 97-08 90-09 C29T33 Machnery and equpmen 96-09 96-09 90-05 99-08 03-08 97-07 01-07 90-09 00-07 90-07 02-07 90-07 97-08 90-09 C34T35 Transpor equpmen 96-09 96-09 90-05 99-08 03-08 97-07 01-07 90-09 90-07 00-07 90-07 02-07 90-07 97-08 90-09 C40T41 ELECTRICITY GAS AND, WATER SUPPLY 96-09 96-09 90-07 99-08 95-09 97-07 01-07 90-09 90-07 00-07 94-08 90-07 93-06 96-08 90-07 01-06 97-08 90-09 C45 CONSTRUCTION 96-09 96-09 90-07 99-08 95-09 97-07 96-07 90-09 90-07 00-08 99-08 94-08 90-09 93-06 96-08 90-07 01-06 97-08 90-09 C50T55 WHOLESALE AND RETAIL TRADE - RESTAURANTS AND HOTELS 96-09 96-09 90-07 99-08 95-09 97-07 01-07 90-09 90-07 00-07 94-08 90-07 93-06 96-08 90-07 01-06 97-08 90-09 C50T52 Wholesale and real rade - repars 96-09 96-09 90-07 99-08 95-09 97-07 01-07 90-09 90-07 00-07 94-08 90-07 02-07 90-07 01-06 97-08 90-09 C55 Hoels and resaurans 96-09 96-09 90-07 99-08 95-09 97-07 01-07 90-09 90-07 00-07 94-08 90-07 02-07 90-07 01-06 97-08 90-09 C65T74X FINANCE, INSURANCE AND BUSINESS SERVICES 96-09 98-03 99-08 95-09 97-07 01-07 90-09 90-07 00-07 93-06 02-08 90-07 01-06 97-08 90-09 C10T41 INDUSTRY INCLUDING ENERGY 96-09 96-09 90-07 99-08 95-09 97-07 96-07 90-09 90-06 99-08 94-08 90-07 93-06 96-08 90-07 01-06 97-08 90-09 C50T74X BUSINESS SECTOR SERVICES (excludng real esae acves) 96-09 98-03 99-08 95-09 97-07 01-07 90-09 90-07 00-07 02-08 90-07 97-08 90-09 17

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