Boosting Productivity via Innovation and Adoption of New Technologies : Any Role for Labor Market Institutions?

The authors present empirical evidence on the determinants of industry-level multifactor productivity growth. They focus on "traditional factors," including the process of technological catch up, human capital, and research and development (R&D), as well as institutional factors affecting labor adjustment costs. Their analysis is based on harmonized data for 17 manufacturing industries in 18 industrial economies over the past two decades. The disaggregated analysis reveals that the process of technological convergence takes place mainly in low-tech industries, while in high-tech industries, country leaders tend to pull ahead of the others. The link between R&D activity and productivity also depends on technological characteristics of the industries: while there is no evidence of R&D boosting productivity in low-tech industries, the effect is strong in high-tech industries, but the technology leaders tend to enjoy higher returns on R&D expenditure compared with followers. There is also evidence in the data that high labor adjustment costs (proxied by the strictness of employment protection legislation) can have a strong negative impact on productivity. In particular, when institutional settings do not allow wages or internal training to offset high hiring and firing costs, the latter reduce incentives for innovation and adoption of new technologies, and lead to lower productivity performance. Albeit drawn from the experience of industrial countries, this result may have relevant implications for many developing economies characterized by low relative wage flexibility and high labor adjustment costs.

Bibliographic Details

Main Authors:	Scarpetta, Stefano, Tressel, Thierry
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-04
Subjects:	ACCOUNTING, BASE YEAR, BUSINESS CYCLES, CAPITAL STOCK, CAPITAL-LABOR, CAPITAL-LABOR RATIO, CLIMATE, COMPARATIVE ADVANTAGE, CONSTANT RETURNS, CONSTANT RETURNS TO SCALE, CONSUMERS, COUNTRY COMPARISONS, DECREASING RETURNS, DETERMINANTS OF GROWTH, ECONOMETRIC ANALYSIS, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIES OF SCALE, ECONOMISTS, ELASTICITY, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPLOYMENT, EQUILIBRIUM, EQUILIBRIUM LEVEL, EXPECTED RETURNS, FACTORS OF PRODUCTION, GDP, GDP PER CAPITA, GROWTH LITERATURE, GROWTH MODEL, GROWTH MODELS, GROWTH PATH, GROWTH PERFORMANCE, GROWTH RATES, HUMAN CAPITAL, HUMAN DEVELOPMENT, INCENTIVES TO SAVE, INCOME, INDUSTRIAL ECONOMIES, INNOVATION, INVENTORY, LABOR COSTS, LABOR FORCE, LABOR INPUT, LABOR PRODUCTIVITY, LAWS, LEGISLATION, MACROECONOMIC SHOCKS, MARGINAL COST, MARGINAL COSTS, MARGINAL PRODUCT, MARKET POWER, OLDER PEOPLE, OVERLAPPING GENERATIONS MODEL, PENALTIES, PERFECT COMPETITION, POLICY MAKERS, PRICE LEVELS, PRODUCT DIFFERENTIATION, PRODUCT MARKETS, PRODUCTION FUNCTION, PRODUCTION PROCESS, PRODUCTION PROCESSES, PRODUCTIVITY, PRODUCTIVITY GROWTH, PURCHASING POWER, RELATIVE PRICES, ROLE OF INNOVATION, SAVINGS, SHARE OF LABOR, SUNK COSTS, TECHNICAL CHANGE, TECHNICAL PROGRESS, TECHNOLOGICAL FACTORS, TECHNOLOGICAL PROGRESS, TECHNOLOGY ADOPTION, TIME SERIES, TOTAL COSTS, TRADE UNIONS, WAGES, WORKERS PRODUCTIVITY GROWTH, INNOVATION IN BUSINESS, TECHNOLOGICAL CHANGE, TECHNOLOGICAL INNOVATIONS, LABOR MARKET NEXUS, FACTOR PRODUCTIVITY, HUMAN CAPITAL FORMATION, RESEARCH & DEVELOPMENT, INSTITUTIONAL FRAMEWORK, MANUFACTURING SECTOR, INDUSTRIALIZED SOCIETIES, TECHNOLOGICAL CAPACITY, RATE OF RETURN, ADJUSTMENT COSTS, EMPLOYMENT POLICIES, ON THE JOB TRAINING, WAGE CONTROLS,
Online Access:	http://documents.worldbank.org/curated/en/2004/04/3227079/boosting-productivity-innovation-adoption-new-technologies-role-labor-market-institutions https://hdl.handle.net/10986/14748
Tags:	Add Tag No Tags, Be the first to tag this record!