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on Efficiency and Productivity |
| By: | Andrew Sharpe; Alisaleh Shariati |
| Abstract: | Productivity growth in Canada has been abysmal in Canada in recent years. Using either 2017 or 2019 as a base, output per hour growth in this country has been by far the weakest in the G-7. For two-digit NAICS industries, the transportation and warehousing sector has experienced the worst labour productivity performance, down 4 per cent per year since 2017, compared to a 0.6 per cent increase for the business sector. This massive drop in productivity has resulted in the level of output per hour in the transportation sector falling from 93 per cent of the business sector average in 2017 to 77 per cent in 2023. This one sector reduced business sector productivity growth by about 0.2 percentage points per year. The objective of this report is to shed light on the nature of this fall in productivity growth in the transportation and warehousing. Three of the nine three-digit transportation sector industries are found to account for over 78 per cent of the fall in labour productivity growth in the sector, namely air transport, public transit and trucking. The report provides a detailed analysis of how and why productivity fell in these industries. |
| Keywords: | transportation sector, labour productivity, warehousing, air transport, public transit, trucking, Canada, productivity decline |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2409 |
| By: | Peter Harrison; Andrew Sharpe |
| Abstract: | This report provides a comprehensive review of the literature on productivity measurement in the public sector, prepared for the Treasury Board of Canada Secretariat. It covers definitions, concepts, and measurement issues including frameworks for understanding inputs, outputs, outcomes, and productivity. An international survey of government productivity measurement practices in the United States, United Kingdom, New Zealand, Finland, Australia, and OECD countries is provided. The report examines how Canada can improve public service productivity measurement and explores linkages between the People Management Framework and productivity. |
| Keywords: | public sector productivity, government productivity, measurement, non-market output, human resources management |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2406 |
| By: | Christina Caron |
| Abstract: | This report examines the role of natural capital in economic and productivity growth. It proposes that natural capital should be considered a pivotal explanatory variable in the rise and subsequent decline of global productivity growth over the past five centuries, and presents extensive supporting evidence. Labour productivity and multifactor productivity (MFP) growth rates have been declining in advanced economies for several decades, with significant implications for living standards; the decline in labour productivity growth has extended to emerging economies over the past fifteen years. Global MFP growth has flatlined since 2007 in both advanced and emerging economies. While many explanations for these trends have been advanced, no clear consensus has yet emerged. However, the pervasive and persistent nature of the declines signals that factors of global scope and extended duration are likely implicated. This report presents an alternative explanation for the secular decline in global productivity growth: that erosion of natural capital has been occurring on a sufficiently large scale as to exert significant and growing downward pressure on productivity growth. Accordingly, a fundamental transformation in the economic role of natural capital has taken place, from productivity accelerator from the 16th century through the mid-20th century, to productivity decelerator subsequently. This role has been obscured due to the absence of natural capital from conventional economic frameworks and production functions. |
| Keywords: | natural capital, productivity growth, multifactor productivity, environmental degradation, climate change, biodiversity, global productivity |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2507 |
| By: | Norris Keiller, Agnes; de Paula, Aureo; Van Reenen, John |
| Abstract: | Standard methods for estimating production functions in the Olley and Pakes (1996) tradition require assumptions on input choices. We introduce a new method that exploits (increasingly available) data on a firm's expectations of its future output and inputs that allows us to obtain consistent production function parameter estimates while relaxing these input demand assumptions. In contrast to dynamic panel methods, our proposed estimator can be implemented on very short panels (including a single cross-section), and Monte Carlo simulations show it outperforms alternative estimators when firms' material input choices are subject to optimization error. Implementing a range of production function estimators on UK data, we find our proposed estimator yields results that are either similar to or more credible than commonly-used alternatives. These differences are larger in industries where material inputs appear harder to optimize. We show that TFP implied by our proposed estimator is more strongly associated with future jobs growth than existing methods, suggesting that failing to adequately account for input endogeneity may underestimate the degree of dynamic reallocation in the economy. |
| Keywords: | Expectations; Productivity |
| JEL: | L11 L23 C23 C21 O31 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19259 |
| By: | Ritisha Chittoor; Paul Pietraru; Andrew Sharpe |
| Abstract: | This report investigates recent trends in productivity growth within the U.S. manufacturing sector, highlighting a significant and persistent slowdown. By evaluating compound annual growth rates, we found that growth in manufacturing fell from 3.75 per cent over 1997-2011 to -0.51 per cent over 2011-2023, the largest slowdown of any two-digit NAICS sector. Using two- and three-digit NAICS data, this report first situates manufacturing within the broader private business sector and then aims to identify the specific industries contributing most to the sector’s underperformance. The manufacturing productivity growth slowdown was broad-based, but a few industries accounted for most of the aggregate decline. Comparative analysis with peer economies highlights that the U.S. manufacturing productivity slowdown has been particularly severe by international standards. Given manufacturing’s historical importance as a driver of productivity growth, its considerable scale, and its extensive inter-industry linkages, this slowdown has had broad implications for the wider private business sector. This report explores several potential explanations, including diminishing returns to technological innovation, structural shifts across industries, reduced R&D effectiveness, and the persistent effects of the Great Recession. It also considers broader constraints such as offshoring, stagnating capital intensity, and challenges related to productivity measurement. |
| Keywords: | United States, manufacturing, productivity slowdown, labour productivity, total factor productivity, computer electronics, growth accounting |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2506 |
| By: | Strine, Joshua; Fiechter, Chad; Kuethe, Todd |
| Abstract: | Between 2002 and 2023, 37 mergers occurred among Farm Credit System (FCS) agricultural credit associations (ACAs). We examine the effect of these mergers on ACA technical efficiency and financial performance using a window data envelopment analysis followed by a second-stage stacked difference-in-differences framework. We find no significant improvement in technical efficiency following consolidation. However, mergers yield different benefits for the merging associations. The smaller ACAs in the mergers reduce their bank efficiency ratios by 9.8–9.9 percentage points, a 34 percent reduction in the average ACA bank efficiency ratio, indicating they have less non-interest expense per dollar of income. Larger ACAs in the mergers increase their net interest margin by 0.12 percentage points, a 4 percent increase relative to the average ACA net interest margin, indicating a greater interest margin relative to their earning assets. |
| Keywords: | Agricultural Finance, Farm Management |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404332 |
| By: | Biondi, Filippo; Inferrera, Sergio; Mertens, Matthias; Miranda, Javier |
| Abstract: | We study changes in job reallocation in Europe after 2000 using novel microaggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness. |
| Keywords: | Business dynamism; job reallocation; productivity; responsiveness of labor demand; market power; technology; European cross-country data |
| JEL: | D24 D43 J21 J23 J42 L11 L25 |
| Date: | 2025–11–05 |
| URL: | https://d.repec.org/n?u=RePEc:eoe:escoed:escoe-dp-2025-16 |
| By: | Jones, Kyle; Palmou, Christina |
| Abstract: | Trade matters. There is indisputable evidence across countries that firms that participate in international markets are more productive. But literature is less clear as to why. What are the mechanisms driving the trade-productivity premia observed in the data? To investigate this, we use an innovative dataset originally developed by Wales et al. (2018), which combines administrative data on trade in goods with survey data on firm labour productivity. We extend this dataset to include trade in services and updated trade in goods information between 2017 and 2022. This dataset, covering the 2005 to 2022 period, allows us to build the most comprehensive picture of British traders and to, not only estimate the most up-to-date relationship between trade and productivity but also to disentangle the role of self-selection of productive firms into exporting, from other causal impacts of trade on productivity via, for instance, technological upgrading or learning-by-doing. |
| Keywords: | trade; productivity; administrative data; learning-by-exporting |
| JEL: | F1 O3 O4 |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:eoe:escoed:escoe-dp-2025-10 |
| By: | Arkoh, Isaac; Van der Sluis, Evert |
| Abstract: | This study evaluates the impact of public agricultural research and development (R&D) and interstate knowledge spillovers on US agricultural productivity from 1971 to 2012. Using a statelevel production framework, it tests four spillover weighting schemes: USDA regions, geographic distance, production-mix clusters, and correlation-weighted clusters. Findings confirm that R&D significantly boosts total factor productivity, with national average social internal rates of return (19%-28%) substantially exceeding average local rates (9%-15%). Results are highly sensitive to spillover modeling, with agro-ecological similarity proving more predictive than geographic proximity. Public extension services further complement R&D, underscoring the need for coordinated investment to sustain productivity. |
| Keywords: | Productivity Analysis, Research and Development/Tech Change/Emerging Technologies |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404707 |
| By: | Besley, Timothy (London School of Economics); Lambert, Peter John (London School of Economics and University of Warwick and CAGE); Michalski-Roland, Isabelle (Bank of England); Van Reenen, John (London School of Economics) |
| Abstract: | This paper examines the impact of credit frictions arising from firm-level default risk on aggregate economic performance. We build a micro-to-macro model with heterogeneous firms and sector-specific production functions, showing that perceived default risk is a sufficient statistic for credit frictions. Using UK administrative data (2004-2019) matched to S&P risk measures, counterfactual estimates reveal that relaxing frictions raises output by 25% and wages by 23%. Ignoring equilibrium wage adjustments overstates output gains, while fixed-capital misallocation approaches understate them. Most gains reflect aggregate capital accumulation. Credit frictions remain above pre-crisis levels, reshape firm size dynamics, increase misallocation across firms, and dampen productivity growth over time. |
| Keywords: | productivity, default risk, credit frictions, misallocation JEL Classification: D24, E32, L11, O47 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:818 |
| By: | Choi, Jaedo; Levchenko, Andrei; Ruzic, Dimitrije; Shim, Younghun |
| Abstract: | We quantify the contribution of the largest firms to South Korea's economic performance over the period 1972-2011. Using firm-level historical data, we document a novel fact: firm concentration rose substantially during the growth miracle period. To understand whether rising concentration contributed positively or negatively to South Korean real income, we build a quantitative dynamic heterogeneous firm small open economy model. Our framework accommodates a variety of potential causes and consequences of changing firm concentration: productivity, distortions, selection into exporting, scale economies, and oligopolistic and oligopsonistic market power in domestic goods and labor markets. The model is implemented directly on the firm-level data and inverted to recover the drivers of concentration. We find that most of the differential performance of the top firms is attributable to higher productivity growth rather than increasingly favorable distortions. Exceptional performance of the top 3 firms within each sector relative to the average firms contributed 20.8% to the 2011 real GDP and 6.6% to the net present value of welfare over the period 1972-2011. Thus, the largest Korean firms were superstars rather than supervillains. |
| Keywords: | market power |
| JEL: | F12 F16 L11 N15 O40 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19207 |
| By: | Alisaleh Shariati |
| Abstract: | The productivity performance of Canada’s residential construction has been abysmal since the turn of the century. Output per hour in 2024 was 8 per cent lower than in 2000, reflecting an average annual decline of 0.4 per cent over the period. This report sheds light on this troubling development, with particular attention to the sharp 3.8 per cent average annual decline in labour productivity from 2019 to 2024, which has intensified cost pressure and further undermined housing price affordability in Canada. This report identifies several factors contributing to the construction sector’s poor productivity performance, including: technological stagnation marked by persistent reliance on manual building methods; an industry structure dominated by small firms that are slow to adopt innovations; and regulatory barriers, such as fragmented building codes, lengthy permitting processes, and restrictive zoning. Since 2019, “labour hoarding” (i.e., retaining workers despite reduced activity) was also a significant factor. This collapse in labour productivity after 2019 raised unit labour costs by nearly 8 per cent annually in residential construction, well above economy-wide cost pressures. We estimate this added $6–$7.7 billion to new housing costs, accounting for 15-20 per cent of the increase in new homes from 2019 to 2024, raising average homebuyer costs by $24, 000-$31, 000 in 2024. This report concludes that, without a dramatic improvement in residential construction productivity, Canada will not meet its ambitious housing supply targets. It recommends actionable strategies to boost residential construction productivity — including wider adoption of digital tools and off-site manufacturing, streamlined regulations, and stronger recruitment of skilled workers — which taken together, could lower home costs, boost supply, and ultimately restore housing affordability over the long run. |
| Keywords: | residential construction, labour productivity, housing affordability, housing prices, housing starts, Canada, provinces |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2508 |
| By: | Andrew Sharpe; Stephen Tapp |
| Abstract: | Over the past half century, Canada’s labour productivity growth has slowed dramatically, falling from 3.7 per cent annually in 1947–73 to less than 1 per cent since 2000. This paper asks whether weak public policy explains that decline and whether new pro-productivity policies could reverse it. Using long-run data and the policy typology of Van Ark et al. (2023), we examine Canada’s record on factor accumulation, technological and structural change, market functioning and resource allocation, and international integration. Our analysis suggests that successive Canadian governments have generally pursued relatively market-oriented, pro productivity reforms — such as liberalizing trade, delivering a stable, predictable inflation environment, modernizing and cutting taxes, and investing in human capital — yet productivity growth continued to falter. The main drivers appear to be declining technological progress and inadequate business investment, not an absence of policy effort. We conclude that, while new policy reforms are desirable and worthwhile (such as easing interprovincial barriers and sharpening competition), they are unlikely to deliver a major revival of Canada’s long-term productivity growth. |
| Keywords: | productivity policy, Canada, secular decline, pro-productivity, technological progress, business investment |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:sls:resrep:2504 |
| By: | Jaumandreu, Jordi |
| Abstract: | At the firm-level, productivity is constantly evolving because of the introduction of new technology and innovations. Some of these productivity gains diffuse uniformly across firms, others only spread out in the industry with time. The unequal evolution of productivity impacts the structure of the industry, the more the greater the degree of competition. We analyze the relationship between the distribution of firms’ productivity advantages and the distribution of market shares, and show that this relationship is more intense the more competition. We briefly comment on two applications: we show that, because productivity gains, market concentration and inflation can be negatively related, and we give an alternative interpretation to the case for a recent rise of US markups attributed to increased market power. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19384 |
| By: | Joshua Brault; Maryam Haghighi; Jing Yang |
| Abstract: | Recent advances in artificial intelligence (AI) have revived expectations of transformative productivity gains and large-scale labour-market disruption. Yet despite rapid improvements in AI capabilities, aggregate productivity growth in advanced economies remains subdued, and widespread job displacement has not materialized. This divergence between technological promise and measured outcomes—the “AI productivity paradox”—poses important challenges for policy. This article synthesizes emerging empirical evidence on AI’s effects on labour markets and productivity. Near-term impacts are concentrated in within-occupation task restructuring and early-career hiring, while causal micro-level studies document sizable productivity gains (15–60 percent) that have yet to appear in aggregate statistics because of diffusion lags, organizational adjustment costs, and measurement limitations. We then examine the macroeconomic implications for potential output (Y*) and inflation dynamics. While AI is likely to boost potential output and exert disinflationary pressures over the long run, the effect on inflation during transition is much less certain. For monetary policy, the central challenge is distinguishing structural adjustment from cyclical weakness in real time. We argue that effective policy during the AI transition should exhibit measured flexibility. |
| Keywords: | Monetary policy; Inflation dynamics and pressures; Monetary policy framework and transmission; Structural challenges; Digitalization and productivity |
| JEL: | E24 E31 E50 E52 E58 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsap:26-4 |
| By: | Gustavo de Souza; Andrew J. Fieldhouse; Karel Mertens; Ishan Nath; Valerie A. Ramey |
| Abstract: | This paper provides the first causal estimates of the global social returns to U.S. public R&D. We use a narrative identification strategy to quantify the effects of exogenous shocks to U.S. R&D appropriations on the dynamic TFP response of 69 foreign economies from 1980–2019. A U.S. R&D appropriations shock equal to 1 percent of the federal R&D capital stock raises foreign TFP by approximately 1 percent after 12 years. This response is driven primarily by nondefense rather than defense R&D and is concentrated in non-OECD economies. These patterns are most consistent with diffusion occurring through openly accessible scientific content, capital-embodied trade and technological leapfrogging by economies further from the global frontier. A back-of-the-envelope calculation suggests that the global social returns to U.S. public nondefense R&D are roughly twice as large as the domestic returns, meaning the U.S. captures about half of these productivity benefits. |
| Keywords: | Public R&D; International R&D Spillovers; Social Returns to R&D; Productivity; Technological Diffusion |
| JEL: | E62 F62 O33 O38 O47 |
| Date: | 2026–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103620 |