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Transcript of Productivity Gap
The Industry Origins of The Industry Origins of the US-Japan the US-Japan Productivity GapProductivity Gap
Dale W. Jorgenson (Harvard University)
Koji Nomura (Keio University)
Japan Project Meeting, June 26-27, 2007 Tokyo, Japan
ContentsContents Relative PricesRelative Prices
Industry PPPs for output and KLEM inputsIndustry PPPs for output and KLEM inputs Bilateral I-O FrameworkBilateral I-O Framework Hybrid Approach based on production-side Hybrid Approach based on production-side
data and demand-side datadata and demand-side data
Economic Growth in the U.S. and JapanEconomic Growth in the U.S. and Japan Level Comparison of ALP and TFPLevel Comparison of ALP and TFP Industry Origins of TFP-gapIndustry Origins of TFP-gap
Manufacturing vs ServicesManufacturing vs Services
Relative Prices Required Relative Prices Required for for Productivity ComparisonProductivity Comparison Industry-Level PPPs forIndustry-Level PPPs for
42 US-Japan Common Industry Classification42 US-Japan Common Industry Classification Gross Output: XGross Output: X Capital Service: K and Capital Acquisition: ACapital Service: K and Capital Acquisition: A Labor Service: LLabor Service: L Energy: EEnergy: E Materials: MMaterials: M
Bilateral I-O Framework used for defining Bilateral I-O Framework used for defining PPPs for X, E, M, and APPPs for X, E, M, and A
US-Japan 42 Common US-Japan 42 Common Industry ClassificationIndustry Classification
1.Agriculture, Forestry, Fishery 15.Stone, Clay, Glass 29.Air Transportation
2.Coal Mining 16.Primary Metal30.Other Trans and Storage
3.Other Mining 17.Metal Products 31.Communications
4.Construction 18.Machinery 32.Electricity
5.Foods 19.Computers 33.Gas Supply
6.Textile 20.Communications Equipment 34.Wholesale and Retail
7.Apparel 21.Electronic Components35.Finance and Insurance
8.Woods and Related Products 22.Other Electrical Machinery 36.Real Estate
9.Furniture and Fixture 23.Motor Vehicles 37.Education
10.Paper and Pulp 24.Other Transportation Equipment 38.Research
11.Printing and Publishing 25.Precision Instruments 39.Medical Care
12.Chemical Products 26.Misc Manufacturing 40.Other Services
13.Petroleum Refining 27.Railroad Transportation 41.Public Administration
14.Leather Products 28.Water Transportation 42.Household
Various Concepts of Various Concepts of Relative Prices on Relative Prices on CommodityCommodity Producer’s PricesProducer’s Prices
Domestic Output Price : PPdidi Demand Price of Domestic Goods : PPd(H)i andd(H)i and PPd(I)i, d(I)i,
where (H) and (I) represent Purchases by Household and Industry, respectively
Demand Price of Composite Goods (inc. imports): PPc(H)ic(H)i, PPc(I)ic(I)i
Purchaser’s Prices Purchaser’s Prices Demand Price of Domestic Goods : PPpd(H)i andpd(H)i and PPpd(I)ipd(I)i Demand Price of Composite Goods (inc. imports): PPpc(H)i pc(H)i
, PPpc(I)ipc(I)i PPPs for X, E, M, and APPPs for X, E, M, and A
PPdi used for X, di used for X, PPc(I)i for E and M, and c(I)i for E and M, and PPpc(I)i for A pc(I)i for A
Bilateral I-O Framework Bilateral I-O Framework in Measuring Relative in Measuring Relative PricesPricesⅠⅠ. Construction of Price Model . Construction of Price Model
based on Bilateral Input-Output Frameworkbased on Bilateral Input-Output Framework
ⅡⅡ. Describe the Linkages among Relative Prices. Describe the Linkages among Relative Pricesbased on the Price Modelbased on the Price Model
ⅢⅢ. One Data Sources All Relative Prices⇒. One Data Sources All Relative Prices⇒
(e.g. (e.g. PPpc(H)pc(H)i i ⇒ ⇒ PPc(H)c(H)
i i ⇒ ⇒ PPd(H)d(H)ii == PPd(I)d(I)
i i ⇒ ⇒ PPddi i ⇒ ⇒ PPc(I)c(I)
ii ))
ⅣⅣ. Comparison and Check in the case that multiple . Comparison and Check in the case that multiple estimates will be available for one commodityestimates will be available for one commodity
JPJP
USUSFreight &Freight &InsuranceInsurance
DutyDuty
RoWRoW
outpuoutputt
DutyDuty
Value addedValue added
JPJP USUS JPJP USUSExport Export to RoWto RoW outpuoutpu
tt
Intermediate DemandIntermediate Demand Final DemandFinal Demand
jUJIFjJUIF F
JU jIF F
UJ jIF
jUJCDjJUCD F
JU jCD F
UJ jCD
jUJCDjJUCD F
JU jCD F
UJ jCD
jJVA
jUVA
iji RJmRJ xp
ii RJmRJ Fp
iji RUmRU xp
ii RUmRU Fp
iji JJdJ xpe
1iji JU
dJ xpe
1ii JJ
dJ Fpe
1ii JU
dJ Fpe
1ii JR
dJ Epe
1ii J
dJ Xpe
1
jj JdJ Xpe
1
iji UJdU xp
iji UUdU xp
ii UJdU Fp
ii UUdU Fp
ii URdU Ep
ii UdU Xp
jj UdU Xp
Bilateral Input-Output TableBilateral Input-Output Table between Japan and US between Japan and US
Linkage of Relative PricesLinkage of Relative Prices
Domestic Price Linkages between Output and Domestic Price Linkages between Output and InputInput Pd
i=fd(Pd(H)i , Pd(I)
i ) ←consumption demand share of domestic goods
Linkages between Domestic Price and Linkages between Domestic Price and Composite PriceComposite Price Pd(H)
i=fH(Pc(H)i), Pd(I)
i=fI(Pc(I)i)
←imports share, freight and insurance, duties Linkages between Producers Price and Linkages between Producers Price and
Purchasers PricePurchasers Price Ppd(H)
i=fdH(Pd(H)i), Ppd(I)
i=fdI(Pd(I)i)
Ppc(H)i=fcH(Pc(H)
i), Ppc(I)i=fcI(Pc(I)
i)←wholesale and retail margin, transportation cost
Data SourcesData Sources Japan-US Bilateral I-O Table in 1990 (METI)Japan-US Bilateral I-O Table in 1990 (METI)
164 commodities164 commodities Import share & consumption share by commodityImport share & consumption share by commodity Freight & insurance rate Freight & insurance rate by commodityby commodity(←supplementary (←supplementary
table)table) Duties tax rate Duties tax rate byby commoditycommodity (←supplementary table) (←supplementary table)
US Use-Table in 1987 and Japan X-Table in 1990US Use-Table in 1987 and Japan X-Table in 1990 Wholesale and retail margin rate by 164 commodity Wholesale and retail margin rate by 164 commodity Transportation margin rate(rail,road,water,air,other) by Transportation margin rate(rail,road,water,air,other) by
164 commodity164 commodity A Multitude of Data Source for Relative PricesA Multitude of Data Source for Relative Prices
next page next page
Data for Relative PricesData for Relative Prices
SourcesTarget and Classification
Price Evaluation
Domestic/ Imports
ICP (UN) FD, ICP basic heading Purchaser inc.Import
Eurostat-OECD FD, ICP basic heading Purchaser inc.Import
Energy Prices & Taxes (IEA)Coal,raw oil,LNG,electricity,town-gas
PurchaserDomestic/Import
Consumer Price Comparison Survey (METI)
94 consumer goods & services
Purchaser inc.Import
Intermediate goods Price Comparison Survey (METI)
152Goods & 35service as intermediate inputs
Purchaser(Producer, partly)
inc.Import
PPP Survey Committee (METI) About 100 Products Producer Domestic
Transportation Service Price (MLIT)
Transportation Producer Domestic
Housing,Construction Price (MLIT)
Building&Const. Producer(Cost) Domestic
Foods and Restaurant Price(MAFF)
Foods and Restaurant Purchase inc.Import
Mobile Phone Price ( MPT ) Communication Purchaser Domestic
Woods Products Price (MAFF) Woods Products Purchaser inc.Import
PPpc(H)pc(H)ii
PPpc(H)pc(H)ii
PPpdpdii
PPpc(H)pc(H)ii
PPddii
PPpc(I)pc(I)ii
PPddii
PPddii
PPpdpdii
PPpcpcii
PPpc(I)pc(I)ii
PPP for Capital InputsPPP for Capital Inputs Common Classification for Asset CategoryCommon Classification for Asset Category
29 tangible assets29 tangible assets 2 intangible assets: mineral exploration and software2 intangible assets: mineral exploration and software InventoriesInventories LandLand
Measurement of PPPs for capital acquisitionMeasurement of PPPs for capital acquisition Based on purchaser’s price PPP for composite goods Based on purchaser’s price PPP for composite goods
sold to industry sold to industry
Measurement of annualization factorMeasurement of annualization factor Detailed tax system is considered in each countryDetailed tax system is considered in each country 59 assets in 36 industries in the U.S. 59 assets in 36 industries in the U.S. 103 assets in 47 industries in Japan103 assets in 47 industries in Japan
PPP for Labor InputsPPP for Labor Inputs
Common Classification for Labour CategoryCommon Classification for Labour Category industry: common 38 industriesindustry: common 38 industries gender: male and femalegender: male and female age: 6 groups (-24, 25-34, 35-44, 45-54, 55-64, 65-)age: 6 groups (-24, 25-34, 35-44, 45-54, 55-64, 65-) class of worker: employeeclass of worker: employee education: four groups(male), three groups(female)education: four groups(male), three groups(female) Totally, 1596 categoriesTotally, 1596 categories
See Nomura and Samuels (2003)See Nomura and Samuels (2003)
Aggregate PPPs for KLEM: 1960-Aggregate PPPs for KLEM: 1960-20042004
Industry Origins of PPP-for-GDP Industry Origins of PPP-for-GDP Gap Gap in 1990in 1990 6.33
4.60
4.00
2.95
2.19
1.70
1.43
1.39
0.80
0.76
0.64
0.54
0.51
0.36
0.35
0.32
0.28
0.27
0.26
0.25
0.21
0.15
0.12
0.07
0.04
0.02
-0.01
-0.04
-0.05
-0.11
-0.17
-0.18
-0.21
-0.24
-0.31
-0.40
-0.44
-0.45
-0.78
-1.12
-1.43
-2.30
-4% -2% 0% 2% 4% 6% 8%
Industry Contribution
1.69
1.45
2.31
1.55
3.28
2.39
2.04
1.14
1.89
2.58
1.16
4.17
1.08
2.82
1.28
4.14
1.25
1.12
1.11
1.11
1.12
1.34
1.16
1.77
1.08
0.96
0.95
0.89
0.86
0.97
0.66
0.74
0.68
0.40
0.60
0.75
0.41
0.33
0.62
0.72
0.19
0 1 2 3 4 5
42.Household
40.Other Services
36.Real Estate
4.Construction
32.Electricity
5.Foods
1.Agriculture, Forestry, Fishery
34.Wholesale and Retail
11.Printing and Publishing
3.Other Mining
37.Education
13.Petroleum Refining
41.Public Administration
2.Coal Mining
9.Furniture and Fixture
17.Metal Products
33.Gas Supply
26.Misc Manufacturing
30.Other Trans and Storage
31.Communications
12.Chemical Products
16.Primary Metal
6.Textile
7.Apparel
14.Leather Products
20.Communications Equipment
38.Research
25.Precision Instruments
8.Woods and Related Products
10.Paper and Pulp
35.Finance and Insurance
29.Air Transportation
15.Stone, Clay, Glass
27.Railroad Transportation
28.Water Transportation
24.Other Transportation Equipment
22.Other Electrical Machinery
19.Computers
21.Electronic Components
18.Machinery
39.Medical Care
23.Motor Vehicles
Relative Price for Value Added
PPP for GDP-output PPP for GDP-output based=181.0based=181.0
PPP for GDP-expenditure PPP for GDP-expenditure based=189.2 (OECD)based=189.2 (OECD)
Exchanger rate=144.8Exchanger rate=144.8
Economic Growth in the U.S. and Economic Growth in the U.S. and JapanJapan 1960-73 1973-90 1990-95 95-2000 2000-04 1960-2004
Value Added 3.90 2.83 2.35 4.12 2.56 3.21Capital Input 1.81 1.59 1.19 2.14 1.46 1.66
IT Capital 0.21 0.41 0.49 0.97 0.63 0.44Non-IT Capital 1.60 1.18 0.70 1.16 0.83 1.22
Labor Input 1.29 1.08 0.81 1.29 -0.17 1.02Total Factor Productivity 0.81 0.17 0.35 0.69 1.27 0.54
Agriculture 0.00 0.13 0.03 0.07 0.10 0.07IT-manufacturing 0.09 0.20 0.27 0.48 0.04 0.19Motor Vehicle 0.02 0.00 -0.01 0.02 0.06 0.01Other manufacturing 0.52 -0.02 0.11 0.21 0.04 0.19Communications 0.01 0.06 -0.01 -0.04 0.07 0.03Trade 0.17 0.15 0.07 0.15 0.51 0.18Finance & Insurance -0.05 0.01 0.04 0.11 0.30 0.03Other services 0.04 -0.37 -0.14 -0.30 0.15 -0.17
Value Added 10.00 4.50 1.31 1.31 1.14 5.10Capital Input 4.95 2.19 1.93 1.02 0.72 2.71
IT Capital 0.22 0.26 0.27 0.32 0.37 0.27Non-IT Capital 4.72 1.93 1.66 0.70 0.35 2.44
Labor Input 1.75 1.12 -0.16 -0.19 -0.15 0.90Total Factor Productivity 3.30 1.18 -0.46 0.48 0.57 1.48
Agriculture 0.20 0.00 0.06 -0.01 -0.04 0.06IT-manufacturing 0.17 0.21 0.09 0.42 0.35 0.22Motor Vehicle 0.28 0.13 0.00 0.02 0.11 0.14Other manufacturing 1.78 0.41 -0.33 0.17 0.08 0.68Communications 0.07 0.05 0.07 0.12 0.08 0.07Trade 0.94 0.28 0.01 -0.13 -0.03 0.37Finance & Insurance 0.23 0.10 -0.22 0.15 0.04 0.10Other services -0.36 0.01 -0.14 -0.26 -0.03 -0.15
United States
Japan
Note: All figures are average annual growth rates.Value added is aggregated from industry GDPs evaluated at the factor cost.
Changes in Contribution of Changes in Contribution of Industry TFP to Economic Growth:Industry TFP to Economic Growth:2000-2004 less 1995-20002000-2004 less 1995-2000
-0.18
0.11
-0.11
-0.03
0.41
0.00
-0.20
0.00
0.09
0.08
-0.03
0.02
-0.01
0.03
0.00
0.01
-0.02
0.00
0.00
0.00
0.01
0.00
0.00
0.00
-0.01
0.00
0.00
-0.01
-0.01
0.00
0.01
0.01
-0.04
0.00
-0.02
-0.09
0.06
-0.06
0.05
0.07
0.07
-0.11
-0.4 -0.2 0.0 0.2 0.4 0.6
Japan
0.45
0.36
0.19
0.11
0.08
0.07
0.05
0.04
0.04
0.04
0.03
0.03
0.02
0.02
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-0.01
-0.01
-0.01
-0.01
-0.01
-0.02
-0.02
-0.03
-0.06
-0.06
-0.08
-0.09
-0.14
-0.17
-0.25
-0.4 -0.2 0.0 0.2 0.4 0.6
40.Other Services
34.Wholesale and Retail
35.Finance and Insurance
31.Communications
39.Medical Care
29.Air Transportation
36.Real Estate
25.Precision Instruments
23.Motor Vehicles
30.Other Trans and Storage
1.Agriculture, Forestry, Fishery
18.Machinery
3.Other Mining
12.Chemical Products
24.Other Transportation Equipment
27.Railroad Transportation
26.Misc Manufacturing
9.Furniture and Fixture
8.Woods and Related Products
38.Research
15.Stone, Clay, Glass
42.Household
41.Public Administration
37.Education
6.Textile
2.Coal Mining
14.Leather Products
10.Paper and Pulp
28.Water Transportation
7.Apparel
11.Printing and Publishing
22.Other Electrical Machinery
20.Communications Equipment
33.Gas Supply
17.Metal Products
16.Primary Metal
5.Foods
13.Petroleum Refining
32.Electricity
4.Construction
19.Computers
21.Electronic Components
United States
U.S.-Japan Labor Productivity GapU.S.-Japan Labor Productivity Gap
-1.6
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000
TFP Labor Quality
Non-IT Capital Deepening IT Capital Deepening
Labor Productivity Gap
log (relative productivity level:
1960 1973 1980 1990 1995 2000 2004Labor Productivity 21.2 42.8 52.5 66.6 69.9 69.7 65.7
U.S.-Japan TFP GapU.S.-Japan TFP Gap
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000
Non Manufacturing Motor Vehicle
Non-IT Mnf.(exc. Vehicle) IT Manufacturing
TFP Gap for the Whole Economy TFP Gap for Manufacturing
log (relative productivity level:
1960 1973 1980 1990 1995 2000 2004Total Factor Productivity 52.4 72.5 75.4 86.1 82.6 81.7 79.5
Industry Origins Industry Origins of TFP Gap of TFP Gap in 1990in 1990
1.98
0.90
0.89
0.80
0.45
0.40
0.35
0.34
0.29
0.28
0.24
0.21
0.07
0.06
0.05
0.04
0.02
0.00
0.00
-0.02
-0.05
-0.08
-0.17
-0.17
-0.18
-0.21
-0.21
-0.32
-0.36
-0.36
-0.39
-0.43
-0.54
-0.62
-0.98
-0.98
-1.09
-1.58
-1.64
-2.21
-3.13
-6.78
-8 -6 -4 -2 0 2
Industry Contribution
1.40
1.16
1.11
1.60 1.07
1.31
1.09
1.22
1.33
1.05
1.24
1.28
1.03
1.01
1.14
1.02
1.00
1.00
1.00
0.97
0.78
0.93
0.89
0.97
0.95
0.84
0.85
0.61
0.90
0.21
0.62
0.84
0.71
0.82
0.68
0.79
0.76
0.60
0.91
0.71
0.81
0.73
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6
23.Motor Vehicles
18.Machinery
35.Finance and Insurance
21.Electronic Components
39.Medical Care
19.Computers
22.Other Electrical Machinery
24.Other Transportation Equipment
29.Air Transportation
36.Real Estate
27.Railroad Transportation
28.Water Transportation
10.Paper and Pulp
16.Primary Metal
38.Research
15.Stone, Clay, Glass
37.Education
41.Public Administration
42.Household
20.Communications Equipment
14.Leather Products
8.Woods and Related Products
25.Precision Instruments
12.Chemical Products
31.Communications
7.Apparel
6.Textile
33.Gas Supply
26.Misc Manufacturing
2.Coal Mining
9.Furniture and Fixture
13.Petroleum Refining
3.Other Mining
17.Metal Products
11.Printing and Publishing
1.Agriculture, Forestry, Fishery
30.Other Trans and Storage
32.Electricity
34.Wholesale and Retail
5.Foods
4.Construction
40.Other Services
TFP gap
Industry Origins Industry Origins of TFP Gap of TFP Gap in 2004in 2004
1.79
1.62
0.83
0.57
0.34
0.32
0.26
0.23
0.15
0.10
0.10
0.03
0.01
0.00
0.00
-0.04
-0.05
-0.06
-0.08
-0.10
-0.12
-0.14
-0.16
-0.18
-0.19
-0.20
-0.33
-0.34
-0.35
-0.48
-0.61
-0.77
-0.80
-0.87
-1.08
-1.37
-1.46
-1.49
-1.86
-2.21
-5.18
-5.76
-7 -5 -3 -1 1
Industry Contribution
1.40
1.41
1.18
1.29
1.11 1.49
1.40
1.28
1.05
1.00
1.05
0.99
1.02
1.00
1.00
0.92
0.63
0.92
0.89
0.76
0.93
0.91
0.79
0.18
0.67
0.75
0.90
0.92
0.78
0.45
0.58
0.74
0.91
0.66
0.61
0.66
0.55
0.62
0.82
0.69
0.82
0.71
0.0 0.5 1.0 1.5 2.0
23.Motor Vehicles
31.Communications
36.Real Estate
13.Petroleum Refining
22.Other Electrical Machinery
20.Communications Equipment
28.Water Transportation
29.Air Transportation
37.Education
39.Medical Care
24.Other Transportation Equipment
18.Machinery
8.Woods and Related Products
41.Public Administration
42.Household
25.Precision Instruments
14.Leather Products
33.Gas Supply
27.Railroad Transportation
19.Computers
15.Stone, Clay, Glass
10.Paper and Pulp
6.Textile
2.Coal Mining
7.Apparel
38.Research
16.Primary Metal
12.Chemical Products
21.Electronic Components
9.Furniture and Fixture
3.Other Mining
26.Misc Manufacturing
35.Finance and Insurance
11.Printing and Publishing
17.Metal Products
30.Other Trans and Storage
32.Electricity
1.Agriculture, Forestry, Fishery
4.Construction
5.Foods
40.Other Services
34.Wholesale and Retail
TFP gap
TFP Level Comparison TFP Level Comparison during 1960-during 1960-2004 (1)2004 (1)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1960 1970 1980 1990 2000
18.Machinery
0
5
10
15
20
25
30
35
1960 1970 1980 1990 2000
21. Electronic Components
0
10
20
30
40
50
60
70
80
90
100
1960 1970 1980 1990 2000
19.Computers
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1960 1970 1980 1990 2000
4.Construction
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1960 1970 1980 1990 2000
1.Agriculture, Forestry, Fishery
(US)
(Japan)
(Productitivy Level in the U.S. in 1960=1.0)
0.0
0.5
1.0
1.5
2.0
2.5
1960 1970 1980 1990 2000
20.Communications Equipment
TFP Level Comparison TFP Level Comparison during 1960-during 1960-2004 (2)2004 (2)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1960 1970 1980 1990 2000
23.Motor Vehicles
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1960 1970 1980 1990 2000
34. Wholesale and Retail
0.0
0.5
1.0
1.5
2.0
2.5
1960 1970 1980 1990 2000
31.Communications
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1960 1970 1980 1990 2000
35.Finance and Insurance
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1960 1970 1980 1990 2000
22. Other Electrical Machinery
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1960 1970 1980 1990 2000
40. Other Service
ConclusionConclusion Labor Productivity GapLabor Productivity Gap
65.7 in 200465.7 in 2004 Lower TFP accounts for 57%Lower TFP accounts for 57% Lower Non-IT-capital deepening accounts for 37%Lower Non-IT-capital deepening accounts for 37%
TFP GapTFP Gap Period of Convergence: 1960-1990Period of Convergence: 1960-1990 Period of Divergence: 1990-2004Period of Divergence: 1990-2004
IT producing Industries during the late 1990sIT producing Industries during the late 1990s IT using industries after 2000IT using industries after 2000
79.5 in 200479.5 in 2004 Wholesale and Retail Trade emerged as the largest Wholesale and Retail Trade emerged as the largest
contributor to this gap, accounting for 25% of the contributor to this gap, accounting for 25% of the lower TFP of the Japanese economylower TFP of the Japanese economy