Editor’s Overview
The 35th issue of the International Productivity Monitor contains eight articles
featuring two individual articles and two symposia. The topics of the two articles are employment and productivity in U.S. manufacturing and the role ofdemand and digitization in solving the productivity puzzle. The topic of thefirst symposium of four articles is explaining slower productivity growth since2000 in Canada. The topic of the second symposium of two articles is the global
productivity slowdown.

The manufacturing sector experienced
very rapid productivity growth in theper cent of this contribution.
The puzzle of slower productivity

United States up to the Great Recession of 2008-2009. Since 2010 however,the productivity performance of the sec-growth in advanced economies in a period of rapid technological change has intrigued many researchers. In the second

tor has been dismal, with the absolutelevel of labour productivity falling. Thecounterpart of falling labour productiv-article Jaana Remes, Jan Mischke
and Mekala Krishnan from the McKinsey Global Institute offer a comprehen-

ity has been strong employment growth,with U.S. manufacturing since 2010 enjoying the second longest period of rising

sive and cogent explanation of the slowdown in labour productivity growth inseven countries between 2000-2004 andemployment growth in the post-war period.
In the first article of the issue,

2010-2014. They identify three waves
or drivers of productivity growth: thewaning of effects of the first ICT rev-

Richard Schmalensee from Massachusetts Institute of Technology pro-olution; financial crisis aftereffects, including weak demand and uncertainty;

vides a detailed industry analysis ofrecent developments in U.S. manufacturing related to productivity, output,

and digital disruption. They estimatethat the first two waves reduced labour
productivity growth by 1.9 percentage

and employment. After advancing at
a 4.2 per cent average annual rate in
1980-2000 and 5.3 per cent in 2000-

points, on average in the countries studied, between the two periods, from 2.4
per cent per year to 0.5 per cent. The

2010, output per hour in U.S. manufacturing fell at a 0.1 per cent annual
rate in 2010-2017. The computer andimpact of the digital revolution is uncertain, but the authors argue that it has
the potential to boost labour productiv-

semi-conductors industry (NAICS 334)
is found to account for 38 per cent of
the slowdown in manufacturing produc-

ity growth by at least 2 per cent per
year over the next decade. Capturing
this potential requires promoting both

tivity growth, with the fall in the rateof decline of deflators for computers anddemand growth and digital diffusion in
addition to the traditional supply-side

semiconductor responsible for around 85

approaches.

INTERNATIONAL PRODUCTIVITY MONITOR

1The first symposium in the issue con-debate in Canada has been compar-

taining four articles is on explaining
slower productivity growth in Canada
and is based on papers presented at twoisons with the United States. From themid-1980s to 2010 productivity growthin Canada trailed that in the United

sessions of the annual meeting of theCanadian Economics Association held at
McGill University in June 2018. The ses-States, but since 2010 this situation
has been reversed. In the second article in the symposium Wulong Gu

sions were organized by the Centre for
the Study of Living Standards and theProductivity Partnership.

and Michael Willox from Statistics
Canada provide a detailed industry
analysis of labour productivity growth

Any analysis of the productivity slowdown must be based on a solid grasp ofand the sources of labour productivity growth in Canada and the UnitedStates in the 1987-2010 and 2010-2014

the stylized facts associated with slower
productivity growth. The first paperin the symposium by Andrew Sharpe

periods and shed light on this reversal.
Factors that contributed to this rever-and John Tsang from the Centre for
the Study of Living Standards provide
these stylized factors. The article shows

sal of labour productivity growth werestronger demand and output growth in
Canada after 2010 and the greater wan-that it was multifactor productivity that
accounted for the lions share of the post2000 labour productivity showdown ining of the productivity gains from ICT
production and use south of the 49thparallel. For example, one third of theCanada, that the slowdown was primarily a within-industry phenomenon andnot due to resource re-allocation, andmuch faster business sector MFP growthin the United States in 1987-2010 relative to Canada was due to the com-that the slowdown was largely in thegoods sector, with manufacturing making by far the largest industry contri-

puters and electronics products industry.
By 2010-2014, the contribution to MFP
growth from this industry was the same

bution to the slowdown, especially tothe labour productivity slowdown. Since

in both countries. The authors conclude
that the search for the determinants of2000, labour productivity growth has
been around 0.9 per cent per year inboth the 2000-2008 and 2008-2016 sub-productivity growth should focus on thefactors contributing to demand growthsuch as access to international markets

periods, but the sources of this growth
have been different, with multifactor
productivity much more important inand financial stability.
It is widely recognized that the ICT
revolution boosted productivity growth

the more recent period and capital intensity growth less important. This post2008 pick-up in multifactor productivity

in the second half of the 1990s in Canada
and the United States. But is the post2000 slowdown in productivity growth

growth may bode well for future labour
productivity growth.
A major focus of the productivity

in Canada explained by a weaker contribution to productivity from ICT? Thisis the issue addressed in the third arti-2NUMBER 35, FALL 2018cle of the symposium by Jeff Mollins

evidenced by book-based indicators ofand Pierre St-Amant from the Bankof Canada. The authors investigate anumber of models with different chan-technological change, did indeed contribute to slower productivity growth.
The large fall-off in titles in mechan-nels by which ICT affects productivity,
including production effects, the use effect, and the impact of the relative priceical/manufacturing and electrical technologies is consistent with the greater
slowdown in productivity growth in theof ICT goods. They find that 0.1-0.2
percentage points (20-40 per cent) of thelabour productivity slowdown in Canada

goods sector. The authors conclude on
an optimistic note, arguing that datasuggest that Canada may be on thesince the early 2000s can be explainedby a weaker ICT contribution, but point

threshold of major technological breakthrough in the areas of artificial intelligence and robotics and that this may

out that the timing of the two developments do not coincide. While productivity growth slowed in the first half oflead to a pick-up in productivity growth.
The second symposium in the issue

the 2000s, the ICT contribution only fellaround the time of the Great Recession.
The authors note that future work on

contains two articles on the productivity slowdown in a global context. The
articles are based on presentations madethis topic needs to address both potential price mismeasurement and the growing role of ICT services, especially cloudat the Third Annual OECD Global Forum on Productivity held at the Bankof Canada in Ottawa, Canada in June

computing, which because of data limitations, they were unable to do.
Likely the most widely given expla-2018.
A key issue for economists is whether
the slower output and productivity

nation for slower productivity growthis that the pace of fundamental technological change has fallen off. But

growth observed in advanced countries
since 2000 represents the new normal orwhether this is a transitory state thathow does one in fact quantify technological change? Multifactor productiv-

will be replaced by stronger growth. In
the first article in this symposium John

ity growth is affected by many factors socannot be used as a proxy in this regard.
Direct measures of the pace of techno-

Fernald from INSEAD argues the former. He points out that the demographic developments that have led tological change may be more promising.
In the fourth article in the symposiumMichelle Alexopoulos and Jon Co-slower population growth are unlikely tobe reversed. In addition, labour quality improvements are likely to be weakerhen from the University of Toronto provide such direct measures of innovation
for Canada, namely books held in Cana-and a drag on future labour productivity
growth. He notes that neither mismeasurement issues nor regulation appear

dian libraries. They find that a fall-off
in the commercialization of new technologies in this country after 2000, as

to explain slower productivity growth.
In terms of total factor productivity, hesees 0.5 per cent per year as the newINTERNATIONAL PRODUCTIVITY MONITOR

3

trend, not enough to revive the cur-ductivity growth in the 2003/04-2016/17

rent modest labour productivity growth.
This situation reflects a return to normal after the exceptional 1995-2005 pe-period than in the 1989/90-2003/04 period, even though the productivity experiences of the industries were very di-riod when IT drove productivity gains.
An industry perspective on the productivity slowdown can provide insightverse. He suggests that this pattern may
mean a common factor, such as a slower
pace of technological change or a rise in

into its nature and causes. In the second
article in the symposium Kevin Fox
from the University of New South Wales-inefficiency, is behind the slowdown. He
concludes by identifying a number of directions or areas for future research to

Sydney presents industry data to shedlight on the productivity slowdown in

shed light on the productivity slowdown,
namely the treatment of new and disappearing goods, the valuation of new freeAustralia. He finds that for the 15 industries in his sample, virtually all (14 of15) experienced slower multifactor pro-4

goods and services, better time-use data,and exploitation of firm-level data.

NUMBER 35, FALL 2018