Brown Bag Seminar in Economics and Finance

You are most welcome to join us for the “Brown Bag Seminar in Economics and Finance”presented by Oleg Badunenko from Brunel University London

Title:

The Great Recession: Sectors, Efficiency, Technological innovation, Capital deepening, and Labour mobility

Date: Monday, 10 May
Time: 12:10-12:55

Room: https://ju-se.zoom.us/j/65965469113
Fix Meeting-ID for Spring 1, 2021: 659 654 691 13

Abstract

We propose a new decomposition of aggregate productivity growth that accounts for sectoral efficiency and technology changes as well as capital deepening and provide new evidence on the sources of productivity growth in OECD countries.

Extended Abstract

In this paper, we analyze aggregate labor productivity of developed economies in three periods: (i) years before (2002-2006), (ii) leading to (2006-2009), and (iii) recovery from the global financial crisis (GFC) (2009-2014). First, we decompose aggregate productivity growth into components attributable to intra-sectoral productivity growth effect (within component) and effect of employment share reallocation that is split into the static and dynamic components. We use data for 10 sectors from 26 countries. We confirm that the within component is the key driver of labor productivity growth in good years and in the recovery period. However, we find that it is the major culprit in years leading to GFC. We, therefore, study the factors that affect the within component by employing a non-parametric production frontier approach to conceptually decompose the within component into components attributable to efficiency change, technological change, and capital deepening. The retrenchment in technological progress followed by efficiency losses plays on average the most important role in explaining the collapse of productivity growth in years leading to GFC. Efficiency losses were highest in ICT, manufacturing, construction, utilities, and wholesale. In the recovery period, technological progress has played the largest role in manufacturing, finance, information, and wholesale. In particular, the rate of technological progress in manufacturing has surpassed its level in the pre-crisis period. Productivity is, however, still mired by efficiency losses with exceptions of the agriculture and construction sectors. Capital deepening kept on driving up productivity in all periods. Capital deepening contribution has been especially prominent in the recovery period. To our knowledge, this is the first study that uses sectoral data on capital to analyze the role of sectoral dynamics in terms of efficiency, technology, and capital deepening in aggregate productivity growth. Doing so allows to identify the relative role of these three factors to productivity growth.