OECD Productivity Report

OECD Compendium of Productivity Indicators
2006
OECD COMPENDIUM OF PRODUCTIVITY INDICATORS 2006
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14 December 1960, and which came th into force on 30 September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: To achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy. To contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and To contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.
th
The original member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries th became members subsequently through accession at the dates indicated hereafter: Japan (28 April th th th 1964), Finland (28 January 1969), Australia (7 June 1971), New Zealand (29 May 1973), Mexico th st th (18 May 1994), the Czech Republic (21 December 1995), Hungary (7 May 1996), Poland nd th th (22 November 1996), Korea (12 December 1996) and the Slovak Republic (14 December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention).
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FOREWORD
Over the past few years, productivity and economic growth have been an important focus of OECD work. This work has included both efforts to improve the measurement of productivity growth, as shown in the development of the OECD Productivity Manual, published in 2001, as well as work to enhance the understanding of the drivers of productivity performance. In the course of this work, questions about data choices and the measurement of productivity were examined at several occasions. At the same time, OECD was confronted with a growing interest in internationally comparable data on productivity growth. The continued interest of many OECD member countries in productivity led to a decision to develop an OECD Productivity Database, based on data that were considered to be as comparable and consistent across countries as possible. This database and related information on methods and sources is available through the OECD Internet site and free of charge at: www.oecd.org/statistics/productivity In 2005, a large number of indicators on productivity were being combined in one document for the first time to coincide with an OECD workshop on productivity measurement, held in Madrid. The present document constitutes the 2006 update of the productivity compendium. Its primary source is the OECD Productivity Database, although indicators are drawn from other sources, such as the OECD STAN database, which enables productivity calculations for individual industries. The compendium includes indicators as well as methodological notes and describes the measurement challenges and data choices that were made as well as the remaining measurement problems. Further detail is available in a number of specific annexes. The compendium was prepared for an OECD workshop on productivity measurement and analysis, held in Bern from 16-18 October 2006. Agnes Cimper, Julien Dupont, Paul Schreyer and Colin Webb prepared the text and tables in the compendium. Additional contributions to text and tables from Nadim Ahmad and Pascal Marianna are gratefully acknowledged.
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Compendium of Productivity Indicators
TABLE OF CONTENTS
Highlights Background: why productivity matter? A) Economy-wide indicators of productivity growth

A.1. Growth in GDP per capita A.2. Growth in GDP per hour worked A.3. Alternative measures of labour productivity growth A.4. Capital productivity A.5. Growth accounts for OECD countries A.6. The contribution of multi-factor productivity and ICT capital to GDP growth A.7. Labour productivity growth in the business sector
7 11 13 14 16 18 20 22 24 26 29 30 32 34 36 38 41 42 44 46 48 51 52 54 56 58 60 62 68 73 76
B) Productivity levels
B.1. Income and productivity levels B.2. Levels of GDP per capita and GDP per hour worked, 1950-2005 B.3. Alternative measures of output B.4. Differences in labour productivity by economic activity B.5. Labour productivity and heterogeneity
C) Productivity growth by industry

C.1. Contribution of key activities to aggregate productivity growth C.2. Productivity growth in manufacturing C.3. Productivity growth in services C.4. Labour productivity of foreign affiliates
D) Official multi-factor productivity statistics for OECD member countries

D.1. Australia D.2. Canada D.3. New Zealand D.4. Switzerland D.5. United States
Annex 1 OECD productivity database Annex 2 OECD estimates of labour productivity levels Annex 3 OECD databases relevant to productivity analysis References
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HIGHLIGHTS
This compendium presents productivity indicators in four broad areas. The first section presents economy-wide indicators of productivity growth. It shows that: Over 1995-2005, growth in GDP per hour worked was highest in Ireland, Korea and the Slovak Republic. In the Czech Republic, Greece, Hungary and Iceland, labour productivity grew much faster during 2000-2005 compared with the period 1995-2000. Over the same period, labour productivity growth slowed down in many other OECD countries. Alternative measures of labour productivity growth, based on net domestic product or gross domestic income, show a very similar picture, with some exceptions. Capital productivity has declined in most OECD countries over the last fifteen years. The fall in capital productivity since 1990 has been very pronounced in Japan but also in Spain, Canada, Portugal and Denmark. Notable exceptions to the decline in output per unit of capital input are Ireland and Finland where capital productivity grew over most of the last decade. Stronger growth in the major seven countries in the second half of the 1990s was due to several factors, including higher labour utilisation, capital deepening, notably due to investment in information and communications technology (ICT), and more rapid multi-factor productivity (MFP) growth. In France, Germany and in the United States, the contribution of labour input to growth was positive for the period 1995-2000 but negative for the period 2000-2005. The fall in the contribution of labour input to growth has also been most pronounced in the United Kingdom. The decline in the contribution of labour input to growth slowed markedly in Japan. In Canada, France, Germany, Italy and the United Kingdom, MFP growth fell between the period 1995-2000 and 2000-2005, but it rose in Japan and in the United States. Investment in ICT accounted for between 0.3 and 0.6 percentage points of growth in GDP over the period 1995-2005. Australia, Denmark, Sweden, the United Kingdom and the United States received the largest boost from ICT capital; Japan and Canada a more modest one; and Austria, France and Germany a much smaller one. In several countries, ICT accounts for the bulk of capitals contribution to GDP growth.
The second section presents indicators of productivity levels. It shows that: Iceland, Ireland, Luxembourg, Norway, Switzerland and the United States had the highest levels of per capita income in 2005, while Belgium, France, Ireland, the Netherlands, Norway and the United States had the highest levels of GDP per hour worked. The different ranking of certain countries on these two measures is due to labour utilisation; many European countries have lower levels of labour utilisation than the United States. This implies that they have fewer people contributing to GDP; levels of GDP per capita are therefore lower than levels of GDP per hour worked. These rankings change little when alternative measures of output, such as net domestic product or gross national income, are used. Exceptions are Ireland and Luxembourg that have a lower ranking on gross national income per hour worked than on GDP per hour worked. Since the 1950s, cross-country differences in income and productivity levels have eroded considerably. Japan and Korea have experienced the highest rates of catch-up since 1950, while many European countries experienced strong catch-up with the United States until 1980, but have fallen back since, Ireland and Korea being among the most notable exceptions.
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Australia, Canada, New Zealand and the United Kingdom already had relatively high income levels in 1950 and have done little catching up since. Eastern European countries, Mexico and Turkey started with low income levels in the 1950s and have only caught up a little. Industries predominantly involved in the extraction, processing and supply of fuel and energy goods produced the highest value added per labour unit. These industries were more than twice as productive as the average industry. Besides the energy-producing industries, those that yield the most value added per labour unit are industries considered more technology and/or knowledge intensive. In manufacturing, the chemical industry has the highest relative labour productivity level, while in services, finance, insurance and telecommunications lead the way. The focus on labour productivity growth generally assumes that homogeneity exists within the predefined industry groups, in other words that the productivity growth observed at the aggregate level is representative of the growth at the business level. However, comprehensive estimates of productivity are dependent on business level data. The comparison of the coefficient of variation at the 2 digit industry level for 6 large OECD countries show that there is considerable business size class heterogeneity in labour productivity across countries and industries.
The third section presents indicators of productivity growth by industry, and also includes indicators on the contribution of multinationals to productivity performance. It shows that: In many OECD countries, notably in Spain, Greece, Czech Republic, Sweden, Hungary, the United Kingdom, the United States, and Australia, business sector services have accounted for the bulk of labour productivity growth over 2000-2005. However, the manufacturing sector remains important in the Korea, Sweden, Hungary, Finland and Czech Republic. Within manufacturing, large differences in the rate of productivity growth can be observed. Electrical and optical equipment is often the industry with the highest rate of productivity growth, over 15% annually in 1995-2000 for some OECD countries such as Finland, Hungary, Korea, Sweden and the United States. The variation in labour productivity growth across services sectors is also considerable. Industries such as wholesale and retail trade, post and telecommunications are typically the services sectors with the highest rate of productivity growth, while business services, hotels and restaurants, and transport and storage often have lower rate of labour productivity growth. Labour productivity of foreign affiliates in manufacturing in the United Kingdom is more than two times higher than the average labour productivity of domestic firms in the manufacturing sector. Foreign affiliates made an important contribution to labour productivity growth in the United States, accounting for almost a quarter of manufacturing productivity growth over 1995-2001. In the Czech Republic, France, Sweden and the United Kingdom, the bulk of productivity growth in manufacturing was due to foreign affiliates. In Japan, foreign affiliates made only a minor contribution to productivity growth.
The fourth and last section presents the methodology used for the calculation of official multi-factor productivity statistics published by some OECD countries and how MFP measures differ from those computed by the OECD. It shows that: The Australian Bureau of Statistics has computed and published time series of multi-factor productivity indices for several years. The ABS MFP measures differ in several aspects from the MFP measures computed by the OECD. First, national data is based on more detailed source data than the international data. Second, ABS adjusts labour input measures to reflect the composition of the labour force e.g., by age, education and experience whereas the OECD labour input data is a simple aggregate of hours worked. Thirdly, capital input as computed by ABS is based on a
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broader scope of capital assets than used by the OECD. In particular, the national data includes agricultural land and inventories, two assets that are absent from the OECD capital computations. Statistics Canada has computed and published time series of multi-factor productivity indices for a number of years. The MFP measures published by the Statistics Canada differ in several aspects from the MFP measures computed by the OECD. First, the national data is significantly more detailed and also more timely than the international data. Second, labour input measures have been adjusted by Statistics Canada to reflect the composition of the labour force e.g., by age, education and experience whereas the OECD labour input data is a simple aggregate of hours. Thirdly, capital input as computed by Statistics Canada is based on a broader scope of capital assets than used by the OECD. In particular, the national data includes land and inventories, two assets that are absent from the OECD capital computations In 2006, Statistics New Zealand released for the first time an official time series of multi-factor productivity growth. This first dataset relates to the measured sector, consisting of industries for which estimates of inputs and outputs are independently derived in constant prices. Excluded are those industries mainly government non-market industries whose services such as administration, health and education, are provided for free or at nominal charge whose real value-added is measured in the national accounts largely using input methods, such as number of employees. Labour input is measured as the total number of hours paid, the number of ordinary and overtime hours for which an employee is paid. The elements of capital input are compiled at a detailed and broader level than the OECDs own estimates of capital services (which exclude for example, residential buildings). The basic methodology behind the New Zealand MFP estimates closely follows the methods presented in international documents such as the OECD Productivity Manual. In some specific aspects, the national measures differ from MFP measures computed by the OECD (scope of capital assets, sector coverage). In 2006, The Swiss Federal Statistical Office published a first set of MFP estimates for Switzerland. The basic methodology behind the Switzerland MFP estimates closely follows the methods presented in international documents such as the OECD Productivity Manual. In some specific aspects, however, the national measures differ from MFP measures computed by the OECD. The national data is based on more detailed source than the six-way asset classification used by the OECD. There is also important difference in the scope of capital measures; in particular the estimates by the Swiss Federal Office include residential assets which are excluded from the OECD data. The United States Bureau of Labour Statistics has computed and published time series of multifactor productivity for a number of years. BLS MFP measures differ in several aspects from the MFP measures computed by the OECD. First, the national data is significantly more detailed and also more timely than the international data. Second, labour input measures have been adjusted by BLS to reflect the composition of the labour force e.g., by age, education and experience whereas the OECD labour input data is a simple aggregate of hours worked.
As a general rule, the national source is to be preferred over the international source for analyses that relate to the country only whereas the international source is often better suited for comparisons between countries.
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WHY PRODUCTIVITY MATTERS
Productivity isnt everything, but in the long run it is almost everything. A countrys ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker. Paul Krugman, The Age of Diminishing Expectations (1994) Productivity is commonly defined as a ratio of a volume measure of output to a volume measure of inputs and measures how efficiently production inputs are being used in the economy to produce outputs. While there is no disagreement on this general notion, a look at the productivity literature and its various applications reveals very quickly that there is neither a unique purpose for, nor a single measure of, productivity. There is also a general understanding that productivity matters for the standard of living and economic growth but to answer more specific analytical questions, different measures of productivity are required. This Compendium has as one of its objectives to show various productivity measures that are available at the OECD, along with brief information on their interpretation and methodology. In one way or another, the various measures relate to the broader objectives of productivity measurement, tracing technology, technical change and efficiency in the economy, in an industry or in a sector. More specific analytical reasons why the OECD is interested in the measurement of productivity include: Productivity growth is considered a key source of economic growth and competitiveness and as such forms a basic statistic for many international comparisons and country assessments; Productivity data are also used in the analysis of labour and product markets of OECD countries. For example, Conway et al. (2006) investigate the link between productivity and product market regulation across OECD countries; Productivity change constitutes an important element in modelling the productive capacity of OECD economies. This permits computation of capacity utilisation measures, themselves important to gauge the position of economies in the business cycle and to forecast economic growth. In addition, the degree to which an economys capacity is used informs analysts about the pressures from economic demand and thereby about the risk of inflationary developments.
The international perspective typically embraced by the OECD gives rise to some additional possibilities for analysis but poses also additional difficulties for measurement. Some of these analytical possibilities as well as the associated measurement issues are indicated in the text accompanying the productivity indicators.
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A. ECONOMY-WIDE INDICATORS OF PRODUCTIVITY GROWTH
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GROWTH IN GDP PER CAPITA

Growth in GDP per capita remains one of the core indicators of economic performance. Estimates of the increase in GDP per capita for OECD countries for 1995-2000 and 2000-2005 show that rates of growth in GDP per capita were high for both periods in the Slovak Republic, Hungary, Korea and Ireland. In most OECD countries, growth of GDP per capita was higher in 1995-2000 than in 2000-2005. The Czech Republic, Greece and the Slovak Republic were the countries with the largest acceleration between the two periods; while in most of countries, notably Ireland, Portugal and Mexico, GDP per capita grew much slower in 2000-2005 than in 19952000. The estimates shown here are not adjusted for differences in the business cycle; cyclically adjusted estimates might show a somewhat different pattern. The growth in GDP per capita can be broken down in a part that is due to labour productivity growth (see indicator A.2.) and a part that is due to increased labour utilisation, measured as hours worked per capita. Growing labour utilisation can have considerable impacts on the growth of GDP per capita. A slowing or declining rate of labour utilisation combined with high labour productivity growth can be indicative of a greater use of capital or
A.1.
of a dismissal (or failure to employ) low-productivity workers. Compared with the second half of the 1990s, in the early 2000s, many European countries have experienced a decrease in their rate of labour utilisation. This slowdown in labour utilisation growth was also accompanied by a sharp decline in labour productivity growth in many European countries. Only Greece and Japan experienced a pick-up in both labour utilisation and labour productivity growth from 1995-2000 to 2000-2005, showing that there need not be a trade-off between labour productivity growth and increased labour use.
Sources OECD Productivity Database, September www.oecd.org/statistics/productivity 2006:
OECD, Annual National Accounts Database, September 2006. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
Growth in GDP per capita Total economy, percentage change at annual rate
% 9 8 7 6 5 4 3 2 1 0 -1
ep H ubl un ic g G ary C re ze e ch K ce R o re ep a ub Ire lic l Po and la Tu nd r Lu Ic key x e N em lan ew b d Z e our al g Fi and U ni A nla te u n d st d K i ra ng lia d Sw o m ed e S n C pai an n N ada or w U ni O ay te E d C St D at e Ja s pa E n D Uen 19 m Be a r lg k iu Au m st N F ri a et ra he n rl c e G and er s m a Sw M ny it z exic er o la nd Po It a rtu ly ga l
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2000-2005
1995-2000
EU19 includes all EU members that are also OECD member countries.
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A.1.
GROWTH IN GDP PER CAPITA

Growth in GDP per capita the contribution of productivity and labour utilisation Total economy, percentage change at annual rate
Average 1995-2000 Growth of GDP per capita Average 2000-2005
Growth of GDP per hour worked
Growth in labour utilisation (1)
Slovak Republic Hungary Greece Korea Czech Republic Ireland Iceland Luxembourg New Zealand Finland Australia United Kingdom Sweden Spain Canada Norway United States Japan OECD19 (2) Denmark EU15 Belgium Austria France Netherlands Germany Mexico Switzerland Italy Portugal
8.5
-2
-2
-2
1. Labour utilisation is measured as hours worked per capita. 2. OECD19 includes Japan, EU15 and NAFTA.
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GROWTH IN GDP PER HOUR WORKED

Productivity growth can be measured by relating changes in output to changes in one or more inputs to production. The most common productivity measure is labour productivity which links changes in output to changes in labour input. This key economic indicator is closely associated with standards of living. In 1995-2000, estimates of GDP per hour worked for OECD countries show that rates of labour productivity growth were the highest in Ireland, Korea and the Slovak Republic; and, while Ireland marked a slowdown over those last five years, labour productivity growth for Korea and the Slovak Republic remained very high in 2000-2005. On the other hand, labour productivity growth was the lowest in 1995-2000 for Italy, the Netherlands and Spain and it remained quite low for Italy over the last five years. Over the past 10 years, labour productivity growth has varied considerably; in the Czech Republic, Greece, Hungary and Iceland it grew much faster during 2000-2005 compared with the period 19952000. Over the same period, labour productivity growth slowed down in other OECD countries, such as Austria, Canada, Ireland, Luxembourg, Mexico and Portugal. Since 2000, most OECD countries have experienced a marked slowdown in labour productivity growth, exception made of some small countries, such as
A.2.
the Czech Republic, Hungary and Iceland which had among the highest labour productivity growth over this last decade, together with Greece, Ireland and the Slovak Republic. The estimates shown here are not adjusted for differences in the business cycle; cyclically adjusted estimates might show a somewhat different pattern.
Sources OECD Productivity Database, September 2006: www.oecd.org/statistics/productivity OECD, Annual National Accounts Database, September 2006. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Ahmad, N., F. Lequiller, P. Marianna, D. Pilat, P. Schreyer and A. Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Papers 2003/14, OECD, Paris. Beffy, P-O., Patrice Ollivaud, Pete Richardson and F.Sdillot (2006), New OECD Methods for Supply-Side and Medium-Term Assessments: A Capital Services Approach, Economics Department Working Paper 2006/482, OECD, Paris. Pilat, D. and P. Schreyer (2004), The OECD Productivity Database An Overview, International Productivity Monitor, Number 8, Spring, pp. 59-65. OECD (2004), Clocking In (and Out): Several Facets of Working Time, OECD Employment Outlook 2004, Chapter 1, OECD, Paris.
OECD measures of labour productivity growth

The OECD Productivity Manual. There are many different approaches to the measurement of productivity. The calculation and interpretation of the different measures are not straightforward, particularly for international comparisons. To give guidance to statisticians, researchers and analysts who work with productivity measures, the OECD released the OECD Productivity Manual in 2001. It is the first comprehensive guide to various productivity measures and focuses on the industry level. It presents the theoretical foundations of productivity measurement, discusses implementation and measurement issues and is accompanied by examples from OECD member countries to enhance its usefulness and readability. It also offers a brief discussion of the interpretation and use of indicators of productivity. See: www.oecd.org/sti/measuring-ind-performance The OECD Productivity Database. Productivity measures rely heavily on the integration of measures of output and input. Some of the most important differences among studies of labour productivity growth are linked to choice of data, notably the combination of employment, hours worked and GDP. To address this problem, OECD has developed a reference database on productivity at the aggregate level, with a view to resolving the problem of data consistency. In deriving estimates of labour productivity growth for the economy as a whole, the database combines information on GDP, employment and hours worked. For employment and hours worked, a special effort is made to use the best available information for each country, based on a consistent matching of data on employment and annual hours worked per person employed (see Annex 1).
Until 2005, estimates of productivity growth were published in the Annex Tables of the OECD Economic Outlook. These measures were estimates of labour productivity growth for the business sector and were designed for different purposes, though considered of equal value to those published in the Productivity Database. However, the two sets of series differed in the following ways: 1) The measures of labour and multi-factor productivity in the OECD Productivity Database refer to the total economy. They are based on a detailed assessment of labour and capital input, which incorporates adjustments for average hours worked per person employed and for capital services. These economy-wide productivity measures provide a close link to changes in GDP per capita. 2) The measures of labour productivity in the OECD Economic Outlook covered the business sector only and did not adjust for average hours worked nor for capital services. The main advantage of these measures was that a large part of the economy was excluded, notably the public sector in which productivity is typically poorly measured. However, reflecting the absence of consistent source information, the quality and comparability of those series varied over time and between countries, therefore in 2006, OECD Economic Outlook shifted to a total economy basis and business sector estimates are no longer published. In the longer term however, the intention is for Economic Outlook to move back to a business sector basis as and when consistent and appropriate data are available from member country sources. Further information regarding the background and use of such data is given by Beffy et al. (2006). More information is available on the special website for the database: www.oecd.org/statistics/productivity
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A.2.
R
% 0 1 2 3 4 5 6
1. OECD19 includes Japan, EU15 and NAFTA.
2000-2005
GROWTH IN GDP PER HOUR WORKED
1995-2000 compared with 2000-2005
1995-2005
1995-2000
Total economy, percentage change at annual rate
Total economy, percentage change at annual rate
ep ub lic C K ze or ch Ir ea R e la ep nd H ubl un ic g G ary re Ic ece e Sw lan e d U ni Fi den te nl d an St d a N tes or w a U ni A Jap y te u a d st n K O ing ralia EC d L u D om xe 19 m (1 bo ) u Fr rg a Po n c rt e C uga an l G a er da m Au any st EU r i a SwBelg 15 it z ium e D N e rl a n ew n d m Z e ar al k N M and et e he x rla ico nd s It a Sp l y ai n
Sl ov C ak ze R ch ep R ub ep lic Hu u bl ng i c a Ko ry r Ic ea el G and re e Po ce la U ni Ire nd te la d n S d Sw tate ed s e Ja n N pa or n U ni F wa te in y d la O Ki n nd EC gd D om Au 19 ( st 1) ra Fr lia G a nc er e m Lu Den any xe m m ar bo k ur EU g C 1 an 5 N B ad ew el a g Ze iu m al a N Au nd et s h t Sw erl ria i tz and er s la n Sp d a M in ex ic o I t Po al rtu y ga l
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ALTERNATIVE MEASURES OF LABOUR PRODUCTIVITY GROWTH

Real depreciation has grown somewhat faster than real
GDP in the past decade in many OECD countries, reflecting investment in new technologies and a shift in the structure of investment and capital stocks towards shorter-lived assets. As a consequence, NDP per hour worked has risen somewhat slower than GDP per hour worked. The gap turned out to be relatively large in the United States, Denmark and Switzerland whereas in Finland, in the Slovak Republic and in the United Kingdom, NDP growth exceeded GDP growth.
Sources OECD Productivity Database, September 2006: www.oecd.org/statistics/productivity
A.3.
OECD, Annual National Accounts Database, September 2006. For further reading Commission of the European Communities, OECD, IMF, United Nations, World Bank (1993), System of National Accounts 1993, Brussels/Luxembourg, New York, Paris, Washington DC. Boarini, Romina, sa Johansson and Marco Mira dErcole (2006), Alternative Measures of Well-Being, OECD Statistics Brief, n11, May. Kohli, Ulrich (2004); Real GDP, real domestic income and terms of trade changes; Journal of International Economics 62.
Looking at trend growth of real GDP and GDI per hour

worked over the past ten years shows that differences between the two measures are relatively small, except for a few countries (e.g. Finland, Sweden, Korea and Switzerland). By definition, the difference between the two measures is most important in those countries that experienced the largest shifts in their terms of trade and/or where foreign trade accounts for a large share of GDP.
Alternative measures of output

GDP is a gross measure that does not account for capital used in production. The associated loss in value, depreciation, reduces the net value of production that is available as net income in any given year. The observation has often been made that a growing part of capital goods is short-lived (for example computers), and that this structural shift in the composition of assets brings with it a higher overall depreciation. A case could thus be made to measure productivity on the basis of net output as well as GDP. Countries with a structure of fixed assets that is biased towards short-lived assets would exhibit a relatively lower NDP per hour worked than GDP per hour worked, reflecting relatively higher depreciation. However, net measures require reliable estimates of depreciation and the empirical basis for depreciation estimates is generally not well established. For similar types of assets, significant differences exist in the service lives and depreciation rates that are used by different countries. These rates are sometimes based on assumptions more than in-depth empirical studies or are based on evidence dating back a number of years. This reduces the quality of depreciation estimates as well as their international comparability. The international GDP-NDP comparisons should thus be interpreted with caution. It is also useful to compare GDP per hour worked with Gross Domestic Income (GDI) per hour worked over time. Real gross domestic income (GDI) measures the purchasing power of the total incomes generated by domestic production (including the impact on those incomes of changes in the terms of trade); it is equal to gross domestic product at constant prices plus the trading gain (or less the trading loss) resulting from changes in the terms of trade. The terms-of-trade effect arises because real GDI is obtained by deflation with the price index for domestic final demand rather than the price index for GDP. It measures the rate at which exports can be traded against imports from the rest of the world. The difference between movements in GDP at constant prices and real GDI are not always small. If imports and exports are large relative to GDP, and if the commodity composition of the goods and services which make up imports and exports are very different, the scope for potential trading gains or losses may be large. If the prices of a countrys export rise faster (or fall more slowly) then the prices of its imports that is if its terms of trade improve less exports are needed to pay for a given volume of imports so that at a given level of domestic production of goods and services can be reallocated from exports to consumption or capital formation. Thus, an improvement in terms of trade makes it possible for an increased volume of goods and services to be purchased by residents out of the incomes generated by a given level of domestic production. Despite its analytical usefulness, it should be borne in mind that GDI is a measure of income and not a measure of production. However, as has been pointed out by some authors (Kohli 2004), terms of trade effects resemble technical change. Changes in constant price GDP would only reflect technical change whereas GDI is a measure that reflects both technical change and terms of trade. This makes GDI a meaningful measure even in the context of production analysis.
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A.3.
ALTERNATIVE MEASURES OF LABOUR PRODUCTIVITY GROWTH
Growth in National Domestic Product per hour worked compared with growth in GDP per hour worked 1995-2005 Total economy, percentage change at annual rate
% 6 5 4 3 2 1 0
St Au at es st ra li a (2 00 U ni 4) te d Ki ng do m Be lg iu m (2 00 4) D Sw en i tz m ar er k la nd (2 00 4) N et he rl a nd s Fi nl an d Ic el an d Fr an ce (2 00 4) Sw ed en er m Au st ria (2 00 4) Ita ly
Ita ly
NDP per hour w orked
GDP per hour w orked
ni te d
lic
an y
R ep ub
Sl ov ak
Growth in Gross Domestic Income per hour worked compared with growth in GDP per hour worked 1995-2005 Total economy, percentage change at annual rate
% 6 5 4 3 2 1 0
(2 00 4) Ko Ire re la a nd (2 00 4) Ic el an d Sw ed en Fi nl U an ni d te d Au St st at ra es li a (2 00 Ja 4) pa n (2 U ni 00 te 4) d Ki ng do m Fr an ce G er C m an an ad y a (2 00 N 4) ew Au Ze s al tri an a d (2 00 4) Be M lg ex iu m ic o (2 00 4) Sw D i tz en er m la ar nd k (2 00 N 4) et he rl a nd s
GDI per hour w orked
Sl ov ak
R ep ub
lic
C an ad
M ex ic o
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CAPITAL PRODUCTIVITY GROWTH

While labour productivity is the most common partial productivity measure, capital productivity provides another, supplementary piece of information about productivity growth. Capital productivity is measured as the ratio between output and capital input. Capital productivity has to be distinguished from the rate of return to capital. The former is a physical, partial productivity measure; the latter is an income measure that relates capital income to the value of the capital stock. Capital productivity has declined in most OECD countries over the last fifteen years. The fall in capital productivity since 1990 has been very pronounced in Japan but also in Spain, Canada, Portugal and Denmark. Notable exceptions to the decline in output per unit of capital input are Ireland and Finland where capital productivity grew over most of the last decade. Two important drivers shape capital productivity: overall efficiency or multi-factor productivity growth and the amount of labour input per unit of capital in production. The fewer hours worked are available per unit of capital, the lower capital productivity. Generally, the cost of using capital has declined relative to labour, so that the amount of labour input per capital input has declined as well, leading to the observed fall in capital productivity.
A.4.
Although most countries experienced a decline in capital productivity, the rates at which capital productivity fell has varied significantly over time. In Japan, the United States, Sweden, Spain, Australia and New Zealand, the decline in capital productivity slowed noticeably between the period 1990-95 and 1995-2000, before to decline markedly between the period 1995-2000 and 2000-2005. The most remarkable shift could be observed in Finland where capital productivity declined in the first half of the 1990s and then rose in the period afterwards. Note, however, that like other productivity measures, capital productivity varies considerably with the business cycle as no adjustments have been made for variations in the rate of capacity utilization.
Sources OECD Productivity Database, September 2006: www.oecd.org/statistics/productivity For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Schreyer P. (2003), Capital Stocks, Capital Services and Multi-factor Productivity, OECD Economic Studies No 37. Schreyer, P., P-E. Bignon and J. Dupont (2003), OECD Capital Services Estimates: Methodology and A First Set of Results, OECD Statistics Working Papers 2003/6, OECD, Paris.
Box 1. Measuring capital input

From the viewpoint of the economic theory, the objective is to measure the flow of productive services that capital delivers in production. This measure relies on the assumption that capital services are a fixed proportion of the productive capital stock. In which case, the rate of change of capital services coincides with the rate of change of the capital stock. The latter is estimated by cumulating investment flows and correcting them for retirement, wear and tear and obsolescence. The aggregate flow of capital services is obtained by weighting the flow of capital services of each type of asset by its share in total capital income. More information on capital measurement can be found on the documentation OECD Productivity Database.
Box 2. International comparability of price indices

Price indices are vital for in measuring volume investment, capital services and user costs. Accurate price indices should be constant quality deflators that reflect price changes for a given performance of ICT investment goods. Thus, observed price changes of computer boxes have to be quality-adjusted for comparison of different vintages. There are differences how countries deal with quality adjustment with possible consequences for the international comparability of price and volume measures of ICT investment. In particular, those countries that employ hedonic methods to construct ICT deflators tend to register a larger drop in ICT prices than countries that do not. The OECD uses a set of harmonised deflators to control for some of the differences in methodology and assumes that the ratios between ICT and non-ICT asset prices evolve in a similar manner across countries, using the United States as the benchmark. Although no claim is made that the harmonised deflator is necessarily the correct price index for a given country, we feel that the possible error due to using a harmonised price index is smaller than the bias arising from comparing capital services based on national deflators. However, from an accounting perspective, adjusting the price index for investment goods for any country implies an adjustment of the volume index of output. In most cases, such an adjustment would increase the measured rate of volume output change. At the same time, effects on the economy-wide rate of GDP growth appear to be contained (see Schreyer (2001) for a discussion). More information is available on the special website for the database: www.oecd.org/statistics/productivity
20
OECD 2005
A.4.
CAPITAL PRODUCTIVITY GROWTH

Growth in capital productivity, 1995-2000 compared with 2000-2005 Total economy, percentage change at annual rate
% 5 4 3 2 1 0 -1 -2 -3 -4
2000-2005
1995-2000
% 5 4 3 2 1 0 -1 -2 -3 -4
Be lg iu m G er m an y C an ad a G re ec N ew e Ze al U an ni d te d Ki ng do m Sw ed en D en m ar k
Po r tu ga ni l te d St at es U
Fi nl an d
Ir e la nd
Ita ly
Fr an ce N et he rla nd s Au st ra lia Au st r ia
1. 1991-1995 for Germany.
Ja pa n
Sp ai n
Fr an Ire ce la nd ( 2 Sw 00 ed 3) en (2 00 Be 3) lg iu m (2 00 3) G er Au m an st U ra y ni lia te d (2 Ki 00 ng 4) do m (2 00 U ni 3) te d S ta G te re ec s N e et (2 he 00 rl a 3) nd s (2 00 3) C an ad Ja a pa n (2 00 Au 4) st r ia (2 00 3) Ita ly ( 20 Po 03 rtu ) ga l (2 D 00 en 3) m ar k (2 00 3)
(2 00 Sp 3) N ai ew n ( 2 Ze 00 al 4) an d (2 00 2)
Fi nl
an d
Growth in capital productivity, 1990-1995 compared with 1995-2000 Total economy, percentage change at annual rate
1995-2000 1990-1995
OECD 2006
21
GROWTH ACCOUNTS FOR OECD COUNTRIES

Stronger growth in the major seven countries in the second half of the 1990s was due to several factors, including higher labour utilisation, capital deepening, notably due to investment in information and communications technology (ICT), and more rapid multi-factor productivity (MFP) growth. In France, Germany and in the United States, the contribution of labour input to growth was positive for the period 1995-2000 but negative for the period 2000-2005. The fall in the contribution of labour input to growth has also been most pronounced in the United Kingdom. The decline in the contribution of labour input to growth slowed markedly in Japan. In Canada, France, Germany, Italy and the United Kingdom, MFP growth fell between the period 19952000 and 2000-2005, but it rose in Japan and in the United States. Investment in ICT accounted for between 0.3 and 0.6 percentage points of growth in GDP over the period 1995-2005. Australia, Denmark, Sweden, the United Kingdom and the United States received the largest boost from ICT capital; Japan and Canada a more modest one; and Austria, France and Germany a much smaller one. In several countries, ICT accounts for the bulk of capitals contribution to GDP growth.
A.5.
In Canada, Finland, Ireland, the Netherlands, New Zealand and Spain, increased labour utilisation made a large contribution to growth of GDP over 1995-2005. In Ireland, Finland, Greece and the United States, MFP growth was also an important source of GDP growth. In Austria, Denmark, Italy, the Netherlands and Spain, MFP growth was very low or negative between 1995 and 2005.
Source OECD Productivity Database, September 2006 www.oecd.org/statistics/productivity For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Schreyer, P., P.E. Bignon and J. Dupont (2003), OECD Capital Services Estimates: Methodology and a First Set of Results, OECD Statistics Working Paper 2003/6, OECD, Paris. Schreyer, P. (2004), Capital Stocks, Capital Services and Multi-factor Productivity Measures, OECD Economic Studies No. 37, 2003/2, OECD, Paris, pp. 163184.
Growth accounting
Economic growth can be increased in several ways; by increasing the amount and types of labour and capital used in production, and by attaining greater overall efficiency in how these factors of production are used together, i.e. higher multi-factor productivity. Growth accounting involves breaking down growth of GDP into these contributions; i.e. labour input, capital input and MFP. The growth accounting model is based on the microeconomic theory of production and rests on a number of assumptions, among which the following are important: i) production technology can be represented by a production function relating total GDP to the primary inputs labour L and capital services K; ii) this production function exhibits constant returns to scale; and iii) product and factor markets are characterised by perfect competition. For any desired level of output, the firm minimises costs of inputs, subject to the production technology discussed above. Factor input markets are competitive, so that the firm takes factor prices as given and adjusts quantities of factor inputs to minimise costs. The rate of growth of output is a weighted average of the rates of growth of the various inputs and of the multi-factor productivity term. The weights attached to each input are the output elasticities for each factor of production. Output elasticities cannot be directly observed, however, and the factor shares of labour and capital are often used as weights.
22
OECD 2005
A.5.
GROWTH ACCOUNTS FOR OECD COUNTRIES

Contributions to growth of GDP, G7 countries, 1995-2000 and 2000-2005 Percentage points
1
% 5
Labour input
ICT capital
Non-ICT capital
Multi-factor productivity
-1 Canada France Germany Italy Japan United Kingdom

2
2000-2005
1995-2000
United States
Contributions to GDP growth 1995-2005 Percentage points

Labour input % 9 8 7 6 5 4 3 2 1 0 -1
d Gr ee ce Ca na da Un ited St ate s Ne w Ze ala Un nd ite dK ing do m Ne th e rla nd s Po rtu ga l Sw ed en
ICT capital
Non-ICT capital
Multi-factor productivity
Be lgi um
Fin lan d
De nm ark
Au str ia
Ire lan
Au str a
1. 1995-2003 for Italy and the United Kingdom; 1995-2004 for Japan. 2. 2000-2002 for New Zealand; 2000-2003 for Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, Netherlands, Portugal, Sweden, and the United Kingdom; 2000-2004 for Australia, Japan and Spain.
Ge rm
Fra
Ja pa n
Sp ain
nc e
Ita
an y
lia
ly
OECD 2006
23
GROWTH ACCOUNTS THE CONTRIBUTION OF MULTI-FACTOR PRODUCTIVITY AND ICT CAPITAL TO GDP GROWTH
Multi-factor productivity growth was one of the factors that helped strengthen growth in Greece, the United States, Spain, Japan, Sweden and New Zealand between the periods 1995-2000 and 20002005. In other countries, including Ireland, Portugal, Australia, Finland, Italy, Canada Germany, Italy, the United Kingdom, Austria, Belgium, Denmark, the Netherlands and Spain, MFP growth slowed down from 1995-2000 to 2000-2005. Multi-factor productivity rose during the period 1995-2000 and declined in the period 2000-2005 in the Netherlands, Austria, Denmark, Portugal and Italy. The contribution of ICT capital to GDP growth decreased in most of OECD countries between 1995-2000 and 2000-2005. The decrease over this period was particularly large for Sweden and the United States and Japan, and smallest for the United Kingdom, Canada, the Netherlands and Denmark. The contribution of ICT capital to GDP growth has
A.6.
increased from 1995-2000 to 2000-2005 in Greece, New Zealand, Finland, Italy and Austria.
Source OECD Productivity Database, September 2006 www.oecd.org/statistics/productivity Groningen Growth and Development Centre, June 2005. For further reading Lequiller, F., N. Ahmad, S. Varjonen, W. Cave and K.H. Ahn (2003), Report of the OECD Task Force on Software Measurement in the National Accounts, OECD Statistics Working Paper 2003/1, OECD, Paris. Ahmad, N. (2003), Measuring Investment in Software, STI Working Paper, 2003/6, OECD, Paris. Schreyer, P., P.E. Bignon and J. Dupont (2003), OECD Capital Services Estimates: Methodology and a First Set of Results, OECD Statistics Working Paper 2003/6, OECD, Paris.
The contribution of ICT capital to GDP growth

Correct measurement of investment in ICT in both nominal and volume terms is crucial for estimating its contribution to economic growth and performance. Data availability and measurement of investment in ICT based on national accounts (SNA93) vary considerably across OECD countries, especially as regards measurement of investment in software, deflators applied, breakdown by institutional sector and temporal coverage. In the national accounts, expenditure on ICT products is considered as investment only if the products can be physically isolated (i.e. ICT embodied in equipment is considered not as investment but as intermediate consumption). This means that investment in ICT may be underestimated and the order of magnitude of the underestimation may differ depending on how intermediate consumption and investment are treated in each countrys accounts. In particular, expenditure on software has only very recently been treated as capital expenditure in the national accounts, and methodologies still vary considerably across countries. Difficulties for measuring software investment are also linked to the ways in which software can be acquired, e.g. via rental and licences or embedded in hardware. Moreover, software is often developed on own account. To tackle the specific problems relating to software in the context of the SNA93 revision of the national accounts, a joint OECD-EU Task Force on the Measurement of Software in the National Accounts has developed recommendations concerning the capitalisation of software (Lequiller, et al., 2003; Ahmad, 2003). These are now being implemented by OECD member countries.
24
OECD 2005
A.6.
GROWTH ACCOUNTS THE CONTRIBUTION OF MULTI-FACTOR PRODUCTIVITY AND ICT CAPITAL TO GDP GROWTH
Multi-factor productivity growth, 1995-2000 and 2000-2005 In percentage points
2000-2005 1995-2000
1
5% 4% 3% 2% 1% 0% -1%
an G d ni ree te ce d St at e Sw s ed e Fi n nl an U d ni Ja te d p Ki a n ng do Au m N ew stra Z e lia al an d Fr an c G er e m a C ny an a Be da lg iu m S N p et he ain rla nd s Au st r D en ia m a Po rk rtu ga l It a ly U Ire l
The contributions of ICT capital, 1995-2000 and 2000-2005 In percentage points

2000-2005 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0%
D en lia ew ma Z e rk al a Be n d lg iu U m ni te Gre d Ki ece ng do m U Fin ni l a te d nd St at es
1995-2000
1. 2000-2002 for New-Zealand; 2000-2003 for Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Portugal, Sweden and the United Kingdom, 2000-2004 for Australia, Japan and Spain.
It a l Ja y pa n C an ad Sw a ed e Fr n an c Au e N s et he tria rl a nd Ire s la nd Sp a Po i n rtu G ga er l m an y
Au s
tra
OECD 2006
25
LABOUR PRODUCTIVITY GROWTH IN THE BUSINESS SECTOR

Productivity growth can be measured by relating changes in output to changes in one or more inputs to production. The most common productivity measure is labour productivity which links output to labour input. The OECD publishes several labour productivity measures: those presented in the OECD Productivity Database refer to the total economy and relate changes in output to changes in hours worked, while those published in the OECD Economic Outlook N. 78, relate output per employed person in the business sector. In 2006, due to difficulties in obtaining reliable, consistent and comparable data of labour input for the business sector, OECD Economic Outlook shifted to a total economy basis and business sector estimates are no longer published, see text box below for details. As with other productivity indicators, the growth in business sector labour productivity is quite variable from year to year, because employment generally moves more slowly than value added. Businesses do not immediately employ more staff when there is an upturn and they do not immediately lay off staff when there is a down turn. The following charts show considerable differences in business sector labour productivity growth between countries. In 1995-2005, Greece, Iceland, Korea, Poland and Turkey had the highest growth in business sector labour productivity, while growth for Italy, Germany, Mexico, the Netherlands, Spain and Switzerland was slower over the same period. In the Czech Republic, Norway, Turkey, Greece and the
A.7.
United States, business sector labour productivity grew much faster from 2000-2005 than from 1995-2000, while it slowed down over the period in other OECD countries, notably Australia, Italy, Luxembourg, Mexico, Poland and Portugal. From 2000 onwards, business sector productivity slowed down in most OECD countries and only picked up in a few countries.
Sources OECD Economic Outlook, No. 78. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Ahmad, N., F. Lequiller, P. Marianna, D. Pilat, P. Schreyer and A. Wlfl (2003), Comparing Growth in GDP and Labour Productivity: Measurement Issues, OECD Statistics Brief, No. 7 December, OECD, Paris. Ahmad, N., F. Lequiller, P. Marianna, D. Pilat, P. Schreyer and A. Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Papers 2003/14, OECD, Paris. Beffy, P-O., Patrice Ollivaud, Pete Richardson and F.Sdillot (2006), New OECD Methods for Supply-Side and Medium-Term Assessments: A Capital Services Approach, Economics Department Working Paper 2006/482, OECD, Paris. Pilat, D. and P. Schreyer (2004), The OECD Productivity Database An Overview, International Productivity Monitor, Number 8, Spring, pp. 59-65. Atkinson, Tony (2005) Atkinson Review: Final report; available on http://www.statistics.gov.uk.
Measuring business sector productivity

Business sector output is defined as economy-wide GDP less the government wage bill, less net indirect taxes and government consumption of fixed capital. Business sector employment is defined as total economy employment less public sector employment. The business sector thus excludes outputs and inputs that relate to government. The main advantage of business sector measures is that they exclude a large part of the economy, i.e. the public sector, in which productivity is typically poorly measured. In the absence of market production and market prices (as is the case for example for general administration), government output is normally measured by the inputs that are used to produce this output, implying zero productivity growth. Measures of business sector productivity are also important because this sector ultimately determines the development of an economys potential output and of the economy's tax base. At the same time, the precise definition of the business sector is not always straightforward. Also, it can be difficult to allocate certain enterprises to the market or to the non-market sector. In their national statistics, countries use different approaches towards measuring the output and inputs of the business sector. Differences arise in particular in the treatment of health or education services that may be considered part of non-market production in some countries and part of market production in others. Over the past few years, several countries have started to develop output-based measures of production for non-market activities. For example, the United Kingdom has put in place measures of output of education and health services in their national accounts. A report to the U.K. Office of National Statistics (Atkinson 2005) provides a comprehensive discussion of the issues involved in measuring nonmarket output. Despite their conceptual advantages, business sector measures of labour productivity are subject to greater constraints of data availability than labour productivity measures for the total economy. In particular, it is difficult to obtain reliable and internationally comparable data for the total number of hours worked in the business sector, making it necessary to revert to the total number of persons employed as a measure of labour input. As long as average hours worked per person do not change significantly over time, this makes little difference to the resulting productivity measures. However, when there are marked shifts in working hours, the two measures of labour input may give rise to quite different rates of labour productivity growth. In 2006, OECD Economic Outlook shifted to a total economy basis and business sector estimates are no longer published. In the longer term however, the intention is for Economic Outlook to move back to a business sector basis as and when consistent and appropriate data are available from member country sources. Further information regarding the background and use of such data is given by Beffy et al. (2006).
26
OECD 2005
-3 % 7 0 1 2 3 4 5 6
-2
-1
A.7.
Po
-3 % 7 0 1 2 3 4 5 6 -2 -1
OECD 2005
2000-2005
Percentage change at annual rate
LABOUR PRODUCTIVITY GROWTH IN THE BUSINESS SECTOR
Growth in GDP per employee in business sector, 1995-2000 compared with 2000-2005
Growth in GDP per employee in business sector, 1995-2005
Percentage change at annual rate
1995-2005
1995-2000
la Ic nd el an Ko d re Tu a r C ze G key ch re e N Rep ce ew u b U Z e lic ni al te an d St d a Sw tes ed Fi en nl an Au d U ni De stria te d nm Ki a r ng k d Au om st ra C lia an Po ada rtu g Fr al an B c Lu elg e xe iu m m bo u N rg or w a M y e G xic N e rm o et he any Sw rlan it z ds er la nd Sp ai n Ita ly
Po la n Tu d rk G ey re C e ze Ic ce ch el R and ep ub li Ko c re U N a ni or te w d St a y at U e ni te Sw s d e Ki de ng n do Fi m n D lan en d m a A u rk st r Fr ia an N Be ce ew lg i Z e um al Au and st ra C lia an G ad N e rm a et he a ny rl a nd s Sw Sp a itz in er l Po and rtu g M al ex ico Lu xe It m aly bo ur g
27
B. PRODUCTIVITY LEVELS
OECD 2005
29
INCOME AND PRODUCTIVITY LEVELS

In 2005, GDP per capita in the OECD area ranged from over USD 35 000 in Iceland, Ireland, Luxembourg, Norway, Switzerland and the United States to less than USD 15 000 in Mexico, Poland and Turkey. For most OECD countries, income levels are 70-85% of US income levels. The differences in income reflect a combination of labour productivity, measured as GDP per hour worked, and labour utilisation, measured as hours worked per capita. A countrys labour productivity level is typically the most significant factor in determining differences in income, particularly in countries with low levels of GDP per capita. Most OECD countries have higher levels of GDP per hour worked than GDP per capita because they have lower levels of labour utilisation. The difference between income and productivity levels is largest in European countries; in 2005, GDP per hour worked surpasses the US productivity level in Belgium, France, Ireland, the Netherlands and Norway, whereas income levels in most of these countries are substantially lower than in the United States. In many OECD countries, labour use, as measured by hours worked per capita, is substantially lower
B.1.
than in the United States. This is because of disparities in working hours but also in several countries because of high unemployment and low participation of the working-age population in the labour market. In Iceland and Korea, however, labour input per capita in 2005 is considerably higher than in the United States, owing to relatively long working hours and high rates of labour force participation. Labour input per capita is also relatively high in Canada, the Czech Republic, Japan, New Zealand and Switzerland.
Sources OECD, Productivity Database, September 2006: www.oecd.org/statistics/productivity. OECD, Annual National Accounts Database, September 2006. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Pilat, D. and P. Schreyer (2004), The OECD Productivity Database An Overview, International Productivity Monitor, No. 8, Spring, pp. 59-65. OECD (2004), Clocking In (and Out): Several Facets of Working Time, OECD Employment Outlook 2004, Chapter 1, OECD, Paris.
Comparisons of income and productivity levels

Comparisons of income and productivity levels face several measurement problems (see also Annex 2 for further detail). First, they require comparable data on output. In the 1993 System of National Accounts (SNA), the measurement and definition of GDP are treated systematically across countries. Most countries have implemented this system; in the OECD area, Turkey is the only exception, and its output is likely to be understated relative to other OECD countries. Other differences, such as the measurement of software investment, also affect the comparability of GDP across countries, although the differences are typically quite small. The second problem is the measurement of labour input. Some countries integrate the measurement of labour input in the national accounts; this may ensure that estimates of labour input are consistent with those of output. In most countries, however, employment data are derived from labour force surveys which are not entirely consistent with the national accounts. Labour input also requires measures of hours worked, which are typically derived either from labour force surveys or from business surveys. Several OECD countries estimate hours worked from a combination of these sources or integrate these sources in a system of labour accounts, which are comparable to the national accounts. The OECD Productivity Database includes estimates of total hours worked which aim at consistency between estimates of employment and hours worked. The cross-country comparability of hours worked remains somewhat limited, however, with a margin of uncertainty in estimates of productivity levels. Third, international comparisons require price ratios to convert output expressed in a national currency into a common unit. Exchange rates are of limited use for this purpose because they are volatile and reflect many influences, including capital movements and trade flows. The alternative is to use purchasing power parities (PPP), which measure the relative prices of the same basket of consumption goods in different countries. The estimates shown here are based on official OECD Purchasing Power Parities for 2005.
30
OECD 2005
B.1.
INCOME AND PRODUCTIVITY LEVELS

Income and productivity levels, 2005 Percentage point differences with respect to the United States
Effect of labour utilisation1
Percentage gap in GDP per capita

Turkey (2) Mexico Poland Slovak Republic Hungary Portugal Czech Republic Korea Greece New Zealand Spain EU-19 (3) Italy OECD Germany Euro-zone (4) France (5) Japan Finland United Kingdom Belgium Sweden Austria Australia Canada Denmark Netherlands Iceland Switzerland Ireland Norway
Gap in GDP per hour worked
-80
-60
-40
-20
-80
-60
-40
-20
-80
-60
-40
-20
1. Based on total hours worked per capita. 2. GDP for Turkey is based on the 1968 System of National Accounts. 3. EU member countries that are also member countries of the OECD. 4. Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain. 5. Includes overseas departments.
OECD 2005
31
LEVELS OF GDP PER CAPITA AND GDP PER HOUR WORKED, 1950-2005
Cross-country differences in GDP per capita and labour productivity in the OECD area have eroded considerably since the 1950s. Over the 1950s and 1960s, income levels in OECD countries were catching up with those of the United States except in Australia, New Zealand and the United Kingdom. In the 1970s, this phenomenon was less widespread and the rate of catch-up fell except in Korea. In the 1980s, there was even less catch-up, as GDP per capita grew more slowly than in the United States in 19 OECD countries. The same was true for 16 OECD countries from 1990-2005, with Ireland and Korea being the most notable exceptions. Japan and Korea had the highest rates of catch-up over the period 1950-2005, with GDP per capita growing more rapidly than in the United States, by 2.5% and 3.3%, respectively. Rates of catch-up were much lower, typically below 1% a year, in most of western Europe. Australia, New Zealand, the United Kingdom and Canada already had relatively high income levels in 1950 and have done little catching up with the United States. Switzerland has seen a marked decline in its relative income level. Eastern European countries, Mexico and Turkey started with
B.2.
low income levels in the 1950s and have only caught up a little. Changes in levels of GDP per hour worked show a slightly different pattern. Out of 27 OECD countries, for which data are available for a long period, only Mexico, Canada, Switzerland and Australia have not been catching up almost continuously with US productivity levels over the post-war period. Several European countries now stand even with the United States in terms of average labour productivity and some have surpassed US productivity levels.
Sources OECD, Productivity database, September 2006. www.oecd.org/statistics/productivity. OECD, Annual National Accounts Database, September 2006. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Angus Maddison (2001), The World Economy: A Millennial Perspective, Development Centre Studies, OECD, Paris.
Comparisons of income and productivity levels over time

Comparisons of income and productivity levels for a particular year (see B.1) can be updated over time by using time series of GDP, population, employment and hours worked. Time series for GDP, population, employment and hours worked are all derived from the OECD Productivity Database. However, this database only dates back to the early 1970s, therefore for earlier years, estimates were derived by using data for GDP and population from Angus Maddison (2001), The World Economy: A Millennial Perspective, OECD Development Centre, OECD, Paris.
GDP per hour worked in the OECD area, 1950, 1973 and 2005 United States = 100
1950 120 1973 2005
100 United States = 100
80
60
40
20
rw Be a y lg iu m N Irel et a he nd rla nd s U F ni ra te n c d e St G ate er s m D any en m Sw ark ed U e ni te Au n d s Ki tria ng d Au om st ra F lia Sw inla itz nd er la C nd an ad a
Ita ly Sp ai Ic n el an Ja d pa Ne Gr n w eec Ze e al a Sl ov Po nd a k rt u R ga ep l ub C ze Hu lic ch ng R a ry ep ub li Ko c re Po a la n M d ex ic o
No
32
OECD 2005
B.2.
LEVELS OF GDP PER CAPITA AND GDP PER HOUR WORKED, 1950-2005
Catch-up and convergence in OECD income levels, 1950-2005, United States = 100
Medium rate of catch-up (<=1.1% annually)

140 Belgium Germany Italy 100 Finland Netherlands France Norw ay
High-income, no catch-up (<0.1% annually)

140
120
120
100
80
80
60
60
40
40
Australia New Zealand Sw itzerland Denmark
Canada Sw eden United Kingdom
20
20
0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Rapid catch-up (>1.1% annually)
Low starting point, low rates of catch-up (< 0.3% annually)

140
140 Greece 120 Portugal 100 Spain Austria Ireland Japan Korea
120
Czech Republic Mexico Turkey
Hungary Poland Slovak Republic
100
80
80
60
60
40
40
20
20
0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Source: 2005 income levels from indicator B.1; previous years based on OECD productivity database and Angus Maddison (2001), The World Economy: A Millennial Perspective, Development Centre Studies, OECD, Paris.
OECD 2005
33
ALTERNATIVE MEASURES OF OUTPUT

When data in the national accounts are taken at face
value, a comparison between GDP and NDP per hour worked hardly changes the ranking of countries with respect to relative levels of labour productivity. On average, NDP accounts for about 85% of GDP, although there is some variation across countries. Nonetheless, in Japan, the Czech Republic and the Slovak Republic, depreciation is large in relation to GDP. By contrast, Greece, Mexico, or the United States are countries where NDP is relatively high compared to GDP. Similar to the level comparisons of NDP and GDP per hour worked, the growth rates of NDP and GDP per hour worked can be compared (see A.3).
B.3.
available), but the largest increase is registered for Ireland, which is also an example for a country where GDP was significantly higher than GNI, whereas Switzerland is a case where the opposite holds.
Sources OECD Productivity Database, September 2006. www.oecd.org/statistics/productivity OECD, Annual National Accounts Database, September 2006. For further reading Commission of the European Communities, OECD, IMF, United Nations, World Bank (1993), System of National Accounts 1993, Brussels/Luxembourg, New York, Paris, Washington DC. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Ahmad, N., F. Lequiller, P. Marianna, D. Pilat, P. Schreyer and A. Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Papers 2003/14, OECD, Paris. Boarini, Romina, sa Johansson and Marco Mira dErcole (2006), Alternative Measures of Well-Being, OECD Statistics Brief, n11, May.
In most OECD countries, the difference between GDP,

NDP and GNI per hour worked is small since gross income inflows from abroad tends to be offset by gross outflows. This indicates that GDP per hour worked is a useful proxy for other measures of output in productivity calculations, especially when data availability restricts international comparability. However, the difference is significant for a few countries, notably Ireland and Luxembourg. GDP per hour worked, GNI per hour worked and GDI per hour worked increased in all OECD countries between 1995 and 2005 (or latest year
Alternative measures of output level comparisons

GDP is a gross measure that does not account for capital used in production. The associated loss in value, depreciation, reduces the net value of production that is available as net income in any given year. The observation has often been made that a growing part of capital goods is short-lived (for example computers), and that this structural shift in the composition of assets leads to higher overall depreciation. A case could thus be made to measure productivity on the basis of net domestic product as well as GDP. Countries with a structure of fixed assets that is biased towards short-lived assets would exhibit a relatively lower Net Domestic Product (NDP) per hour worked than GDP per hour worked, reflecting relatively higher depreciation. However, net measures require reliable estimates of depreciation and the empirical basis for depreciation estimates is generally not well established. For similar types of assets, significant differences exist in the service lives and depreciation rates that are used by different countries. These rates are sometimes based on assumptions more than in-depth empirical studies or are based on evidence dating back a number of years. This reduces the quality of depreciation estimates as well as their international comparability. The international GDP-NDP comparisons should thus be interpreted with caution. It is also useful to compare GDP with Gross National Income (GNI). This comparison permits to take into account the payments received from or sent to the rest of world. GNI is equal to GDP less net taxes on production and imports, less compensation of employees and property income payable to the rest of the world plus the corresponding items receiving from the rest of the world. For example, when company profits are transferred abroad, this leads to GNI being lower than GDP. Conversely, when foreign affiliates or domestic firms or residents abroad transfer payment to the domestic economy, this will raise GNI relative to GDP. At the same time it should be noted that income-based measures, while useful from a welfare perspective, are not necessarily the preferred indicator when it comes to measuring productivity. The purpose of productivity measures is to capture inputs and outputs in a production process and GNI may not be the best measure of output for this purpose.
34
OECD 2005
B.3.
10
20
30
40
50
60
70
10 0
20
30
40
50
60
70
OECD 2006
USD mln USD mln NDP per hour w orked
ALTERNATIVE MEASURES OF OUTPUT
Gross Domestic Product and National Domestic Product per hour worked, 2005
Gross Domestic Product and Gross National Income per hour worked, 2005
Total economy, USD, current prices, current PPPs
Total economy, USD, current prices, current PPPs
GNI per hour w orked GDP per hour w orked
Lu xe m No bo r ur way g (2 00 Be 4 ) l N et giu m he rl a nd s F Ire ra n la n d ce ( U ni 2 00 te 4) d St at e G er s m an D en y m a Sw rk ed en U ni Aus te t r d Ki ia ng do m Au s t Fin ra l li a and (2 00 Sw 4) i tz er la Ita nd ly (2 00 4) Sp ai C Ic n a N ew na elan d Ze a ( d 2 al an 0 04 d ) J a (20 04 pa ) n (2 00 4 ) Sl G ov re ec ak e P R C ze ep ort ug ch ub a li R ep c (2 l u b 00 4) li c (2 00 4) M ex Kor ea ic o (2 00 4)
Lu xe N m bo orw ur ay g (2 00 Be 4 ) l N et giu m he rl a nd s F Ire ra la n d nce ( U ni 2 00 te 4) d St at e G er s m an D en y m a Sw rk ed en U ni Aus te tr d Ki ia ng do Au m s t Fin ra l li a and (2 00 Sw 4) i tz er la I nd tal (2 y 00 4) Sp ai n C Ic a N ew na ela n d d Ze a al (20 an 04 d ) J a (20 04 pa ) n (2 00 4 ) Sl G ov re ec ak e P R C ze ep ort ug ch ub a li R ep c (2 l 0 ub li c 04) (2 00 4) M K ex or ea ic o (2 00 4)
35
DIFFERENCES IN LABOUR PRODUCTIVITY BY ECONOMIC ACTIVITY

The ratio of value added to employment provides an indication of which industries yield relatively high value added per unit of labour input. Although total employment is not the best measure of labour input for this purpose (see box), a reasonably clear pattern emerges. In 2002, industries predominantly involved in the extraction, processing and supply of fuel and energy goods continued to produce the highest value added per labour unit. These industries were more than twice as productive as the average industry. They account for about 4% of total OECD value added and are typically highly capital-intensive. Besides the energy-producing industries, those that yield the most value added per labour unit are those considered more technology and/or knowledge intensive (see box). In manufacturing, the chemical industry has the highest relative labour productivity level, while in services, finance, insurance and telecommunications lead the way. Construction, wholesale and retail trade, hotels and restaurants and textiles show relatively low levels of labour productivity in all three major OECD regions. These industries are typically highly labour-intensive, have a high proportion of low-skilled jobs and are not considered hightechnology sectors. Measuring labour productivity by industry
B.4.
The relatively low ratios of value added to employment for business services are partly due to the fact that this category covers a diverse range of activities from renting of machinery and equipment, computer services and R&D to legal, accounting, architectural and engineering services. Use of a more detailed activity breakdown would allow more high value added activities to be revealed.
Data Resources: OECD, STAN Indicators Database, August 2005. OECD, STAN Database, August 2005. For further reading Ahmad, Nadim, Francois Lequiller, Pascal Marianna, Dirk Pilat, Paul Schreyer and Anita Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Paper 2003/14, OECD, Paris. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. OECD (2001), OECD Science, Technology and Industry Scoreboard, D.4. OECD, Paris. OECD (2003), OECD Science, Technology and Industry Scoreboard section D and Annex 1. OECD, Paris.
The indicators shown here are determined by data availability and simply measure value added per person employed. Further adjustments to labour input, including adjustment for part-time work and hours worked per worker, can be made for certain OECD countries but international comparisons by industry are not yet feasible. A few other notes apply to the indicators:
For the labour productivity levels, 2002 value added at current prices was used. For the European Union, member countries' value added data were aggregated after applying 2002 US dollar GDP purchasing power parities (PPPs). Industry-specific PPPs are preferable, but are not available for all sectors and countries. The labour productivity levels by industry are relative to the total non-agriculture business sector. This consists of all industries except i) Agriculture, hunting, forestry and fishing (ISIC 01-05); ii) Real estate activities (ISIC 70 - for value added this includes imputed rent of owner occupied dwellings); and iii) Community, social and personal services (ISIC 75-99 - this includes mainly non-market activities such as public administration, education and health for which, in some countries, there are still some measurement problems). This activity-based definition is not to be confused with an institutional definition of the business sector (see A.7). Sectors that are considered technology- and/or knowledge-intensive are highlighted in the graphs. For manufacturing, R&D intensity is the main determinant broadly identifying Chemicals (ISIC 24), Machinery and equipment (ISIC 29-33) and Transport equipment (ISIC 34-45) as high or medium-high technology sectors (see Annex 1, of STI Scoreboard 2003 for more details). For services, preliminary analyses of embodied technology (based on input-output tables) and composition of workforce skills have complemented limited R&D intensity information to describe the following broad service sectors as knowledge intensive: Post and telecommunications (ISIC 64); Finance and Insurance (ISIC 65-67) and Business services (ISIC 71-74). The European Union in this section covers the 15 member countries up to 2004 plus two new members, the Czech Republic and Hungary. Data on value added for the EU countries is expressed in basic prices; for Japan and the United States, it is at factor costs.
36
OECD 2006
B.4.
DIFFERENCES IN LABOUR PRODUCTIVITY BY ECONOMIC ACTIVITY

Labour productivity levels relative to the total non-agriculture business sector, 2002 United States
E l e c t r ic it y , g a s a n d w a t e r s u p p ly P e t r o l e u m r e f in in g M i n in g a n d q u a r r y in g C h e m ic a l s F in a n c e a n d I n s u r a n c e P o s t a n d t e l e c o m m u n ic a t io n s T r a n s p o r t e q u ip m e n t P a p e r , p r i n t in g , p u b li s h in g M a c h i n e r y a n d e q u ip m e n t F o o d , d r in k , to b a c c o N o n - m e t a lli c m in e r a l s R u b b e r a n d p la s t ic s B a s ic m e t a l s a n d p r o d u c t s B u s in e s s s e r v ic e s T ra n s p o rt a n d s to r a g e W o o d a n d m a n u f a c t u r in g n e c C o n s t r u c t io n T e x t il e s , c lo t h in g T r a d e , h o te ls a n d r e s t a u r a n ts
Japan
P e tr o le u m r e fin in g E l e c t r i c i t y , g a s a n d w a t e r s u p p ly C h e m i c a ls F in a n c e a n d In s u ra n c e P o s t a n d te le c o m m u n ic a tio n s T ra n s p o rt e q u ip m e n t B u s i n e s s s e r v ic e s P a p e r , p r in t in g , p u b l i s h i n g M i n in g a n d q u a r r y i n g M a c h in e ry a n d e q u ip m e n t N o n - m e t a l li c m in e r a ls B a s ic m e ta ls a n d p r o d u c ts R u b b e r a n d p la s tic s T ra n s p o rt a n d s to ra g e F o o d , d rin k , to b a c c o T r a d e , h o t e ls a n d r e s t a u r a n t s C o n s tr u c tio n W o o d a n d m a n u fa c tu rin g n e c T e x t i le s , c lo t h i n g
European Union
P e t r o l e u m r e fin in g M in in g a n d q u a r r y in g E le c t r ic it y , g a s a n d w a t e r s u p p ly C h e m ic a ls P o s t a n d te le c o m m u n ic a ti o n s F in a n c e a n d I n s u r a n c e T r a n s p o r t e q u ip m e n t P a p e r, p r in tin g , p u b lis h in g T ra n s p o rt a n d s to ra g e N o n - m e t a ll ic m in e ra ls B u s in e s s s e r v ic e s M a c h in e r y a n d e q u ip m e n t F o o d , d r in k , to b a c c o R u b b e r a n d p la s t ic s B a s ic m e ta ls a n d p r o d u c ts C o n s tr u c tio n W o o d a n d m a n u f a c t u rin g n e c T r a d e , h o te ls a n d r e s t a u r a n ts T e x tile s , c lo th in g
OECD 2006
37
LABOUR PRODUCTIVITY AND HETEROGENEITY

Many examples of productivity analyses focus on relatively aggregated industries, typically at the 2, or sometimes, 3-digit industry level. The focus is typically on productivity growth and, so, these analyses generally assume that homogeneity exists within these pre-defined industry groups. In other words: that the productivity growth observed at the aggregate level is representative of the growth at the business level. Where this assumption does not hold it is possible that changes in 2-digit labour productivity, say, could be attributed to labour merely because of changes in the market share of heterogeneous businesses (as well as entries and exits into the population). Comprehensive estimates of productivity are therefore dependent on business level data. Unfortunately internationally comparable databases of businesses covering whole economies are not currently available; usually because of restrictions that preserve the anonymity and confidentiality of businesses and their data. The OECDs Structural and Demographic Business Statistics database however provides a useful compromise between the need for very detailed data on businesses and the need for international comparability. The database provides information on value-added and employment in most OECD countries at the 4 digit industry level and by size class, and, so, allows researchers to conduct their analysis of productivity levels at a more detailed level; although information on prices and price change are also needed when the focus is on productivity growth. That said the database is able to provide a diagnostic assessment of the robustness of the homogeneity assumption. The accompanying table to this section tries to do this by comparing the coefficient of variation at the 2 digit industry level for 6 large OECD countries. The coefficient is calculated as the standard deviation of labour productivity estimates across 5 size classes normalised by the simple un-weighted average of the labour productivity in these 5 size classes. The table shows considerable heterogeneity in labour productivity figures across industries; in other words that labour productivity figures can differ significantly by business. Of course such a comparison can overstate the true scale of heterogeneity across a sector since businesses within a given size class may indeed be homogeneous and indeed those in the largest size class will contribute disproportionately to overall value-added and employment. But the point of the table is merely to illustrate that heterogeneity can be considerable. Moreover coefficients of variation within a 2 digit industry are similarly sized when one compares labour productivity estimates
B.5.
across its 4 digit industries (see OECD Structural and Demographic Business Statistics, 1996-2003). The table also shows that in many industries, particularly in manufacturing, and in most countries, the larger the business the higher the labour productivity. This will possibly, in part, reflect higher degrees of capital investment in larger businesses but it may also indicate economies of scale. In Japan virtually all sectors show increasing productivity the larger the business (90%). But in the United States the percentage for manufacturing is close to zero. Interestingly this statistic increases dramatically (81%) for the United States if the smallest businesses are excluded. This may reflect the fact that small businesses tend to be newer and more innovative than older, medium size, businesses, reflecting in part the role of creative destruction, but it may also reflect data comparability. Ideally the estimates would have been produced using full-timeequivalent measures or number of hours worked but this has not been possible and instead, for France, Germany, Italy, Japan and the United Kingdom the number of persons engaged were used and for the United States number of employees. Because small businesses will typically have a higher percentage of persons engaged, and not on the pay-roll, it is possible that the estimates of relative labour productivity for small businesses in the United States are biased upwards. Additionally the numerator for the United States uses turnover, whereas in Japan (census based) and EU countries (factor costs) valueadded is used. What is also clear from the table and perhaps not surprising is that the coefficients in service sectors are typically higher than in the manufacturing sector, reflecting possibly the greater heterogeneity in services. The table also shows a lower correlation between business size and labour productivity in the service sector than in manufacturing; perhaps again reflecting the larger heterogeneity.
Data Resources: OECD, SDBS Database, September 2006. For further reading Ahmad et al (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Paper 2003/14, OECD, Paris. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. OECD (2003), OECD Science, Technology and Industry Scoreboard section D and Annex 1. OECD, Paris OECD (2006), Structural and Demographic Business Statistics, 1993-2004. OECD, Paris.
38
OECD 2006
B.5.
LABOUR PRODUCTIVITY AND HETEROGENEITY
Size Class Heterogeneity in Labour Productivity

ISIC Revision 3 and code description 15 Food products and beverages 16 Tobacco products 17 Textiles 18 Wearing apparel and fur 19 Leather and articles of leather; footwear 20 Wood & products of wood & cork, exc. furniture 21 Paper and paper products 22 Printing, publishing and recorded media 23 Coke and petroleum products; nuclear fuel 24 Chemicals and chemical products 25 Rubber and plastic products 26 Other non-metallic mineral products 27 Basic metals 28 Fabricated metal products, exc. machinery 29 Machinery and equipment, nec 30 Office, accounting & computing machinery 31 Electrical machinery & apparatus, nec 32 Radio, TV, communication equipment 33 Medical, precision & optical instrum.; watch & clocks 34 Motor vehicles, trailers and semi-trailers 35 Other transport equipment 36 Furniture; manufacturing, nec 37 Recycling 40-41 Electricity, gas and water supply 40 Electricity, gas, steam and hot water supply 41 Collection, purification and distribution of water 45 Construction 50 Sale, maint.,repair vehic/cycle, person., h/hold gd. 51 W/sale. trade & commission exc motor veh. & cycle 52 Retail trade exc. motor veh. & cyc.; repair h/hold gds. 55 Hotels and restaurants 60 Land transport, transport via pipelines 61 Water transport 62 Air transport 63 Support. & aux. transport act., travel agencies activ. 64 Post and telecommunications 65 Financial intermediation, except insurance and pension funding 66 Insurance and pension funding, except compulsory social security 67 Activities auxiliary to financial intermediation 70 Real estate activities 71 Renting of mach. without operator; rent. of pers. gds. 72 Computer and related activities 73 Research and development 74 Other business activities Average Total Manufacturing Services Average Total: Excluding smallest size class Manufacturing Services
Germany France Italy Japan United Kingdom United States C of Var Mono C of Var Mono C of Var Mono C of Var Mono C of Var Mono C of Var Mono 0.29 Y 0.42 N 0.36 N 0.84 N 0.34 Y 0.12 N 0.24 Y 0.35 Y 0.07 N 0.23 N 0.36 N 0.26 N 0.57 Y 0.30 Y 0.11 N 0.37 N 0.31 N 0.36 Y 0.28 Y 0.29 N 0.22 N 0.31 Y 0.04 N 0.32 Y 0.44 Y 0.15 N 0.20 N 0.31 Y 0.19 N 0.33 Y 0.74 Y 0.34 N 0.30 N 0.21 N 0.22 Y 0.55 Y 0.45 Y 0.20 Y 0.32 N 2.55 N 0.38 N 0.37 N 0.85 N 0.29 Y 0.19 Y 0.27 Y 0.58 Y 0.33 N 0.43 N 0.28 N 0.08 N 0.23 Y 0.51 Y 0.17 Y 0.18 N 0.18 Y 0.55 Y 0.41 Y 0.41 Y 0.23 N 0.24 N 0.36 Y 0.26 N 0.21 Y 0.69 Y 0.16 N 0.37 N 0.26 Y 0.06 N 0.23 Y 0.43 Y 0.24 Y 0.23 Y 0.13 Y 0.20 Y 0.43 Y 0.09 N 0.40 N 0.37 N 0.43 N 0.42 N 0.43 N 0.31 Y 0.15 Y 0.30 Y 0.44 Y 0.07 Y 0.17 N 0.35 Y 0.76 Y 0.22 N 0.35 N 0.21 N 0.32 N 0.47 Y 0.32 N 0.34 N 0.89 N 0.19 N 0.64 Y 0.12 N 0.62 N 0.28 N 2.10 N 0.30 Y 0.53 Y 0.27 N 0.39 N 0.25 Y 0.15 Y 0.39 Y 0.06 N 0.31 N 0.06 N 0.32 N 0.88 N 0.13 N 0.76 N 0.29 N 0.93 N 0.16 N 0.36 N 0.12 N 0.37 Y 0.28 Y 0.11 Y 0.36 Y 0.12 Y 0.22 N 0.09 Y 0.28 N 0.45 Y 0.65 N 0.04 N 0.23 N 0.09 N 0.38 N 0.06 N 0.21 N 0.10 N 0.10 N 0.06 N 0.23 N 0.15 N 0.27 N 0.17 Y 0.16 N 0.22 N 0.16 N 0.20 N 0.50 N 0.22 N 0.56 N 0.29 N 0.38 N 0.80 N 0.17 N 0.40 N 0.83 N 0.29 N 0.14 N 0.24 N 0.22 N 0.12 N 0.09 N 0.46 N 0.39 N 0.55 Y 0.29 N 0.19 N 0.27 N 0.37 N 0.38 N 0.13 N 0.27 N 0.67 N 0.35 N 0.22 N 0.29 N 0.66 N 0.85 N 0.07 N 0.17 N 0.36 Y 0.13 Y 0.37 Y 0.11 N 0.22 N 0.13 N 0.35 N 0.32 Y 0.37 N 0.07 N 0.21 N 0.14 N 0.16 N 0.19 N
0.46 0.59 0.20 0.61 0.76 0.30 0.25 0.32 0.14 0.41 0.43 0.29 0.53 0.79 0.21 0.56 0.84 0.21 0.95 0.95 0.90 0.90 0.16 0.19 0.07 0.30 0.43 0.07 0.03 0.00 0.00 0.61 0.81 0.44
Notes: "C of Var"reflects the coefficient of variation. It measures the standard deviation of labour productivity normalised by the average of labour productivity by size class. It is important to note that the denominator is a simple average of the 5 size classes used and, so, is not weighted by the relative contributions of a particular size class to value-added or employment. "Mono" returns a "Y" if labour productivity increases monotonically by size class and "N" otherwise.Figures in bold ("N") refer to cases where labour productivity is monotonically increasing when the smallest size class is excluded. Averages are based on "Y"=1 and "N"=0. For averages excluding the smallest size class bolded "N"s are also equal to 1.
OECD 2006
39
C. PRODUCTIVITY GROWTH BY INDUSTRY
OECD 2006
41
CONTRIBUTION OF KEY ACTIVITIES TO AGGREGATE PRODUCTIVITY GROWTH

A breakdown of productivity growth by activity can show which industries are particularly important for overall productivity performance. In many OECD countries, notably in Spain, Greece, Czech Republic, Sweden, Hungary, the United Kingdom, the United States, and Australia, business sector services have accounted for the bulk of labour productivity growth over 2000-2005. However, the manufacturing sector remains important in the Korea, Sweden, Hungary, Finland and Czech Republic. For several countries, as Spain, Hungary, Czech Republic, the contribution of business services has increased between the periods 1995-2000 and 20002005. This is linked to their growing share in total value added. However, it also reflects stronger labour productivity growth in some OECD countries, such as Greece, Hungary, and Spain. In Portugal, Luxembourg,
C.1.
Italy, Canada and Australia, on the other hand, labour productivity growth in business services slowed over the past decade, a trend that can also be observed at the aggregate level (see A.7).
Data Resources: OECD, Annual National Accounts Database, September 2006. For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Wlfl, A. (2003), Productivity Growth in Service Industries: An Assessment of Recent Patterns and the Role of Measurement, STI Working Paper 2003/7, OECD, Paris. Wlfl, A. (2005), The Service Economy in OECD Countries, STI Working Paper 2005/3, OECD, Paris.
Measuring labour productivity growth by industry

Labour productivity growth can be calculated as the difference between the rate of growth of output or value added and the rate of growth of labour input. Calculating a sectors contribution to aggregate productivity growth requires a number of simple steps, as explained in the OECD Productivity Manual. First, the aggregate rate of change in value added is a share-weighted average of the industry-specific rate of change in value added, with weights reflecting the current price share of each industry in value added. On the input side, aggregation of industry-level labour input is achieved by weighting the growth rates in total employment (since hours worked by industry are not available across OECD countries) with each industrys share in total labour compensation. Aggregate labour productivity growth can then be calculated as the difference between aggregate growth in value added and aggregate growth in labour input. An industrys contribution to aggregate labour productivity growth is therefore the difference between its contribution to total value added and total labour input. If value added and labour shares are the same, total labour productivity growth is a simple weighted average of industry-specific labour productivity growth. Similar approaches can be followed when production, instead of value added, is used as the output measure. Difficulties in measuring output and productivity in services sectors should also be taken into consideration when interpreting the results (see Wlfl, 2003).
42
OECD 2006
C.1.
CONTRIBUTION OF KEY ACTIVITIES TO AGGREGATE PRODUCTIVITY GROWTH

Contribution to growth of value added per person employed Annual average growth rates and contributions in percentage points 1995-2000
Business sector services Other services 3.0 Manufacturing Other industries
5 4 total economy labour productivity grow th 3 2 1 0 -1

G re ni ec te e d Ki ng do m Au st ra li a N or w N a et he y rla nd s C an ad a Po C r tu ze ch ga l R ep ub li c Ko re a Ja pa n Fi n la Lu nd xe m bo ur g D en m a Sw rk ed en Au st ria G er m an y Fr an ce Be lg iu m H un ga ry Ita ly Sp ai n
2.5
2.1
2.4 1.4 1.5
2.2 1.8
2.9 1.3
2.6 2.5 1.9
3.1 1.9 1.3 1.1 1.3
2.8
0.8
0.9
2000-2005
Business sector services 5 4 3 1.8 2 1 0 -1 1.6 1.6 1.4 1.6 4.3 3.6 3.8 3.4 0.9 2.9 Other services
Manufacturing
Other industries
total economy labour productivity grow th
1.4 1.0 1.0 0.7 1.3 1.1 1.1 0.8 0.1
0.0
-0.5
Sp ai n C G ze re ec ch e R ep ub l Sw ic ed en H un U ni ga te ry d Ki ng U do ni te m d St at es Au st ra lia N or w ay
1. Or latest year available.
Ja pa n Ko re a Be lg N i u et he m rla nd s C an ad a D en m ar k Fi nl an d Au st ria G er m an y Fr an Lu ce xe m bo ur Po g rtu ga l Ita ly
OECD 2006
43
PRODUCTIVITY GROWTH IN MANUFACTURING

The manufacturing sector has traditionally been the main driver of aggregate productivity growth in OECD countries. While its contribution to aggregate productivity growth has become less important in recent years (see C.1), notably in some OECD countries, it still shows strong performance in many industries. For most OECD countries, manufacturing productivity growth was slower over 2000-2003 than over 1995-2000, with the exception of a few countries, notably Australia and Switzerland. The difference is particularly marked in Canada, Korea and Poland, where the productivity growth in manufacturing marked a slowdown in the early 2000 thus revealing a strong structural shift in the manufacturing sector. Within manufacturing, large differences can be observed. High- and medium-high technology industries (see Box), such as machinery, electrical and optical equipment, chemicals and motor vehicles have typically experienced relatively high rates of productivity growth. Low-technology manufacturing industries, such as wood and textiles, have often observed slightly lower rates of productivity growth. However, growth rates remained quite high in 20002003 for some countries, in particular in the textiles sector where the Czech Republic, France, the United Kingdom and the United States had a yearly productivity growth above 7%. Developments in certain industries are also noteworthy. Electrical and optical equipment is among the manufacturing industries with the highest rate of productivity growth. Over the time-period Hedonic methods
C.2.
1995-2000, the productivity growth for most countries was quite high and over 15% annually for a few countries, such as Finland, Hungary, Korea, Sweden and the United States. Nevertheless, most OECD countries experienced slower productivity growth in electrical and optical equipment in 20002003 than in 1995-2000. Due to rapid technological progress, measuring productivity growth in this industry is particularly difficult. Some countries have introduced so-called hedonic deflators to address the rapid changes in quality and characteristics that characterise this industry. Other countries have not, which implies that the international comparability of productivity growth rates in this industry is likely to be somewhat limited.
Data Resources: OECD, STAN Indicators Database, November 2005. OECD, STAN Database, November 2005. For further reading: OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. Pilat, D., A. Cimper, K. Olsen and C. Webb (2006), The Changing Nature of Manufacturing in OECD Economies, STI Working Paper, OECD, Paris. Triplett, Jack (2006), Handbook on Hedonic Indexes and Quality Adjustment in Price Indexes: Special Application to Information Technology Products, OECD, Paris. Wlfl, A. (2003), Productivity Growth in Service Industries: An Assessment of Recent Patterns and the Role of Measurement, STI Working Paper 2003/7, OECD, Paris, www.oecd.org/sti/working-papers
Examining the role of ICT-producing sectors in economic growth is heavily influenced by measurement problems, both regarding outputs and inputs. The key measurement problem for the manufacturing of ICT goods on both the output and input side concerns prices, in particular how to statistically capture significant quality improvements associated with technological advances in goods such as computers and semi-conductors. The use of hedonic deflators is generally considered as the best way to address these problems. Several countries currently use hedonic methods to deflate output in the computer industry (e.g. Canada, Denmark, France, Sweden and the United States). However, these countries do not use exactly the same method. Some countries, such as the United States, apply their own hedonic deflator, others apply the US hedonic deflator adjusted for exchange rates, and yet other OECD countries apply conventional deflators. Adjusting for these methodological differences in computer deflators for the purpose of a cross-country comparison is difficult, since there are considerable cross-country differences in industrial specialisation. Only few OECD countries produce computers, where price falls have been very rapid; many only produce peripheral equipment, such as computer terminals. Similar differences in industry composition exist in Radio, Television and Communication Equipment (ISIC 32), which includes the semi-conductor industry. The differences in the composition of output are typically larger than in computer investment, where standardised approaches have been applied (e.g. Schreyer, et al. 2003).
44
OECD 2006
C U
U ni te d
10
15
20
-5 0 5
ze ch
Lu xe
-15 10 -5 0 5
-10
% 15
-10
m
10
15
20
-5 % 14 12 10 8 6 4 2 0 -2 -4 -6
C.2.
OECD 2006
bo ur g ec e G re Sw ed e n H un g ar y
U ni te
Sw
10 8 6 4 2 0 -2
% 12
it z er la nd
U ni te d
Chemicals
St at es
Machinery2
High- and medium-high technology manufactures
Wood
G er m an y pa n om U ni te d Ki ng d Ja N et he r la nd s Fr a nc e
K R or Lu e p ea xe u b m lic bo Be urg lg iu Au m s C tria an a G da re Sw ece e U Po de n ni te rtu d ga St l at Fi e s n H lan un d ga Sw M e ry it z xic er o la N nd or U w ni te F ay d ra Ki nc ng e G do m er m D an en y m ar N k et he It a rla ly nd Ja s Sl p ov a k S an R pa e p in ub lic
H ni un te g d ar St y a Po tes rtu U ni te N gal d or Ki w ng ay D do m en m a M rk ex Au ico st Fr ria an Lu Gr ce e xe e m ce bo Sw urg ed e Ja n pa Sp n C ze Ge ain ch rm R an ep y ub F l Sw in ic it z land er la n Ko d r N C a ea et na he d rla a nd s Sl ov B It a e a k lg ly R ium ep ub lic
St a Sw tes ed e Ja n p Fi an nla n Fr d an L u K ce xe o r m ea Sw b o it z urg er l H an N un d et g he ar rla y D nd en s m U a ni te A rk d us Ki tri ng a d G om er m Be a ny lg i Po um rtu ga Sp l ai n I C t aly an a G da re Sl ec ov e M ak e R xic ep o ub lic
30 25 20 15 10 5 0 -5 -10 -15 -20
ni te d C
Lu xe
% 8
-4 0 2
-2
% 14 12 10 8 6 4 2 0 -2 -4 -6 -8
%
U
1995-2000 compared with
PRODUCTIVITY GROWTH IN MANUFACTURING
Total manufacturing
Value added per person employed, percentage change at annual rate
10 8 6 4 2 0 -2 -4 -6 -8 -10
2000-2003
1
Low technology manufactures
Electrical & Optical equipment 2
Motor vehicles 3
Textiles
m bo ur g ni Belg te iu d m Ki ng U do ni te m d St at es D en m ar k Fr an ce C an ad a Ja pa n Fi nl an d H un ga ry Sp ai n Ko re a It a G ly er m an y G re ec e Sl M ov ex ak ico R ep ub lic
1. Or latest year available. 2. Data for the United States refer to ISIC sector 29-33 machinery and equipment. 3. Data for Belgium, Japan, Korea, Netherlands, Portugal, Spain and UK refer to ISIC sector 34-35 transport equipment.
St at e G s re e N ce or G wa er y m an y Ja p U ni D e an nm te d Ki ark ng do Po m rtu Be gal lg iu m Fr an Sw ce N e et he den rla nd Fi s nl an M d ex ico It a Au ly st ria Ko r C ea an ad a Sw Sp it z ain er la nd U Sw ni t e ze ed den ch Sta R te ep s ub l Ja ic p Fi an nl an Ko d H rea un D ga en ry m a Fr rk an c A Sw u e it z stria er U l a ni te M nd d Ki exic ng o do m Sp G ain re P e L u o r ce xe tug m al bo u N rg or Be wa y N l et giu he m rl G and er s m an y Sl ov C It a ak an ly R ad ep a ub lic
U U nite ni d t C ed K Sta ze i te ch ng s R do ep m ub N ew Fr lic Z e anc al e a Au nd s G tria re L u Hu e ce xe n g m ar bo y u Ko rg Fi rea nl a N nd o Be rwa lg y Sw ium ed M en D e N en xico et m he a rla rk n Sw J ds it z apa er n la n S d Po pai n G rtug er a m l an y C It a Sl a l ov A na y d ak us a R tra ep lia ub lic
d S Au tate Sl st s ov ak K rali R or a ep ea u G blic re e Ja ce p Ic a e n H lan un d g Po ary U ni te S lan d w d Ki ed ng en C d ze ch M om R ex Sw ep ico it z ubl i D erla c en n d m Be a lg rk i Fi um nl a Au nd Lu F str xe ra ia m nc bo e N urg or w a N Ge Spa y ew rm in Z e an al y N Po and et rt he ug rla al C nd an s ad a It a ly
45
PRODUCTIVITY GROWTH IN SERVICES

In several OECD countries, productivity growth in business services accelerated from 1995-2000 to 2000-2003. This was notably the case in Australia, Hungary, Japan, Korea, New Zealand and the United States. In most other countries, including most large European countries, productivity growth in business services was less rapid over 2000-2003 than over 1995-2000. The variation across services sectors and across countries is considerable. Industries such as wholesale and retail trade, and post and telecommunications are typically the services sectors with the highest rate of productivity growth. Productivity growth in business services, hotels and restaurants as well as transport and storage are typically lower, although these industries have been relatively important in some OECD countries. Productivity growth in social services is not shown in the charts, as many OECD countries still measure the output of these services through their inputs.
Data Resources: OECD, STAN Indicators Database, November 2005. OECD, STAN Database, November 2005. For further reading
C.3.
Ahmad, Nadim, Francois Lequiller, Pascal Marianna, Dirk Pilat, Paul Schreyer and Anita Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Paper 2003/14, OECD, Paris. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris. OECD (2005), Enhancing Services Sector Performance, OECD, Paris. Wlfl, A. (2003), Productivity Growth in Service Industries: An Assessment of Recent Patterns and the Role of Measurement, STI Working Paper 2003/7, OECD, Paris. Wlfl, A. (2005), The Service Economy in OECD Countries, STI Working Paper 2005/3, OECD, Paris.
Measuring productivity in services

The service sector now accounts for about 70 to 80% of aggregate production and employment of OECD economies and continues to grow. But measuring output and productivity growth in many services is not straightforward. What exactly does a lawyer or economist produce? How can the rapidly-changing pricing schemes of telecommunications providers be compared over time? And how should one measure the quantity of health services provided by public hospitals? These and similar questions arise when statisticians attempt to measure the production of services and the output of service industries and the difficulty of this task is hard to overstate. Generally, measuring volumes in the national accounts requires that current-price values of flows of goods and services can be divided into volume and price components. Typically, this is more difficult for services than for goods. Characteristics of goods can normally be identified and changes in quantities and qualities are measurable in principle, whereas for services even quantitative changes are often hard to measure, let alone quality change. Omitting qualitative changes does not necessarily mean that volume of services will be underestimated. For example, technical progress may improve the quality of medical services but may also lead to a decline in quality when, for example, self-service in post offices, longer queuing times or increased distances to the nearest post office all of which reflect an increased burden on customers and a lower quality of services. At the level of individual industries, two types of measurement issues arise: comparability of current-price measures, and comparability of the price indices used to deflate the latter or, in some cases, the comparability of volume indices. When it comes to the impact of service industry measures on the comparability of aggregate GDP series, two other factors come into play. The first is the extent to which a particular service industrys output is bought as intermediate input by other domestic producers as opposed to the share of output that is delivered to final demand (private consumption, investment, government and export). The larger the share of the former, the smaller the impact of a measurement error at the industry level on measures of aggregate GDP growth, and vice versa: if a service industry delivers exclusively for final demand purposes, any possible measurement will carry over to measures of total GDP. The second factor is the size of the industry in question, or more precisely, its share in economy-wide value-added. The larger the share, the bigger the potential impact of an incorrect measure of industry-level output.
46
OECD 2006
% 14 12 10 8 6 4 2 0 -2 -4 -6 -8 % 14 12 10 8 6 4 2 0 -2 -4 -6 -8
C.3.
OECD 2006
U
% 5 4 3 2 1 0 -1 -2 -3
Wholesale & Retail trade
Transport & Storage
Au str a No lia D rw Un en ay ite ma r d St k at Gr es ee c Sp e Ca ain na Un da ite d Ki Italy ng d Sw om ed Fi en nla n M d ex i Au co str ia Ne Fra th nc er e la Ge nd s Sw rma itz ny er la n Ja d pa n
Hu ng Un G ite re ary Un d S ec ta e i te Czted Po s ec Kin lan h g d Re do m pu No bl ic Fi rwa n Ca lan y Ge na d rm da Sw Bel an itz giu y er m la Au n Ne sd w Ko tria Ze re Auala a s n Swtra d li Lu De edea xe nm n m ar b Ne ou k th Sprg er ain lan Ice d lans d Po Ita rtu ly Sl g M a ov ak Frexicl Re an o pu ce bl ic
% 14 10 6 2 -2 -6 -10 -14
1995-2000 compared with
% 18 16 14 12 10 8 6 4 2 0
1. Or latest year available. 2. In STAN, business services include ISIC Rev.3 sectors from 50 to 74.
PRODUCTIVITY GROWTH IN SERVICES
Business services 2
2000-2003
1
Value added per person employed, percentage change at annual rate
Hotels & Restaurants
Post & Telecommunications
Sw itz er la n Sp d a M in e Ge xic rm o a Au ny s No tria r Au way str ali a De Ital Ne nm y th ar er k lan Gr ds ee Un Fin ce ite la n d St d at e Fr s a Sw nce ed Un e ite Can n d Ki ada ng do Ja m pa n
Ic Au ela str nd Koalia r G Cz r ea ec A eec h u Ne R st e w ep ria Un Ze ubl ite Fala ic d in nd Ki la n n Un Sgd d ite weom d de St n Frate s Ca anc n e M ada e S xico No pai De rw n n a Lu Po ma y xe rtu rk m ga bo l ur Sw Hun Ne itz gag e th rla ry er n Belandd lgi s um Sl Po Ital ov G la y ak er n Re ma d pu ny bl ic
Au st ni Ic rali te el a d an St d at Ko es N rea or w Ja ay G pa r n H ee un ce D g en ar m y N U ew P ar ni ol k te Z an d ea d Ki l a ng nd d M om C exic G ana o er d a Be ma lg ny Fi i um n Sw lan d N A ede et u n he st rl ri a Po and Sl rtu s ov ak ga S R p l ep ai ub n lic Lu F It a x e ra l y Sw mb nce it z ou er rg la nd
47
LABOUR PRODUCTIVITY OF FOREIGN AFFILIATES

Foreign affiliates are often considered to make an important contribution to productivity performance. OECD data on foreign affiliates in manufacturing and services help point to their role in economic performance. In 2002, labour productivity of manufacturing foreign affiliates in the United Kingdom was more than two times higher than the average labour productivity of all manufacturing domestic firms. In the United States, Finland and France, labour productivity of manufacturing foreign affiliates was almost at the same level as the national average. With respect to the service sector, foreign affiliates in Portugal were two times more productive than the national average, while in Finland and the United States, labour productivity of foreign affiliates was lower than the national average. Between 1995 and 2001, in the manufacturing sector, foreign affiliates in Sweden, Finland and the United States recorded the highest growth of labour
C.4.
productivity, while in Spain and Portugal the growth of labour productivity of these affiliates was negative. During the same period, the growth of labour productivity of foreign affiliates in the service sector was high in Japan, but negative in the Netherlands, Portugal, Finland, the Czech Republic and France.
Sources OECD, Activity of Foreign Affiliates (AFA) database, June 2005. OECD, Foreign Affiliates Trade in Services (FATS) database, June 2005. For further reading OECD (2005), Measuring Globalisation OECD Handbook on Economic Globalisation Indicators, OECD, Paris. Available at: www.oecd.org/sti/measuringglobalisation OECD (2005), Measuring Globalisation Economic Globalisation Indicators, OECD, Paris. C. Criscuolo (2005), The Contribution of Foreign Affiliates to Productivity Growth: Evidence from OECD Countries, STI working papers 2005-8, OECD, Paris. Available at: www.oecd.org/sti/working-papers
Measuring labour productivity of foreign affiliates in host countries

In the calculations shown here, the choice of measurement of labour productivity was largely determined by the availability of data. Even at the level of total manufacturing, it was not possible to calculate total factor productivity, since no data on capital stock were available for foreign affiliates. Labour productivity is measured on the basis of gross value added divided by the number of employees. Relative labour productivity of foreign affiliates is the ratio of labour productivity of foreign affiliates compared to the national total for labour productivity in the manufacturing and services sectors. To measure labour productivity in terms of growth for total manufacturing and services, value added data for foreign affiliates have been deflated using sectoral deflators of the national industry and re-weighing them according to the sectoral structure of foreign affiliates. These calculations have been made where possible. For some sectors, this approach was not possible due to missing data. In these cases, deflators at a higher level of aggregation were used.
48
OECD 2006
C.4.
LABOUR PRODUCTIVITY OF FOREIGN AFFILIATES

Relative labour productivity of foreign affiliates, 2002 Manufacturing sector
1
Service sector
2.3 2.1 1.9 1.7
2.2 2 1.8 1.6
1.5
1.4
1.3
1.2
1.1
1
Ki ng do m Ne Spa in th er la nd s Ja pa n P Cz or ec tu ga h Re l pu bl i No c rw Hu ay ng a S ry Un we d ite en d St at e Fi s nl an d Fr an ce
Un ite d
Average annual labour productivity growth, 1995-2001 Percentage points Manufacturing sector
Foreign affiliates
12% 10% 8%
Cz ec h
All firms
10% 8% 6% 4%
Foreign affiliates
6% 4% 2% 0%
2% 0% -2% -4% -6%
-2% -4%
-8% -10%
Sp ai n Fi nl an d Fr Un an ite c d e Ki ng do m Hu ng ar y Ja pa Ne n th er la nd s No rw ay Po rtu ga Sw l ed Un en ite d St at es
Re pu bl ic
Ja pa n Ne th er lan ds
Re pu bli c Fi nla nd
Fr an ce
Cz ec h
1. Or nearest available year: Czech Republic 1997-2002; United Kingdom 1995-1999; Finland 1995-2002; Hungary 1996-2002; Spain 1999-2001 and Portugal 1996-2002. 2. Or nearest available year: Czech Republic 1995-2002; Sweden 1997-2000; Hungary 1998-2002; Netherlands 1997-2001; Japan 1997-2000 and Portugal 1996-2002. Sources: OECD, AFA, FATS and STAN databases, June 2005.
Cz ec h
Po rtu ga l Sw ed en Un ite d St at es
Hu ng ar y
Re pu bl ic Sw ed en Fr an ce Ne th er la nd s Fi nl an Un d ite d St at es
Po rtu ga l H un ga ry
Ja pa n
0.9
Service sector
All firms
OECD 2006
49
D. OFFICIAL MULTI-FACTOR PRODUCTIVITY STATISTICS FOR OECD MEMBER COUNTRIES
OECD 2006
51
MULTIFACTOR PRODUCTIVITY MEASURES IN AUSTRALIA

The Australian Bureau of Statistics has computed and published time series of multi-factor productivity indices for several years. The headline figure, also the one that is most timely available is MFP growth for the market sector. The market sector is an industry grouping comprising: agriculture, forestry and fishing; mining; manufacturing; electricity, gas and water supply; construction; wholesale trade; retail trade; accommodation, cafes and restaurants; transport and storage; communication services; finance and insurance; and the cultural and recreational services industries. These are industries with marketed activities for which there are satisfactory estimates of the growth in the volume of output. In addition, MFP productivity measures are presently being developed for individual ANZSIC industries. The ABS derives its estimates of MFP by forming a combined chain volume measure of labour and capital and dividing it into a chain volume measures of the gross value added of the market sector. The elements of capital input are compiled at a detailed level. There are capital input measures for 14 asset types for the corporate and unincorporated sectors for each of the industries included in the market sector. For each capital there is a volume indicator of the flow of capital services and a rental value to weight the service flow with the service flows of other capital inputs. An aggregate chain volume measure of capital services for the whole market sector is then combined with a measure of hours worked using estimates of capital and labour income weights. For more details see ABS (2000). The ABS MFP measures differ in several aspects from the MFP measures computed by the OECD. First and importantly, national data is based on more detailed source data than the international data. Second, ABS adjusts, on an experimental basis, labour input measures to reflect the composition of the labour force e.g., by age, education and experience. There are thus two MFP series, one based on simple hours worked (akin to the OECD labour input data) and one based on hours worked
D.1.
adjusted for compositional changes. Both series are shown in the graph below. It is apparent that MFP based on unadjusted hours rose more quickly than MFP based on adjusted hours. This reflects the fact that unadjusted hours rose less quickly than adjusted hours which in turn means that the composition of labour input has gradually shifted towards more qualified, more experienced workers. In other words, more of output growth can be attributed to labour input, and therefore, a smaller part remains as the unexplained MFP residual. Thirdly, capital input as computed by ABS is based on a broader scope of capital assets than used by the OECD. In particular, the national data includes agricultural land and inventories, two assets that are absent from the OECD capital computations. These and some other technical differences may lead to differences in reported MFP growth between the national and the international source. As a general rule, the national source is to be preferred over the international source for analyses that relate to Australia only whereas the international source is often better suited for comparisons between countries. Productivity indexes fluctuate according to the business cycle. One way to measure the trend rate of growth of productivity is to calculate the average annual growth rate between growth cycle peaks. Growth cycle peaks for multifactor productivity are identified as local maximum positive deviations of the productivity index from its long-term trend. Growth rates of MFP between cycle peaks are shown in the figure below.
Sources Australian Bureau of Statistics, available at: http://www.abs.gov.au For further reading Australian Bureau of Statistics (2000); Australian National Accounts: Concepts, Sources and Methods, Catalogue No 5216.0, Chapter 27. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
52
OECD 2006
D.1.
MULTIFACTOR PRODUCTIVITY MEASURES IN AUSTRALIA
Multi-factor productivity (value-added based) in the market sector, 1985=100 (fiscal years)
MFP based on unadjusted hours w orked
MFP based on hours w orked adjusted for labour composition
130.0 125.0 120.0 115.0 110.0 105.0 100.0 95.0 90.0

n. 19 85 Ju n. 19 87 Ju n. 19 89 Ju n. 19 91 Ju n. 19 93 Ju n. 19 95 Ju n. 19 97 Ju n. 19 99 Ju n. 20 01 Ju n. 20 03 Ju n. 20 05
-65 6 19 to 9 8-6 68 19 -69 7 19 to 4 3-7 73 19 -74 8 19 to 2 1-8 81 19 -82 8 19 to 5 4 -8 84 19 -85 8 19 to 9 8 -8
Source: Australian Bureau of Statistics, Catalogue No 5204.0 - Australian System of National Accounts, 2004-05.
Multi-factor productivity (value-added based) in the market sector during growth cycles Percentage changes at average annual rate between MFP growth cycle peaks (fiscal years)
1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0%
64 19
Source: Australian Bureau of Statistics, Catalogue No 5204.0 - Australian System of National Accounts, 2004-05.
Ju
OECD 2006
53
MULTIFACTOR PRODUCTIVITY MEASURES IN CANADA

Statistics Canada has computed and published time series of multi-factor productivity indices for a number of years. The headline figure, also the one that is most timely available is MFP growth for the business sector. In addition, MFP productivity measures are published for many 2-digit and 3-digit NAICS industries. MFP indices are computed as the ratio between value-added and combined labour and capital input, i.e., they constitute value-added based MFP measures. Statistics Canadas MFP measures differ in several aspects from the MFP measures computed by the OECD. First and importantly, the national data is significantly more detailed and also more timely than the international data. Second, labour input measures have been adjusted by Statistics Canada to reflect the composition of the labour force e.g., by age, education and experience whereas the OECD labour input data is a simple aggregate of hours worked. Thirdly, capital input as computed by Statistics Canada is based on a broader scope of capital assets than used by the OECD. In particular, the national data includes land and inventories, two assets that are absent from the OECD capital computations. These and some other technical differences may lead to differences in reported MFP growth between the national and the international source. As a general rule, the national source is to be preferred over the international source for analyses that relate to Canada only whereas the international source is often better suited for comparisons between countries.
D.2.
Productivity measures at the industry level are derived from a set of industry accounts. Under this approach, a variety of productivity series at the industry level are constructed using alternate measures of output along with their corresponding inputs. Industry data on outputs and inputs permit the construction of bottom-up MFP measures for major sectors as a weighted average of industry productivity growth rates. More detailed information on the methodology underlying Statistics Canadas productivity series can be found in the series description Productivity Measures and Related Variables (CANSIM Record No 1402) and in Baldwin and Harchaoui (2005).
Sources Statistics Canada, CANSIM Database, Tables 383-0016
to 383-0019.available at: http://www.statcan.ca For further reading Baldwin, John and Tarek Harchaoui (2005);The Integration of the Canadian Productivity Accounts within the System of National Accounts: Current Status and Challenges Ahead; Research Paper, Statistics Canada Economic analysis methodology paper series: National accounts; 11F0026 No 004. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
Multi-factor productivity (value-added based) in the business sector, 1981=100
115.0
110.0
105.0
100.0
95.0
90.0
81
83
85
87
89
91
93
95
97
99
01 20
19
19
19
19
19
19
19
19
19
19
Source: Statistics Canada, CANSIM Table 383-0016.
54
20
03
OECD 2006
D.2.
MULTIFACTOR PRODUCTIVITY MEASURES IN CANADA
Multi-factor productivity (value-added based) in 2-digit and selected 3-digit NAICS industries, 1997-2003 Percentage change at annual rate
Printing and related support activities Wood product manufacturing Non-metallic mineral product manufacturing Paper manufacturing Plastics and rubber products manufacturing Fabricated metal product manufacturing Educational services (except universities) Furniture and related product manufacturing Chemical manufacturing Retail trade Primary metal manufacturing Accommodation and food services Wholesale trade Information and cultural industries Clothing manufacturing Manufacturing Transportation equipment manufacturing All industries Food manufacturing Grant-making, civic, and professional and similar organizations Machinery manufacturing Other services (except public administration) Transportation and warehousing Agriculture, forestry, fishing and hunting Warehousing and storage Arts, entertainment and recreation Construction Miscellaneous manufacturing Electrical equipment, appliance and component manufacturing Health care and social assistance (except hospitals) Publishing industries, information services and data processing Professional, scientific and technical services Administrative & support, waste management Personal and laundry services and private households Petroleum and coal products manufacturing Utilities Beverage and tobacco product manufacturing Textile and textile product mills Support activities for mining and oil and gas extraction Computer and electronic product manufacturing Oil and gas extraction
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Source: Statistics Canada, CANSIM Table 383-0013.
OECD 2006
55
MULTIFACTOR PRODUCTIVITY MEASURES IN NEW ZEALAND

In 2006, Statistics New Zealand released, for the first time, an official time series of multi-factor productivity growth. This first dataset relates to the measured sector, consisting of industries for which estimates of inputs and outputs are independently derived in constant prices. Excluded are those industries mainly government non-market industries whose services, such as administration, health and education, are provided free or at nominal charges whose real value-added is measured in the national accounts largely using input methods, such as numbers of employees. Using an input series to estimate the change in outputs implicitly assumes nil productivity growth and to include these industries in the 'measured sector' would lead to a bias in the productivity series. Also excluded are a number of private sector market industries that similarly use some form of input measure to estimate real output, for example the residential and commercial property industries whose output is measured by the growth in property assets. Labour input is measured as the total number of hours paid, the number of ordinary and overtime hours for which an employee is paid. It excludes unpaid overtime but may include some hours that are not actually worked, such as paid leave and statutory holidays. While Statistics New Zealand states a conceptual preference of a measure of hours worked over hours paid, it has greater confidence in the quality of its hours paid data which are also available for longer time series. These data considerations led to the choice of hours paid over hours worked. A full description of data sources and methodology can be found in Statistics New Zealand (2006). Statistics New Zealand follows standard methodology and derives its estimates of MFP by subtracting a volume growth measure of labour and
D.3.
capital inputs from a volume growth measure of output, constant price gross value added. The elements of capital input are compiled at a level of 24 types of assets, and 22 industries. This is more detailed and broader in scope than the OECDs own estimates of capital services (which exclude, for example, residential buildings). In the national series for New Zealand, for each type of asset in every industry there is a volume indicator of the flow of capital services and a rental value to weight the service flow with the service flows of other capital inputs. An aggregate chain volume measure of capital services for the whole economy is then combined with a measure of hours worked using estimates of capital and labour income weights. The basic methodology behind the New Zealand MFP estimates closely follows the methods presented in international documents such as the OECD Productivity Manual. In some specific aspects, however, the national measures differ from MFP measures computed by the OECD (scope of capital assets, sector coverage). It follows that the OECDs estimates of New Zealands MFP growth cannot be directly compared with the national estimates published by Statistics New Zealand. As a general rule, the national source is to be preferred over the international source for analyses that relate to New Zealand only whereas the international source is often better suited for comparisons between countries.
Sources Statistics New Zealand (2006); Productivity Statistics: Sources and Methods; available at http://www2.stats.govt.nz For further reading OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
56
OECD 2006
D.3.
MULTIFACTOR PRODUCTIVITY MEASURES IN NEW ZEALAND

Multi-factor productivity (value-added based) in total economy, 1988=100
140 135 130 125 120 115 110 105 100 95 90

19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05
MFP total economy
Source: Statistics New Zealand.
Growth accounts for New Zealand, 1990-1995, 1995-2000, 2000-2005 and 1995-2005 In percentage points
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1990-1995 1995-2000 2000-2005 1995-2005
Contribution of labour input
Contribution of capital input
Multi-factor productivity grow th
Source: Statistics New Zealand.
OECD 2006
57
MULTIFACTOR PRODUCTIVITY MEASURES IN SWITZERLAND

In 2006, the Swiss Federal Statistical Office published a first set of MFP estimates for Switzerland. This first dataset relates to the total economy and comprises thus the private and the public sector. This differs from other national MFP measures (e.g., Canada, Australia or the United States) but is similar to the OECD MFP statistics. Labour input measures also correspond to the simple unadjusted series of hours worked that are used by the OECD. This reflects a constraint on data availability that does not presently permit the Swiss Federal Statistical Office to adjust hours worked for compositional change although the desirability of such an adjustment is clearly recognised by the Statistical Office. The Swiss Federal Statistical Office follows standard methodology and derives its estimates of MFP by deducting, from the volume measure of GDP a weighted volume growth measure of labour and capital inputs. The elements of capital input are compiled at a level of 16 types of assets. For each type of asset there is a volume indicator of the flow of capital services and a rental value to weight the service flow with the service flows of other capital inputs. An aggregate chain volume measure of capital services for the whole economy is then combined with a measure of hours worked using estimates of capital and labour income weights. The basic methodology behind the Swiss MFP estimates closely follows the methods presented in international documents such as the OECD Productivity Manual. In some specific aspects,
D.4.
however, the Swiss MFP measures differ from MFP measures computed by the OECD. The national data is based on more detailed source data than the six-way asset classification used by the OECD. There is also important difference in the scope of capital measures. In particular, the estimates by the Swiss Federal Statistical Office include residential assets which are excluded from the OECD data. It follows that international comparisons between the national MFP results for Switzerland and OECDs MFP data for other countries have to be made with the necessary caution.
Sources Swiss Federal Statistical Office http://www.bfs.admin.ch For further reading Swiss Federal Statistical Office (2006), Analyse des contributions la croissance des facteurs de production, de la productivit multifactorielle et du rle jou par l'intensit capitalistique de 1991 2004, Neuchtel. Swiss Federal Statistical Office (2006), Stock de capital non financier , Rapport mthodologique, Neuchtel. Swiss Federal Statistical Office (2006), Productivit multifactorielle , Rapport mthodologique, Neuchtel. OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
58
OECD 2006
D.4.
MULTIFACTOR PRODUCTIVITY MEASURES IN SWITZERLAND

Multi-factor productivity (value-added based) in total economy, 1991=100
107.0 106.0 105.0 104.0 103.0 102.0 101.0 100.0 99.0 98.0 97.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Swiss Federal Statistical Office.
Growth accounts for Switzerland, 1995-2000, 2000-2004 and 1995-2004 In percentage points
2.5%
2.0%
1.5%
1.0%
0.5%
0.0% 1995-2000 Contribution of labour input 2000-2004 Contribution of capital input 1995-2004 Multi-factor productivity grow th
Source: Swiss Federal Statistical Office.
OECD 2006
59
MULTIFACTOR PRODUCTIVITY MEASURES IN THE UNITED STATES

The United States Bureau of Labor Statistics has computed and published time series of multi-factor productivity indices for a number of years. The headline figure, also the one most timely available are MFP growth for the business and the non-farm business sector. In addition, MFP productivity measures are published for 20 2-digit SIC manufacturing industries and 108 3-digit SIC manufacturing industries, railroad transportation, and air transportation. Business sector indices of MFP are computed as the ratio between value-added and combined labour and capital input, i.e., as value-added based MFP measures. Industry-level multifactor productivity measures are constructed by dividing an index of output by an index of combined inputs. Combined inputs are a weighted average of employee hours, capital services (land, structures, equipment and inventories), and intermediate purchases (materials, energy, and purchased services). The indexes of output and of combined inputs are Tornqvist indexes, developed for each industry by computing a weighted average of the growth rates of the various outputs or inputs between two periods, with weights based on relative cost shares. The weight for each item equals its average value share in the two periods. Thus, industry-level MFP measures follow a KLEMS-type approach which is different from the value-added based approach for the total business sector.
D.5.
For a more complete discussion of the Tornqvist methodology see "Industry Productivity Measures," Chapter 11 of the BLS Handbook of Methods. BLS MFP measures differ in several aspects from the MFP measures computed by the OECD. First and importantly, the national data is significantly more detailed and also more timely than the international data. Second, labour input measures have been adjusted by BLS to reflect the composition of the labour force e.g., by age, education and experience whereas the OECD labour input data is a simple aggregate of hours worked. These and some other technical differences may lead to differences in reported MFP growth between the national and the international source. As a general rule, the national source is to be preferred over the international source for analyses that relate to the United States only whereas the international source is often better suited for comparisons between countries.
Sources United States Bureau of Labor Statistics, Multifactor Productivity statistics, available at: http://www.bls.gov/mfp/home.htm. For further reading Unites States Bureau of Labor Statistics Handbook of Methods; BLS Bulletin 2490.
(1997),
OECD (2001), Measuring Productivity OECD Manual, OECD, Paris.
Availability of U.S. BLS productivity measures for major sectors and sub-sectors of the economy
Productivity measure Labour productivity1 Business Non-farm business Non-financial corporations Manfacturing, total Durable Non-durable Multifactor productivity1 Private business Private non-farm business KLEMS Multi-factor productivity Manufacturing and and 20 2digit SIC manufacturing industries services
1
Input(s) Labour Labour
Index available Quarterly Quarterly
Labour, capital Labour, capital
Annually Annually
Labor, capital, energy, materials, services
Annually
Includes government enterprises; multifactor productivity measures exclude such enterprises.
60
OECD 2006
D.5.
MULTIFACTOR PRODUCTIVITY MEASURES IN THE UNITED STATES

Major sectors and manufacturing industries of the economy, 1987=100
Multi-factor productivity (value-added based) in the business sector, 1987=100

Private non-farm business sector Private business sector
KLEMS multi-factor productivity in manufacturing, 1987=100

125.0 120.0
125.0 120.0
115.0 110.0 105.0
115.0 110.0
100.0
105.0
95.0 90.0
100.0
87 89 91 93 95 97 99 01 03 05 19 19 19 19 19 19 19 20 20 20
00
97
98
95
87
88
90
91
92
93
89
94
96
20
99
19
19
19
19
19
19
19
19
KLEMS multi-factor productivity in 2-digit SIC manufacturing industries, 1987-2001 Percentage change at annual rate
Electric equipment Ind mach. and computer equipment Durable goods Textile mills products Instruments Rubber and plastic products Apparel products Misc. Manufacturing Furniture and fixtures Stone, clay and glass Lumber and wood products Transportation equipment Fabricated metal products Primary metal industry Nondurable goods Chemicals Petroleum refining Food and kindred products Paper products Printing and publishing
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
19
19
19
4.0%
5.0%
Source: United States Bureau of Labor Statistics.
19
20
19
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ANNEX 1: OECD PRODUCTIVITY DATABASE
Over several years, the analysis of productivity and economic growth has been an important focus of OECD work. To carry out this work, OECD needs comparable data on productivity growth and its underlying drivers. There has also been significant interest in productivity data by researchers and analysts outside the OECD and this led to the development of the OECD Productivity Database, designed to be as comparable and consistent across countries as is currently possible. The database and related information on methods and sources were made publicly available through the OECD Internet site on 15 March 2004. Coverage The OECD Productivity Database currently provides annual estimates of Labour productivity growth, measured as GDP per hour worked, and all components data, for 29 OECD countries and the period 1970-2005; Capital services and multi-factor productivity for 19 OECD countries for the period 1985-2005 or latest year available, depending on countries; Labour productivity levels for 2005.
All of the above data relate to the economy as a whole. In addition, the Productivity Database features industry-level measures of labour productivity growth, drawn from the OECD STAN Database, see www.oecd.org/sti/stan . The OECD Productivity Database is updated on a regular basis as new data become available. It is accessible through the OECD Internet site, at: www.oecd.org/statistics/productivity . Sources of data underlying the OECD Productivity Database The OECD productivity database combines to the extent possible a consistent set of data on GDP, labour input measured as total hours worked, and capital services. The following sources are used in the productivity database. Gross Domestic Product Estimates for GDP are derived from OECD's Annual National Accounts (ANA). The data from ANA are based on OECDs annual national accounts questionnaire to OECD member countries. The data resulting from this questionnaire differ somewhat from national sources and are more comparable across countries than those derived from OECDs quarterly national accounts, thanks to several small methodological adjustments that are made. However, the differences with other OECD sources, such as the Quarterly National Accounts and the Economic Outlook database, are minor for most countries. Labour Input The estimates of labour productivity included in the database refer to GDP per hour worked; measures of GDP per person employed are not yet included. GDP per hour worked requires estimates of trends in total hours worked that are consistent across countries. Generally, the default source for total hours worked in the productivity database is the national accounts. However, for a number of
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countries, the national accounts do not provide hours worked and other sources have to be invoked. Consistency of data is achieved by matching the hours worked that are collected by the OECD for its annual OECD Employment Outlook with the conceptually appropriate measure of employment for each individual country, i.e. the measure of employment for that country that is consistent with the measure of hours worked collected by the OECD. Estimates of average hours actually worked per year per person in employment are currently available on an annual basis for 29 OECD countries (See OECD Employment Outlook, Statistical Annex Table F www.oecd.org/els/employmentoutlook/statannex). The OECD Productivity Database includes, in addition, hours of work per employee for Hungary and Korea. These estimates are available from National Statistical Offices for 22 countries, 15 of which are consistent with National Accounts concepts and coverage. To develop these estimates, countries use the best available data sources for different categories of workers, industries and components of variation from usual or normal working time (e.g. public holidays, annual leave, overtime, absences from work due to illness and to maternity, etc.). For example, in 2 countries (Japan and United States) actual hours are derived from establishment surveys for regular or production/non-supervisory workers in employee jobs and from labour force surveys (LFS) for non-regular or managers/non-supervisory employees, self-employed, farm workers and employees in the public sector. In 3 other countries (France, Germany and Switzerland), the measurement of annual working time relies on a component method based on standard working hours minus hours not worked due to absences plus hours worked overtime. Standard working hours are derived from an establishment survey (hours offered), an administrative source (contractual hours) and the labour force survey (normal hours), respectively. The coverage of workers is extended using standard hours reported in labour force surveys or other sources as hours worked overtime. Vacation time is either derived from establishment-survey data on paid leave or the number of days of statutory leave entitlements. Hours lost due to sickness are estimated from the number of days not worked from social security registers and/or health surveys. On the other hand, the national estimates for several other countries (i.e. Australia, Canada, Czech Republic, Finland, Iceland, Mexico, New Zealand, Slovak Republic, Spain, Sweden and United Kingdom) rely mainly on labour force survey results. Annual working hours are derived using a direct method annualising actual weekly hours worked, which cover all weeks of the year in the case of continuous surveys. But, for labour force surveys with fixed monthly reference weeks, this method results in averaging hours worked during 12 weeks in the year and, therefore, necessitates adjustments for special events, such as public holidays falling outside the reference week (i.e. Canada and Finland). Finally, estimates of annual working time for 4 other EU member states are derived by the OECD Secretariat by applying a variant of the component method to the results of the Spring European Labour Force Survey (ELFS). A summary of the various measures available in September 2006 is shown in Table 1 below. Two other considerations should be kept in mind. First, annual working-time measures are reported either on a job or on a worker basis. To harmonise the presentation, annual hours worked measures can be converted between the two measurement units by using the share of multiple job holders in total employment, which is available in labour force surveys, albeit no further distinction is 1 possible between second and more jobs.
1.
For example, the BLS-Office of Productivity and Technology (OPT) estimates of annual hours of work for the United States are reported on a (per) job basis and are later converted by the OECD Secretariat to a per worker basis by multiplying the job-based annual hours of work by (1 + CPS based share of multiple jobholders in total employment).
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Table 1: Measures of annual working time and employment included in the OECD Productivity Database as of September 2006 Source for annual actual working hours Source for employment data Australia Australian Bureau of Statistics Annual National Accounts Austria Annual National Accounts Annual National Accounts Belgium OECD Employment Outlook Annual National Accounts Canada Annual National Accounts Annual National Accounts Czech Republic OECD Employment Outlook Annual National Accounts Denmark Annual National Accounts Annual National Accounts Finland Annual National Accounts Annual National Accounts France Annual National Accounts Annual National Accounts Germany Annual National Accounts Annual National Accounts Greece Annual National Accounts Annual National Accounts Hungary Annual National Accounts Annual National Accounts Iceland OECD Employment Outlook Annual National Accounts Ireland OECD Employment Outlook Annual National Accounts Italy Annual National Accounts Annual National Accounts Japan OECD Employment Outlook Annual National Accounts Korea Annual National Accounts Annual National Accounts Luxembourg OECD Employment Outlook Annual National Accounts Mexico OECD Employment Outlook Annual National Accounts Netherlands OECD Employment Outlook Annual National Accounts New Zealand OECD Employment Outlook Labour Force Statistics Norway Annual National Accounts Annual National Accounts Poland OECD Employment Outlook Annual National Accounts Portugal OECD Employment Outlook Annual National Accounts Slovak Republic Annual National Accounts Annual National Accounts Spain Annual National Accounts Annual National Accounts Sweden Annual National Accounts Annual National Accounts Switzerland Annual National Accounts Annual National Accounts Turkey No data Labour Force Statistics United Kingdom OECD Employment Outlook UK Office for National Statistics United States US Bureau of Labor Statistics US Bureau of Labor Statistics Source: OECD (2006). Second, given the variety of data sources, of hours worked concepts retained in data sources, 2 and of measurement methodologies (direct measures or component methods ) to produce estimates of annual working time, the quality and comparability of annual hours worked estimates are constantly questioned, and are subject to at least two probing issues:
Labour force survey-based estimates are suspected of over-reporting hours worked compared to work hours reported in time-use surveys, in particular for those working long hours, like managers and professionals. Employer survey-based estimates do not account for unpaid overtime hours and are sometimes suspected of under-reporting hours worked, with consequences on productivity levels and growth.
The comparability of measures of hours worked across OECD countries thus remains an issue, and work is currently underway, notably through the Paris Group, a UN city group on Labour and Compensation, to further improve the available measures of hours worked.
2. However, both methods can be summarised by the following identity: Annual hours per worker = Standard weekly hours worked x Number of weeks actually worked over the year = Weekly hours actually worked x 52 weeks, considering weekly reference period for reporting hours worked.
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Capital input The appropriate measure for capital input within the growth accounting framework is the flow of productive services that can be drawn from the cumulative stock of past investments in capital assets (see OECD, 2001a). These services are approximated by the rate of change of the productive capital stock a measure that takes account of wear and tear, retirements and other sources of reduction of the productive capacity of fixed assets. Flows of productive services of an office building, for instance, are the protection against rain or the comfort and storage services that the building provides to personnel during a given period (Schreyer et al., 2003). The price of capital services per asset is measured as their rental price. If there are markets for capital services, as is the case for office buildings, for instance, rental prices could be directly observed. For most assets, however, rental prices have to be imputed. The implicit rent that capital good owners pay themselves gives rise to the terminology user costs of capital. Capital input (S) is measured as the volume of capital services, assumed to be in a fixed proportion to the productive capital stock (see Schreyer, et al., 2003 for a more extensive explanation and for details of the computation of capital services). The productivity database publishes capital services data with calculations based on the perpetual inventory method (PIM) The PIM calculations are carried out by OECD, using service lives for different assets that are common across countries and correcting for differences in deflators for information and communication technology assets. Sources for the investment series by type of asset underlying the capital services series are national 3 statistical offices and the Groningen Growth and Development Centre Total Economy Growth 4 Accounting Database (http://www.ggdc.net). Measures of multi-factor productivity in the OECD Productivity Database The following methodology has been applied for the computation of multi-factor productivity (MFP) measures: Rates of change of output Output (Q) is measured as GDP at constant prices for the entire economy. Year-to-year changes are computed as logarithmic differences:
ln(
Qt ) Q t 1
Rates of change of labour input Labour input (L) is measured as total hours actually worked in the entire economy. Data on total hours has been specifically developed for the present purpose, see above. Year-to-year changes are computed as logarithmic differences: ln(
Lt ). L t 1
3. 4.
For Australia, Canada, France, Japan, Germany, New Zealand, Spain and the United States. For Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Portugal, Sweden, and the United Kingdom.
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Rates of change of capital input Capital services are computed for six different types of assets ( S t
i
i = 1,2,...7 ) and aggregated
to an overall rate of change of capital services by means of a Trnqvist index:
Sit St 7 1 i i i ln v v ln = + t 1 with v t Si S i =1 2 t t 1 t 1
u it Sit
7 i =1
u it Sit
where
v it is the share of each asset in the total value of capital services
7 i =1
u itSit . In this
expression, the value of capital services for each asset is measured by cost price per unit of capital services and Cost shares of inputs
u itSit where u it is the user
Sit is the quantity of capital services in year t.
The total cost of inputs is the sum of the remuneration for labour input and the remuneration for capital services. Remuneration for labour input has been computed as the average remuneration per employee multiplied by the total number of persons employed. This adjustment was necessary to correct for self-employed persons whose income is not part of the compensation of employees as registered in the national accounts. The source for data on compensation of employees and for the number of employees as well as the number of self employed is the OECD Annual National Accounts.
COMPt w tLt = EE t
where
E t
w t Lt : COMPt : EE t : Et :
remuneration for labour input in period t compensation of employees in period t number of employees in period t total number employed (employees plus self-employed) in period t.
Total cost of inputs is then given by:
C t = w t L t + i =1 u itSit and the corresponding cost shares are

7
sL t
w tLt for labour input and Ct

6 i =1
S t
u itSit
Ct
for capital input.
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Total inputs The rate of change of total inputs is a weighted average of the rate of change of labour and capital input with the respective cost shares as weights. Aggregation is by way of a Trnqvist index number formula:
Xt ln = X t 1
1 2
(s
L t
Lt 1 S S St + sL + 2 s t + s t 1 ln t 1 ln S L t 1 t 1
Multi-factor productivity Multi-factor productivity is measured as the difference between output and input change, or as apparent multi-factor productivity:
MFPt Qt Xt ln = ln ln . MFP Q X t 1 t 1 t 1
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ANNEX 2: OECD ESTIMATES OF LABOUR PRODUCTIVITY LEVELS Introduction International comparisons of productivity growth can give useful insights in the growth process, but should ideally be complemented with international comparisons of income and productivity levels. An examination of income and productivity levels may give insights into the possible scope for further gains, and also places a countrys growth experience in the perspective of its current level of income and productivity. OECD has published estimates of labour productivity levels in various studies (e.g. Scarpetta, et al., 2000; OECD, 2003), and has released estimates of productivity on the OECD Internet site, at: www.oecd.org/statistics/productivity. Since the release of OECD estimates of productivity growth in the OECD Productivity Database in March 2004 (see Annex 1), more attention has turned to the measurement of productivity levels, since these serve as a yardstick of economic performance in many OECD countries. Several statistical agencies and international organisations, including Eurostat, the UK Office for National Statistics, the US Bureau of Labor Statistics, and the International Labour Organisation, now release estimates of labour productivity levels, as do some academic institutions, such as the Groningen Growth and Development Centre, and some private institutions, such as the Conference Board. In several instances, notably in the case of Eurostat and the ONS, estimates of labour productivity levels serve as official yardsticks of economic performance and are used to measure progress with regards to explicit policy targets. Given the importance attached to labour productivity levels, it is unfortunate that there is still considerable variation in the currently available estimates. Primarily, this seems due to differences in the choice of basic data. Indeed, much of the differences can be brought back to how different organisations select and combine information on the three components of labour productivity levels at the economy-wide level. These components are gross domestic product, labour input and a conversion factor for total GDP (typically a purchasing power parity or PPP) that is needed to translate output in national currency units to a common currency. This annex briefly discusses some of the main measurement issues for these components, as well as the different data choices that can be made. It focuses on the current OECD approach to measuring labour productivity levels, but also refers to other possible approaches, where appropriate. The discussion focuses on comparisons of labour productivity at the economy-wide level; the estimation of productivity levels for individual industries raises additional measurement issues that go 5 beyond the scope of this annex. Output: comparability and data choices Most comparisons of labour productivity levels focus on GDP as the measure of output. Other measures of aggregate output, such as GNP or national income, have also been used in a few studies, but are not considered here. The measurement and definition of economic output is treated systematically across countries in the 1993 System of National Accounts (SNA 93). Most countries in the OECD area have now implemented the 1993 SNA, Turkey being the only exception, which implies that its level of GDP is likely to be somewhat understated relative to other OECD countries. However, despite the harmonisation of GDP estimates through the 1993 SNA, there are some differences in estimation methods across countries (Ahmad, et al., 2003). These typically have only a small effect on growth rates, but may be substantially more important for comparisons of output and productivity
5. An OECD reader will discuss these issues in greater detail (OECD, forthcoming).
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levels. Some of the main differences that are known to affect GDP levels are the following (Ahmad, et al., 2003): Expenditure on military equipment. The coverage of government investment in the US National Income and Product Accounts (NIPA) is more extensive than that recommended by the SNA, since it includes expenditures on military equipment (aircraft, ships, missiles) that are not considered assets by the SNA. The national accounts in most other OECD countries strictly follow the SNA in this matter. As the amount of public investment affects GDP, this results in a statistical difference in the measurement of GDP. Convergence on this issue is expected in the next edition of the SNA, in 2008. In the meantime, the OECD publishes data in its Annual National Accounts Database for the United States which adjust for this difference. Financial Intermediation Services. Most banking services are not explicitly charged. Thus, in the SNA, the implicit production of banks is estimated using the difference between interests received and paid. All OECD member countries have estimated this part of bank production, known as Financial Intermediation Service Indirectly Measured or FISIM. While it is relatively straightforward to recognise and estimate FISIM, the key problem is breaking it down between final consumers (households) and intermediate consumers (business and government). Only the first part has an overall impact on GDP. In the United States, Canada and Australia, such a breakdown has been estimated in the national accounts for some time, in accordance with the SNA. A breakdown between final and intermediate consumers has recently been implemented in most European countries, although the number of years of historical data that has also been revised varies. Norway plans to make this change by the end of 2006, Switzerland and the United Kingdom in 2007, and Japan in 2010.Turkey, which, as mentioned above, has not yet moved towards SNA93 has no current plans in this area at present, and New Zealand and Mexico have not yet made announcements. Software investment. Another significant issue in the comparability of GDP concerns the measurement of software. The 1993 SNA recommended that software expenditures be treated as investment as long as the acquisition satisfied conventional asset requirements. This change added nearly 2% to GDP for the United States, around 0.7% for Italy and France, and about 0.5% for the United Kingdom. Doubts on the comparability of these data were raised when comparing investment ratios, which are defined as the share of software expenditures that are recorded as investment to total expenditures in software. These ratios range from under 4% in the United Kingdom to over 70% in Spain (Lequiller, et al., 2003; Ahmad, 2003). A priori, one would expect that these are roughly the same across OECD countries. An OECD-Eurostat Task Force confirmed that differences in estimation procedures contributed significantly to the differences in software capitalisation rates, and a set of recommendations describing a harmonised method for estimating software were formulated (Lequiller, et al, 2003; Ahmad, 2003). Many of these recommendations have begun to be implemented by some countries but differences in software measurement will nevertheless continue to have an impact on the international comparability of GDP levels for some time to come. The informal economy. Another factor that may influence the comparability of GDP across countries is size of the non-observed economy. In principle, GDP estimates in the national accounts take account of this part of the economy. In practice, questions can be raised about the extent to which official estimates have full coverage of economic activities that are included in GDP according to the SNA, or to which extent there some under-reporting is involved. Large differences in coverage could substantially affect comparisons of productivity levels. It is not clear, a priori, how large the impact of these, and possible other, differences is on GDP levels. What is clear, however, is that there is a margin of uncertainty associated with the
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comparability of levels of GDP across countries. Consequently, there is also a range of uncertainty associated with estimates of productivity levels; small differences between countries (of a few percentage points) will obviously fall within this range of uncertainty. This is important in interpreting estimates of productivity levels; countries within a small range of income and productivity levels may not have income and productivity differences that are statistically or economically significant (Schreyer and Koechlin, 2002). The data choices for GDP are fairly uniform across different sources. In the OECD estimates of productivity levels, data on GDP are derived from OECD's Annual National Accounts (ANA). The data from ANA are based on OECDs annual national accounts questionnaire to OECD member countries. The data resulting from this questionnaire may differ somewhat from national sources and are more comparable across countries than those derived from OECDs quarterly national accounts (or the OECD Economic Outlook database), thanks to some small methodological adjustments that are made. For example, the US GDP estimates are adjusted for expenditure on military equipment, as discussed above. However, the differences with other OECD sources, such as the Quarterly National Accounts and the Economic Outlook database, are minor for most countries. For two countries, Australia and New Zealand, the OECDs Annual National Accounts provides GDP estimates for fiscal years. This creates an inconsistency with other countries, since comparisons of productivity levels ideally should correspond to the same (calendar) year. However, this problem is considered relatively limited and no adjustment is made. Labour input Comparable measures of labour input are of great importance for international comparisons of productivity levels. The OECD estimates of labour productivity levels are typically based on the same 6 data choices as the OECD estimates of labour productivity growth. Annex 1 therefore provides a more detailed discussion of the measures of labour input used in the calculations of productivity levels. Purchasing power parities for international comparisons The comparison of income and productivity across countries also requires purchasing power parity (PPP) data for GDP. Exchange rates are not suitable for the conversion of GDP to a common currency, since they do not reflect international price differences, and since they are heavily influenced by short-term fluctuations. The estimates used by the OECD are derived from its joint programme with Eurostat and refer to current-price PPPs (Schreyer and Koechlin, 2002). For the current set of comparisons, the most recent PPP benchmark comparison (for 2002) is used as the basis for the estimates. The OECD does not recommend the use of PPP-adjusted estimates of GDP in time series, because of the difficulty to obtain PPPs that are consistent over time. This is why only one year of productivity level comparisons is included in the OECD Productivity Database. Users interested in adding a time dimension to this one year level comparison should use the corresponding database on productivity growth, which gives appropriate indices of productivity growth for individual OECD countries over a long time period. OECD estimates of labour productivity levels for 2005, September 2006 Clearly, data for international comparisons of income and productivity are not perfect and some choices between different sources have to be made. In the OECD approach, GDP is derived from the
6.
Some OECD countries have only very recently included estimates of hours worked in the national accounts. To the extent possible, these estimates have been incorporated in the OECD estimates of productivity levels, as presented in Annex Table 2. They have been fully incorporated in the OECD estimates of productivity growth and in the data choices for those calculations, as shown in Annex Table 1.
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OECD ANA database, which incorporates the latest comparative information on GDP from OECD member countries. Data on employment for most countries are also from the OECD national accounts as these should have a better correspondence to the estimates of GDP. For a limited number of countries, no appropriate employment estimates are currently available from the national accounts, in which case employment is derived from the OECD Labour Force Statistics. Estimates of hours worked are either from the national accounts, or from the OECD Employment Outlook, as shown in Annex 1. To convert GDP to a common currency, the OECD uses current PPPs, which are developed in the OECD-Eurostat PPP programme. Annex Table 2 presents the data choices and the resulting productivity level estimates for 2005. These estimates still require further work in the following ways: 1. For several OECD countries, the estimates of annual hours worked per person are not yet consistent with the national accounts. Data on hours worked currently reach the OECD through two data collections. First, 22 OECD countries currently provide data on hours worked to the annual data collection for the OECD Employment Outlook; 15 of these countries provide the OECD with estimates of annual hours worked that are consistent with national accounts concepts and coverage. Secondly, 18 countries currently provide estimates of total hours worked in the framework of the national accounts for inclusion in OECDs Annual National Accounts. Further investigation of these estimates of hours worked is needed. 2. The employment estimates that are currently incorporated in the national accounts are not necessarily consistent across countries or with the corresponding estimate of GDP. Addressing this problem will require further statistical work. For analytical purposes, it is important that estimates of GDP per hour worked are combined with estimates of GDP per capita and estimates of GDP per person in the labour force and GDP per person of working age. The national accounts currently often do not include the necessary information on working-age population and labour force, and such data have commonly been derived from labour force statistics. The OECDs change in method towards the national accounts as the main source of employment information requires that the link between labour force statistics (i.e. national concepts) and national accounts estimates of productivity (i.e. domestic concepts) is addressed.
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Annex Table 2. OECD estimates of labour productivity for 2005 (September 2006)
GDP, million national currency units, based on ANA (1) Australia 4 Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico Netherlands New Zealand 4 Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States OECD G7 North America OECD-Europe 5 EU-19 6 Euro-zone 7 959,781 245,103 298,180 1,371,425 2,931,071 1,554,519 157,377 1,710,024 2,241,000 181,088 21,802,261 995,991 162,241 1,417,241 502,487,096 806,621,900 29,324 8,369,246 505,646 155,361 1,903,841 979,191 147,378 1,472,103 905,455 2,672,998 455,594 487,202 1,209,334 12,397,900 Annual average hours worked, OECD source for Total hours OECD source for corresponding to average hours worked (million employment 2 employment hours) worked 2 3 estimates (5) ANA / LFS ANA ANA ANA ANA ANA ANA ANA ANA ANA / LFS ANA ANA ANA / EO ANA ANA / LFS ANA ANA ANA / LFS ANA LFS ANA ANA ANA / LFS ANA ANA ANA ANA LFS ONS BLS 1,730 1,656 1,534 1,736 2,002 1,551 1,714 1,546 1,437 2,053 1,994 1,794 1,638 1,801 1,775 2,354 1,557 1,909 1,367 1,809 1,360 1,994 1,685 1,739 1,669 1,587 1,659 1,918 1,672 1,713 1749 1686 1754 1649 1652 1594 ABS ANA Empl. Outl. ANA Empl. Outl. ANA ANA ANA / Empl. Outl. ANA ANA / EO ANA Empl. Outl. Empl. Outl. ANA / Empl. Outl. Empl. Outl. ANA Empl. Outl. Empl. Outl. Empl. Outl. Empl. Outl. ANA Empl. Outl. Empl. Outl. ANA ANA ANA ANA / EO GGDC Empl. Outl. BLS (6) 17,345 6,885 6,447 28,543 9,534 4,313 4,107 38,702 55,804 8,347 7,733 289 3,206 43,733 113,532 53,742 478 79,776 11,221 3,765 3,143 28,147 8,693 3,624 32,068 6,869 6,937 43,244 48,071 256,587 934,887 584,972 364,906 338,353 327,983 219,692 GDP per hour worked, USD (7) 40.1 40.1 52.9 38.5 21.7 43.3 40.1 49.0 44.0 30.8 22.4 36.6 50.5 38.1 34.4 19.7 64.7 14.2 50.1 28.0 63.5 18.1 24.1 22.9 36.9 43.0 39.0 13.6 40.1 48.3 36.4 43.3 40.1 38.6 38.4 41.9 GDP per hour worked, USA=100 (8) 83 83 109 80 45 90 83 101 91 64 46 76 104 79 71 41 134 29 104 58 131 37 50 47 76 89 81 28 83 100 75 90 83 80 79 87
PPP for total GDP, 2004
GDP, million USD
Employment (1000 persons) 1 (4) 10,024 4,158 4,203 16,438 4,762 2,780 2,397 25,028 38,823 4,065 3,879 161 1,957 24,281 63,948 22,832 307 41,790 8,208 2,082 2,311 14,116 5,159 2,084 19,212 4,328 4,183 22,546 28,743 149,788 534,592 347,048 208,015 205,145 198,490 137,799
(2) 1.38 0.89 0.87 1.25 14.20 8.33 0.96 0.90 0.91 0.70 125.82 94.08 1.00 0.85 128.78 763.64 0.95 7.37 0.90 1.47 9.54 1.93 0.70 17.77 0.76 9.06 1.68 0.83 0.63 1.00
(3) 695,306 276,384 340,897 1,098,876 206,466 186,660 164,637 1,896,431 2,453,962 257,173 173,277 10,586 161,854 1,666,428 3,901,917 1,056,279 30,929 1,134,873 562,194 105,364 199,502 508,571 209,839 82,836 1,184,082 295,131 270,488 586,707 1,928,727 12,397,900 34,044,279 25,344,240 14,631,649 13,067,056 12,586,479 9,204,810
1. The employment estimates for Austria, Canada, Greece, Japan, United Kingdom and United States refer to jobs. 2. ABS = Australian Bureau of Statistics; ANA = OECD Annual National Accounts; LFS = OECD Labour Force Statistics; Empl. Outl. = OECD Employment Outlook; ONS = UK Office for National Statistics; GGDC = Groningen Growth and Development Centre; BLS = US Bureau of Labor Statistics. 3. The estimates of annual hours worked for Austria, Canada, Greece, Japan, United Kingdom and United States refer to hours worked per job. Data for France, Greece, Italy and Switzerland are estimates. 4. GDP estimates refer to fiscal years. 5. Excluding Turkey. 6. All EU members that are also OECD member countries. 7. Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain. Source : OECD Productivity Database, September 2006.
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ANNEX 3: OECD DATABASES RELEVANT TO PRODUCTIVITY ANALYSIS
Annual National Accounts (ANA): The OECDs Annual National Accounts presents a consistent set of data mainly compiled on the basis of the 1993 System of National Accounts (SNA). It contains data from 1970 whenever possible for OECD member countries. The database contains a wide selection of accounts: main aggregates (GDP by expenditure, GDP by kind of activity, GDP by income and disposable income, saving and net lending), detailed breakdown by kind of activity for gross value added (at current and constant prices), components of value added, gross fixed capital formation, employment and hours worked. It also includes final consumption expenditure of households by purpose and simplified accounts for general government. Detailed accounts by institutional sector are also available. The database also provides comparative tables based on exchange rates and purchasing power parities. Publications: OECD, National Accounts of OECD Countries, Volume I, 1993-2004, Main Aggregates, 2006 Edition; OECD, National Accounts of OECD Countries: Detailed Tables 1993/2004, Volume II, 2006 Edition. Also available annually on line on SourceOECD (www.sourceoecd.org). Labour Force Statistics (LFS): The OECDs Labour Force Statistics provides detailed statistics on population, labour force, employment and unemployment, broken down by gender, as well as unemployment duration, employment status, employment by sector of activity and part-time employment. It also contains participation and unemployment rates by gender and detailed age groups, as well as comparative tables for the main components of the labour force. Data are available for each OECD member country and for OECD-Total, Euro zone and EU15. The time series cover 20 years for most countries. It also provides information on the sources and definitions used by Member countries in the compilation of statistics. Publication: OECD, Labour Force Statistics: 1985-2005, 2006 Edition. Available on SourceOECD (www.sourceoecd.org). Economic Outlook (EO): The OECD Economic Outlook Database is a comprehensive and consistent macroeconomic database of the OECD economies, covering expenditures, foreign trade, output, employment and unemployment, interest rates and exchange rates, the balance of payments, outlays and revenues of government and of households, and government debt. For the non-OECD regions, foreign trade and current account series are available. The database contains yearly and quarterly information, both for the historical period and for the projection period. The historical data is based on data from national statistical agencies and OECD sources such as the Quarterly National Accounts, the Annual National Accounts, the Quarterly Labour Force Statistics, the Annual Labour Force Statistics and the Main Economic Indicators. Publication: OECD, Economic Outlook, twice yearly. The database is available on CD-ROM: http://www.oecd.org/dataoecd/47/40/32108765.pdf A statistical annex to the OECD Economic Outlook is available at: http://www.oecd.org/document/61/0,2340,en_2649_34109_2483901_1_1_1_1,00.html Productivity Database: The OECD Productivity Database presents productivity at the aggregate level and is designed to be as comparable and consistent across countries as is currently possible (see Annex 1). The database and related information on methods and sources were first made publicly available through the OECD Internet site on 15 March 2004. The OECD Productivity Database currently provides annual estimates of: Labour productivity growth, measured as GDP per hour worked, for 29 OECD countries and the period 1970-2005 (PROD);
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Capital services and multi-factor productivity for 19 OECD countries for the period 1985-2005 whenever possible (CAP); Labour productivity levels for 2005 (see Annex 2; PRODL).
The OECD Productivity Database is updated on a regular basis as new data become available. It is accessible through the OECD Internet site, at: www.oecd.org/statistics/productivity STAN: The STAN database for Industrial Analysis includes annual measures of output, labour input, investment and international trade by economic activity that allow users to construct a wide range of indicators focused on areas such as productivity growth, competitiveness and general structural change. The industry list based on the International Standard Industrial Classification (ISIC) Rev. 3 provides sufficient detail to enable users to highlight high-technology sectors and is compatible with those lists used in related OECD databases in the STAN family (see below). STAN-Industry is primarily based on member countries annual National Accounts by activity tables and uses data from other sources, such as national industrial surveys/censuses, to estimate any missing detail. Since many of the data points in STAN are estimated, they do not represent the official member country submissions. See: www.oecd.org/sti/stan. Publication: STAN-industry is available on line via SourceOECD (www.sourceoecd.org) with tables showing data up to 2003. STAN-industry is also available on CDROM together with the latest versions of STANR&D (ANBERD), STANBilateral Trade Database (BTD) and a set of derived STAN Indicators. See www.oecd.org/sti/stan/indicators. AFA: The Activities of Foreign Affiliates database presents detailed data on the performance of foreign affiliates in the manufacturing industry of OECD countries (inward and outward investment). The data indicate the increasing importance of foreign affiliates in the economies of host countries, particularly in production, employment, value added, research and development, exports, wages and salaries. AFA contains 18 variables broken down by country of origin and by industrial sector (based on ISIC Rev. 3) for 23 OECD countries. Publication: OECD, Measuring Globalisation: Economic Globalisation Indicators, 2005 Edition. Available on SourceOECD (www.sourceoecd.org). FATS: This database gives detailed data on the activities of foreign affiliates in the services sector of OECD countries (inward and outward investment). The data indicate the increasing importance of foreign affiliates in the economies of host countries and of affiliates of national firms implanted abroad. FATS contains five variables (production, employment, value added, imports and exports) broken down by country of origin (inward investments) or implantation (outward investments) and by industrial sector (based on ISIC Rev. 3) for 21 OECD countries. Publication: OECD, Measuring Globalisation: Economic Globalisation Indicators, 2005 Edition. Available on SourceOECD (www.sourceoecd.org).
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Current country coverage of main databases used in this publication

General databases ANA LFS EO X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Productivity Database PROD CAP PRODL X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Industry-level STAN AFA FATS X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States
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Ahmad, Nadim (2003), Measuring Investment in Software, STI Working Paper 2003/6, OECD, Paris Ahmad, Nadim (2003), Towards More Harmonised Estimates of Investment in Software, OECD Economic Studies, No. 37, 2003/2, pp. 185-200. Ahmad, Nadim, Francois Lequiller, Pascal Marianna, Dirk Pilat, Paul Schreyer and Anita Wlfl (2003), Comparing Labour Productivity Growth in the OECD Area: The Role of Measurement, STI Working Paper 2003/14 also published as OECD Statistics Working Papers 2003/5, OECD, Paris. Ahmad, Nadim, Francois Lequiller, Pascal Marianna, Dirk Pilat, Paul Schreyer and Anita Wlfl (2003), Comparing Growth in GDP and Labour Productivity: Measurement Issues, OECD Statistics Brief, No. 7 December, OECD, Paris. Atkinson, Tony (2005) Atkinson Review of Measurement of Government Output: Final report; available on http://www.statistics.gov.uk. Australian Bureau of Statistics (2000); Australian National Accounts: Concepts, Sources and Methods, Catalogue No 5216.0, Chapter 27. Baldwin, John and Tarek Harchaoui (2005), The Integration of the Canadian Productivity Accounts within the System of National Accounts: Current Status and Challenges Ahead; Research Paper, Statistics Canada Economic analysis methodology paper series: National accounts; 11F0026 No 004. Bassanini, Andrea and Stefano Scarpetta (2001), Does Human Capital Matter for Growth in OECD Countries, Economics Department Working Papers No. 282, OECD, Paris. Bassanini, Andrea and Stefano Scarpetta (2001), The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries, OECD Economic Studies, No. 33, 2001/II, pp. 9-56, OECD, Paris. Beffy, P-O., Patrice Ollivaud, Pete Richardson and F.Sdillot (2006), New OECD Methods for SupplySide and Medium-Term Assessments: A Capital Services Approach, Economics Department Working Paper 2006/482, OECD, Paris. Boarini, Romina, sa Johansson and Marco Mira dErcole (2006), Alternative Measures of Well-Being, OECD Statistics Brief, n11, May. Colecchia, Alessandra and Paul Schreyer (2001), The Impact of Information Communications Technology on Output Growth, STI Working Paper 2001/7, OECD, Paris. Colecchia, Alessandra and Paul Schreyer (2002), The Contribution of Information and Communications Technologies to Economic Growth in Nine Countries, OECD Economic Studies No. 34, pp. 153-171, OECD, Paris.
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Commission of the European Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and World Bank (1993), System of National Accounts 1993, Office for Official Publications of the European Communities Catalogue number CA-81-93-002-EN-C, International Monetary Fund Publication Stock No. SNA-EA, Organisation for Economic Co-operation and Development OECD Code 30 94 01 1, United Nations Publication Sales No. E.94.XVII.4, World Bank Stock Number 31512. Conway, Paul, Donato de Rosa, Giuseppe Nicoletti and Faye Steiner (2006), Regulation, Competition, and Productivity Convergence, OECD Economics Department Working Papers, No. 509, OECD, Paris. Criscuolo, Chiara (2005), The Contribution of Foreign Affiliates to Productivity Growth: Evidence from OECD Countries, STI Working Paper 2005/8, OECD, Paris. De Serres, Alain (2003), Structural Policies and Growth A Non-Technical Overview, Economics Department Working Papers No. 355, OECD, Paris. Evans, John, Douglas Lippoldt and Pascal Marianna (2002), Trends in Working Hours in OECD Countries, Labour Market and Social Policy Occasional Paper 45, OECD, Paris. Guellec, Dominique and Bruno van Pottelsberghe de la Potterie (2001), R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries, OECD Economic Studies, No. 33, 2001/II, pp. 103-126, OECD, Paris. Kohli, Ulrich (2004); Real GDP, real domestic income and terms of trade changes; Journal of International Economics 62. Lequiller, Francois, Nadim Ahmad, Seppo Varjonen, William Cave, Kil-Hyo Ahn (2003), Report of the OECD TaskForce on Software Measurement in the National Accounts, OECD Statistics Working Papers 2003/1, OECD, Paris. Maddison, Angus (2001), The World Economy: A Millennial Perspective, Development Centre Studies, OECD, Paris. Nicoletti, Giuseppe and Stefano Scarpetta (2003), Regulation, Productivity and Growth: OECD Evidence, OECD Economics Department Working Papers, No. 347, OECD, Paris. OECD (1996), Industry Productivity: International Comparison and Measurement Issues, OECD, Paris OECD (2001), Measuring Productivity - OECD Manual, OECD, Paris. OECD (2001), OECD Science, Technology and Industry Scoreboard, D.4. OECD, Paris OECD (2001), Measuring Capital OECD Manual: Measurement of Capital Stock, Consumption of Capital and Capital Services, OECD, Paris. OECD (2003), The Sources of Economic Growth in OECD Countries, OECD, Paris. OECD (2003), Science, Technology and Industry Scoreboard 2003, Section D and Annex 1, OECD, Paris. OECD (2003), ICT and Economic Growth Evidence from OECD Countries, Industries and Firms, OECD, Paris.
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OECD (2004), The Economic Impacts of ICT Measurement, Evidence and Implications, OECD, Paris. OECD (2004), Recent Labour Market Developments and Prospects Special Focus on: Clocking in (and out): Several Facets of Working Time, OECD Employment Outlook, Chapter 1, OECD, Paris. OECD (2005), Enhancing Services Sector Performance, OECD, Paris. OECD (2005), Measuring Globalisation OECD Handbook on Economic Globalisation Indicators, OECD, Paris. Available at: www.oecd.org/sti/measuring-globalisation OECD (2005), Measuring Globalisation Economic Globalisation Indicators, OECD, Paris. OECD (2005), OECD Economic Outlook No 78, December 2005, OECD, Paris. OECD (2006), Structural and Demographic Business Statistics. OECD, Paris. OECD (2006), Economic Policy Reforms: Going for Growth, 2006, OECD, Paris. OECD (forthcoming), Reader on the Measurement of Productivity Levels, OECD, Paris. Pilat, Dirk (2004), The ICT Productivity Paradox: Insights from Micro Data, OECD Economic Studies, 2004/1, pp. 37-65, OECD, Paris. Pilat, D., A. Cimper, K. Olsen and C. Webb (2006), The Changing Nature of Manufacturing in OECD Economies, STI Working Paper, OECD, Paris. Pilat, Dirk, and Frank Lee (2001), Productivity growth in ICT-producing and ICT-using industries: A source of growth differentials in the OECD?, STI Working Paper 2001/4, OECD, Paris. Pilat, Dirk, Frank Lee and Bart van Ark (2002), Production and Use of ICT: A Sectoral Perspective on Productivity Growth in the OECD Area, OECD Economic Studies No. 35, pp. 47-78, OECD, Paris. Pilat, Dirk and Paul Schreyer (2004), The OECD Productivity Database An Overview, International Productivity Monitor, Number 8, Spring, pp. 59-65. Scarpetta, Stefano, Andrea Bassanini, Dirk Pilat and Paul Schreyer (2000), Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level, Economics Department Working Papers No. 248, OECD, Paris. Schreyer, Paul (2000), The Contribution of ICTs to Output Growth: A Study of the G7 Countries, STI Working Paper 2000/2, OECD, Paris. Schreyer, Paul (2003), Capital Stocks, Capital Services and Multi-Factor Productivity Measures, OECD Economic Studies, No. 37, 2003/2, pp. 164-184. Schreyer, Paul and Francette Koechlin (2002), Purchasing power parities measurement and uses, Statistics Brief, March 2002, No. 3, OECD, Paris. Schreyer, Paul and Dirk Pilat (2001), Measuring Productivity, OECD Economic Studies No. 33, pp. 127-169, OECD, Paris.
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Schreyer, Paul, Pierre-Emmanuel Bignon and Julien Dupont (2003), OECD Capital Services Estimates: Methodology and A First Set of Results, OECD Statistics Working Papers 2003/6, OECD, Paris. Swiss Federal Statistical Office (2006), Analyse des contributions la croissance des facteurs de production, de la productivit multifactorielle et du rle jou par l'intensit capitalistique de 1991 2004, Neuchtel. Swiss Federal Statistical Office (2006), Stock de capital non financier , Rapport mthodologique, Neuchtel. Swiss Federal Statistical Office (2006), Productivit multifactorielle , Rapport mthodologique, Neuchtel. Triplett, Jack (2006), Handbook on Hedonic Indexes and Quality Adjustment in Price Indexes: Special Application to Information Technology Products, OECD, Paris. United States Bureau of Labor Statistics (1997), Handbook of Methods; BLS Bulletin 2490. Wlfl, Anita (2003), Productivity Growth in Service Industries: An Assessment of Recent Patterns and the Role of Measurement, STI Working Papers 2003-7, OECD, Paris. Wlfl, Anita (2005), The Service Economy in OECD Countries, STI Working Paper 2005/3, OECD, Paris.
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OECD Productivity Report

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OECD Compendium of Productivity Indicators

OECD COMPENDIUM OF PRODUCTIVITY INDICATORS 2006

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Compendium of Productivity Indicators

Highlights Background: why productivity matter? A) Economy-wide indicators of productivity growth

C) Productivity growth by industry

D) Official multi-factor productivity statistics for OECD member countries

Compendium of Productivity Indicators

Compendium of Productivity Indicators

Compendium of Productivity Indicators

WHY PRODUCTIVITY MATTERS

Compendium of Productivity Indicators

A. ECONOMY-WIDE INDICATORS OF PRODUCTIVITY GROWTH

GROWTH IN GDP PER CAPITA

Compendium of Productivity Indicators

GROWTH IN GDP PER CAPITA

Growth of GDP per hour worked

Growth in labour utilisation (1)

GROWTH IN GDP PER HOUR WORKED

OECD measures of labour productivity growth

1. OECD19 includes Japan, EU15 and NAFTA.

GROWTH IN GDP PER HOUR WORKED

1995-2000 compared with 2000-2005

Total economy, percentage change at annual rate

Total economy, percentage change at annual rate

Compendium of Productivity Indicators

ALTERNATIVE MEASURES OF LABOUR PRODUCTIVITY GROWTH

Looking at trend growth of real GDP and GDI per hour

Alternative measures of output

Compendium of Productivity Indicators

ALTERNATIVE MEASURES OF LABOUR PRODUCTIVITY GROWTH

NDP per hour w orked

GDP per hour w orked

GDI per hour w orked

GDP per hour w orked

CAPITAL PRODUCTIVITY GROWTH

Box 1. Measuring capital input

Box 2. International comparability of price indices

Compendium of Productivity Indicators

CAPITAL PRODUCTIVITY GROWTH

1. 1991-1995 for Germany.

GROWTH ACCOUNTS FOR OECD COUNTRIES

Compendium of Productivity Indicators

GROWTH ACCOUNTS FOR OECD COUNTRIES

-1 Canada France Germany Italy Japan United Kingdom

Contributions to GDP growth 1995-2005 Percentage points

The contribution of ICT capital to GDP growth

Compendium of Productivity Indicators

The contributions of ICT capital, 1995-2000 and 2000-2005 In percentage points

It a l Ja y pa n C an ad Sw a ed e Fr n an c Au e N s et he tria rl a nd Ire s la nd Sp a Po i n rtu G ga er l m an y

LABOUR PRODUCTIVITY GROWTH IN THE BUSINESS SECTOR

Measuring business sector productivity

Percentage change at annual rate

LABOUR PRODUCTIVITY GROWTH IN THE BUSINESS SECTOR

Growth in GDP per employee in business sector, 1995-2005

Percentage change at annual rate

Compendium of Productivity Indicators

Compendium of Productivity Indicators

INCOME AND PRODUCTIVITY LEVELS

Comparisons of income and productivity levels

Compendium of Productivity Indicators

INCOME AND PRODUCTIVITY LEVELS

Percentage gap in GDP per capita