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The Future of Productivity

image of The Future of Productivity

This book addresses the rising productivity gap between the global frontier and other firms, and identifies a number of structural impediments constraining business start-ups, knowledge diffusion and resource allocation (such as barriers to up-scaling and relatively high rates of skill mismatch).

Analysis based on micro and industry-level data highlights the importance of reallocation-friendly policies, including well-functioning product, labour and risk capital markets, efficient judicial systems, bankruptcy laws that do not excessively penalise failure, housing policies that do not unduly restrict labour mobility, and improvements in public funding and organisation of basic research which do not excessively favour applied vs basic research and incumbents vs young firms.

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Editorial

Paul Krugman noted in 1994: “productivity isn't everything, but in the long run it is almost everything”. Productivity is about “working smarter”, rather than “working harder”. It reflects our ability to produce more output by better combining inputs, owing to new ideas, technological innovations and business models. Innovations such as the steam engine, electrification and digitisation have led to radical changes in the production of goods and services, raising living standards and well-being. Indeed, the large differences in income per capita observed across countries mostly reflect differences in labour productivity (Figure I.1). At the same time, productivity is expected to be the main driver of economic growth and well-being over the next 50 years, via investment in innovation and knowledgebased capital. Thus, it is of little surprise that the recent productivity slowdown has sparked widespread interest, with the debate centring on the extent to which the productivity slowdown is temporary, or a sign of more permanent things to come.

English

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