Productivity slowdowns and inequality speedups: what is the role of intangibles? Jonathan Haskel, Imperial College Business School, Imperial College, London www.imperial.ac.uk/people/j.haskel @haskelecon; [email protected]2016 Conference of the Global Forum on Productivity: Structural Reforms for Productivity Growth Session 1: Sources and implications of the productivity slowdown, 7-8 July 2016 - Lisbon, Portugal Features work from: SPINTAN (EUgrant No. 612774 ) with Carol Corrado, Cecilia Jona-Lasinio; Book project with Stian Westlake www.theintangibleeconomy.com
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Productivity Slowdowns and Inequality Speedups: What is the Role of Intangibles?
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Productivity slowdowns and inequality speedups: what is
the role of intangibles?
Jonathan Haskel, Imperial College Business School, Imperial College, London
Preliminaries: have we made any progress on understanding the labour productivity slowdown?
• Is the productivity slowdown “Keynesian”? • Depressed animal spirits =>
• investment slowdown =>
• workers have less capital to work with =>
• Labour productivity slowdown
• What do the Conference Board say?
Source: The Conference Board Total Economy Database, 16 developed countries covered by the Conference Board Total Economy Database. Countries are Austria (AUT), Belgium (BEL), Czech Republic (CZE), Denmark (DNK), Finland (FIN), France (FRA), Germany (GER), Hungary (HUN) Ireland (IRL), Italy (ITA), Netherlands NLD), Portugal (PRT), Spain (ESP), Sweden (SWE), United Kingdom (UK) and the United States (USA).
Ok, so it’s a TFP slowdown..
• But that’s just finance and a big shock right?
…or fundamentally weak economies?
Two other preliminaries
• Rise in company inequality • Before the great recession
• Rise in income inequality • For most (US) workers,
stopped rising in 2000
• Workers who have done better have been in firms who have done better i.e. higher-paid workers are in firms with higher-paid co-workers
• Low investment with very low borrowing costs: secular stagnation? • Low total factor productivity growth, including in some of the successful
economies e.g. Scandinavia. • Wage inequality rise (before great recession) • Company productivity inequality rise (before great recession, and paying all
worker types higher wages)
• We also know that economies are getting more intangible intensive and did so before the great recession.
• Question : what is the role of intangibles, if any, in explaining these facts?
Intangible investment programme attempts to understand economies…
Which used to produce this…
…and now produce this.
Investment has changed From this…. To this…
Computerized Information
Innovative Property
Economic Competencies
• Software development • Database development
• R&D • Mineral exploration • Copyright development (artistic originals) • Design and other product development costs
• Market research & advertising • Business process investment • Training & skill development
Source: Corrado, Hulten and Sichel, 2005, 2009 and Carol Corrado, OECD/MIT presentation, NAS, December, 2012
Properties of intangibles • (At least some) not measured in GDP.
• Implication: GDP too low since investment undermeasured. GDP and TFP growth slows down if unmeasured investment is higher than measured GDP growth.
• Properties of intangibles- the four “S”s (Lev, CHS, Haskel/Westlake) • Sunk • Scalable • Spillovers • Synergies • Implications:
• Sunk: financing difficulties • Spillovers: if intangible investment falls, TFP growth falls; and by more in intangible-intensive
economies • Scalable: intangible-intensive companies get relatively larger => frontier gap gets bigger • Synergies: potentially large wage gains for intangible capital owners
• Do mismeasurement and 4S properties of intangibles help explain the data?
Finding: productivity spread has risen the most in intangible-intensive industries. And if these firms pay higher wages to all workers, wage inequality rises too.
Source: Haskel and Westlake, 2016, using data from SPINTAN and Distributed Microdata project
• “Traditional” values versus “cosmopolitan” values • Cosmopolitan values? From
psychology literature maybe associated with personality traits: • openness to experience. • agreeableness
• Are these the types of workers who
can potentially succeed in an intangible economy (benefit from spillovers and synergies)?
Summary • Key facts to explain
• TFP slowdowns and inequality speedups • TFP falls are in some of the most previously successful countries e.g. Scandinavia.
• Are intangibles part of the story? • Intangible investment fell in Great Recession, then grew more slowly • But recovered faster than tangibles and GDP
• Implications • GDP growth too low since investment more mis-measured => TFP growth falls • Fewer spillovers => TFP growth falls • And: both effects magnified in intangible-intensive countries • Intangible-intensive firms scale up and frontier breaks away
• Political economy: are we leaving certain worker types behind? Who won’t support globalisation?