Labour productivity in some

European countries and in the United States

Gilbert CETTE - Banque de France

- Université de la Méditerranée

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MAIN MESSAGES

• Apparently some EU countries productivity > US• Thorough analysis : all EU behind the US• Lower per capita GDP reflects lower « structural » labour

input (employment rate and working time) as well as lower productive efficiency

• e.g higher employment rate lower productivity as new employees probably less productive

• To catch up the US level, we need both higher employment rate and productivity, which require further structural reforms

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Table 1 : Per capita GDP and labour productivity in 2002

Country Labour productivity perhour

As a % of US level

Per capita GDP

As a % of US level

OECD Eurostat VA-MG OECD Eurostat VA-MG

U S 100 100 100 100 100 100

E U 91 88.2 91.6 73 72.8 71.7

Japan 72 67.5 73.1 74 73.4 73.7

Belgium 111 106.3 112.0 78 77.5 76.2

France 103 106.6 107.8 77 76.1 72.8

Germany 101 91.7 101.5 75 72.5 75.0

Italy 105 91.8 97.2 75 71.5 73.4

Netherlands 106 100.2 103.8 82 81.1 80.2

UnitedKingdom

79 78.6 81.7 74 78.2 72.7

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Table 2 : Hours worked and employment rate in 2002

Country Averageannual hours

worked

In hours

Employmentrate

As a % ofpopulationaged 15-64

Labour forceparticipation

As a % ofpopulationaged 15-64

Standardisedunemployment rate

As a % of labourforce

U S 1,815 71.9 76.4 5.8

E U 64.3 69.8 7.6

Japan 1,809 68.2 72.3 5.4

Belgium 1,559 59.7 64.1 7.3

France 1,545 61.1 68.0 8.7

Germany 1,444 65.3 71.5 8.2

Italy 1,619 55.6 61.2 9.0

Netherlands 1,340 73.2 75.6 2.8

UnitedKingdom

1,707 72.7 76.6 5.1

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Table 3 : Employment rates in 2002 – As a %

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• Decreasing returns to:

– Employment rate :

the first to be employed are the more efficient

– Hours worked :

“fatigue effects” outweigh those of fixed costs

• Banque de France (country panel data) econometrics “long term” elasticity of productivity per hour is about:

– - 0.35 relative to hours worked

– - 0.5 relative to employment rate

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Table 4 : Observed and ‘structural’ hourly productivity in 2002 - As a % of US

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Decomposition of the GDP per capital gap(from productivity, working time and employment rate)

compare to US - %

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Summary conclusion- Lower labour input from

• partly lifestyle choice

• partly conflicting fiscal signals

• partly rigidities

• …..

Lower Lower structural productivity from

• partly lower education level

• partly lower ICTS diffusion

• partly rigidities

• …..

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From « observed hourly productivity » to « structural hourly productivity »

In % of the US level

Calculation French case

« observed productivity » 107.8- -

[productivity elasticity relative to workingtime

[-0.35

x xdifference in working time (in %)] -15%]

- -[productivity elasticity relative toemployment rate

[-0.5

x xdifference in employment rate (in%)] -15%]

= =« structural productivity » 95.1