Editor’s Overview
The 37th issue of the International Productivity Monitor contains seven articles.
The topics are a comparison of the productivity growth slowdown between Europeand the United States; firm-level evidence on the impact of digitalization on productivity; the impact of the China shock on innovation and productivity in Canadianmanufacturing; productivity dispersion at the firm level in Canada; the role of R&D
in productivity improvement; consistency issues on the construction of productivity
indices; and the state of productivity research.

Productivity comparisons between countries have the potential to offer significant insight into the explanation of pro-nologies should have a positive impact onproductivity. In the second article, Peter Gal, Giuseppe Nicoletti, Christina

ductivity developments. In the lead article, Robert J. Gordon from Northwestern University and Hassan Sayed fromvon Rüden and Stéphanie Sorge fromthe OECD and Théodore Renault fromthe Graduate Institute of International andPrinceton University provide a detailed examination of productivity trends by industry in the United States and Europe.

Development Studies examine the impactof digitalization on productivity in Europe. They find robust evidence that digi-

Their analysis sheds much light on thephenomenon of slower productivity growth.
The key finding is that productivity growth

tal adoption is in fact associated with productivity gains at the firm level, especiallyin manufacturing, and for routine-intensive

in EU-10 countries, at both the aggregate
and industry level, has followed that inactivities and the more productive firms.
They note that compared to earlier waves

the United States with a 20 year lag. Indeed, the total economy labour productivity of slowdown of 1.67 percentage points inof innovation, digital technologies appear
more difficult to implement for less productive firms because of the increased impor-the United States between 1950-1972 and2005-2015 was virtually identical to thatin Europe between 1972-1995 and 2005-

tance of intangible capital and skills. This
has in turn has led to a slower pace of diffusion for these firms and increased disper-

2015 (1.68 points). The authors argue thatthese transatlantic developments support
the view that the productivity slowdown

sion of productivity growth among firms
and may in part explain slower aggregate
productivity growth.

is due to a slowing of the pace of technicalchange that has affected the same industries, by the same magnitude on both sides

The rise of China has had a major effecton many aspects of the global economy, including productivity. In the third article,of the Atlantic.
The slowdown in productivity growthobserved in the world economy has taken

Myeongwan Kim from the Centre for theStudy of Living Standards looks at the impact of the China shock on innovation andplace in a period of rapid development ofdigital technologies. This is paradoxical as

productivity in Canadian manufacturing atthe firm level. He finds that increased im-

many believe the adoption of these tech-port competition from China reduced prof-

INTERNATIONAL PRODUCTIVITY MONITOR

1

itability, especially in smaller firms, andconsequently decreased R&D expenditures

tic frontier model based on firm-level data
for Canadian manufacturing. They findand total factor productivity growth withinfirms. But the exit from the market ofmany smaller less productive firms becausethat R&D does improve multifactor productivity, but that the actual impact depends of R&D efficiency. This in turn isof Chinese imports had a positive reallocation effect on TFP, more than offsetting
the negative direct effect. Had there been

related to factors internal to the firm, including management practices, ICT investment, a skilled workforce, firm size andno increase in Chinese import penetration,
TFP growth in Canadian manufacturingmarket power, and business strategy.
Many national statistical offices produce

would have been 0.2 percentage points per
year lower in 2005-2010.
Productivity researchers have greatly

both quarterly and annual estimates of productivity in index form based on the samedata sources. This raises the question ofbenefited from the increased public availability of firm-level data in recent years.
These data have provided many new in-whether consistency between the two series can be expected. In the sixth article,
Bert M. Balk from Erasmus University

sights, especially on the dispersion of productivity and productivity growth acrossfirms. In the fourth article, Wulong Gu

explores this issue from a theoretical perspective, concluding that consistency is infact unattainable. He then lays out thefrom Statistics Canada presents data forthe firm time on the productivity of frontierfirms, the most productive 10 per cent of all

choices open to statistical offices to deal
with the inconsistency, stressing the importance of communicating clearly to data

firms, and non-frontier firms in Canada. He
finds that labour productivity growth wasusers that there is at best an approximate relationship between annual and sub-indeed faster for the former than the latter in the 1991-2015 period. But because
non-frontier firms account for 90 per centannual productivity series.
The literature on productivity topics hasburgeoned in recent years, making it in-of total employment, these firms also accounted for the lion’s share of the post-2000
productivity slowdown in Canada.

creasingly difficult for researchers to keep
up with the progress in the field. Fortunately, the publication of the Oxford Hand-

Research and development (R&D) has
long been considered a key driver of technological innovation and productivity growth.

book of Productivity Analysis, edited byEmili Grifell-Tatjé, Knox Lovell, and Robin
Sickles, will make keeping abreast of new

But is R&D alone enough to improve
productivity or are complementary coinvestments also needed for a productiv-

developments easier. In the final article in
the issue, Marshall Reinsdorf from theInternational Monetary Fund provides a re-ity payoff from R&D? In the fifth article,
Jianmin Tang from Innovation, Science

view article of the book, concluding thatthe Handbook is an extremely valuable ref-and Economic Development Canada andWeimin Wang from Statistics Canada examine this issue by estimating a stochas-

erence as both a general introduction to theproductivity field and as a source of authoritative articles on key productivity topics.

2NUMBER 37, FALL 2019