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Productivity’s wave goodbye?

Did you know that the pace of productivity growth is slowing sharply across the OECD area? Moreover, the trend has continued downward since the early 2000s after a brief upward tick in the 1980s and 1990s, which in part reflected the diffusion of new information and communications technologies

A working paper from the French central bank distinguishes four periods from 1890 to 2012 during which both innovation and catch-up drove productivity. First, from 1890 to the First World War, productivity grew moderately, led by the UK with other countries catching up. Second, a US-led phase, with a major wave of productivity acceleration in the 1930s and 1940s, while other advanced countries still struggled in the aftermath of the Great Depression and war.

Third, following the Second World War, Europe and Japan enjoyed a golden age, catching the wave launched by the United States. When the fourth wave came, from 1995, the post-war convergence process had come to an end, and US productivity growth regained the lead with a short though distinct wave of growth. Technological breakthroughs characterised these waves, from electricity and combustion engines, to pharmaceuticals and IT, though the authors note an “impressive slowdown” in the impact of the latter from 2000.

For more on these trends and their historical causes, see “Productivity Trends from 1890 to 2012 in Advanced Countries” by Antonin Bergeaud, Gilbert Cette and Rémy Lecat, February 2014, Document de Travail (Working Paper) No 475, available at www.banque-france.fr. The paper drew discussion at the Joint OECD-NBER Conference on Productivity Growth and Innovation in the Long Run at the OECD 26-27 September 2014: see http://oe.cd/IC.

© OECD Observer No 300, Q3 2014