Technology and Demand Drivers of Productivity Dynamics in Developed and Emerging Market Economies
Frequently, factors other than structural developments in technology and production efficiency drive changes in labor productivity in advanced and emerging market and developing economies (EMDEs). This paper uses a new method to extract technology...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/499561611604841870/Technology-and-Demand-Drivers-of-Productivity-Dynamics-in-Developed-and-Emerging-Market-Economies http://hdl.handle.net/10986/35072 |
| Summary: | Frequently, factors other than
structural developments in technology and production
efficiency drive changes in labor productivity in advanced
and emerging market and developing economies (EMDEs). This
paper uses a new method to extract technology shocks that
excludes these influences, resulting in lasting improvements
in labor productivity. The same methodology in turn is used
to identify a stylized example of the effects of a demand
shock on productivity. Technology innovations are
accompanied by higher and more rapidly increasing rates of
investment in EMDEs relative to advanced economies,
suggesting that positive technological developments are
often capital-embodied in the former economies. Employment
falls in both advanced economies and EMDEs following
positive technology developments, with the effect smaller
but more persistent in EMDEs. Uncorrelated technological
developments across economies suggest that global
synchronization of labor productivity growth is due to
cyclical (demand) influences. Demand drivers of labor
productivity are found to have highly persistent effects in
EMDEs and some advanced economies. Unlike technology shocks,
however, demand shocks influence labor productivity only
through the capital deepening channel, particularly in
economies with low capacity for counter-cyclical fiscal
policy. Overall, non-technological factors accounted for
most of the fall in labor productivity growth during 2007-08
and around one-third of the longer-term productivity decline
after the global financial crisis. |
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