Reader’s guide
Productivity is commonly defined as a ratio between the volume of output and the volume of inputs. In other words, it measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output. Productivity is considered a key source of economic growth and competitiveness and, as such, internationally comparable indicators of productivity are central for assessing economic performance.
This OECD Compendium of Productivity Indicators presents a broad overview of recent and longer term trends in productivity in OECD countries, providing insights on:
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international comparisons of income per capita and the role of labour productivity;
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the role played by labour and capital inputs and multifactor productivity in driving economic growth;
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the contribution of individual industries or sectors to aggregate labour productivity growth;
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differences in productivity small and medium-sized enterprises (SMEs) and large firms;
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the links between productivity and international competitiveness;
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the relationship between wages and productivity;
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long-term trends in productivity growth in major advanced economies.
Measures of productivity
There are many different productivity measures. The key distinguishing factor reflects the policy focus, albeit data availability can also play an important role.
Labour productivity, measured as Gross Domestic Product (GDP) per hour worked, is one of the most widely used measures of productivity at country level. Productivity based on hours worked better captures the use of the labour input than productivity based on numbers of persons employed (head counts). Generally, the source for total hours worked is the OECD National Accounts Statistics (database), although other sources are necessarily used where data are lacking. Work continues at the national level to develop the necessary source data but despite the progress and ongoing efforts, for some countries, the measurement of hours worked still suffers from a number of statistical problems that can hinder international comparability (Chapter 8. ).
To take account of the role of the capital input in the production process, the preferred measure is the flow of productive services that can be drawn from the cumulative stock of past investments, such as machinery and equipment. These services, provided by capital goods to the production process, are known as capital services. Capital services provided by each type of capital good are estimated by the rate of change of the productive capital stock, taking into account wear and tear, retirements and other sources of reduction in the productive capacity of fixed capital goods. The overall volume measure of capital services (i.e. capital input) is computed by aggregating the volume change of capital services of all individual assets using asset specific user cost shares as weights. No conceptual distinction is made between user costs of capital and rental prices of capital. In principle, the rental price is that price that could be directly observed if markets existed for all capital services. In practice, however, rental prices have to be imputed for most assets, using the implicit rent that capital goods’ owners “pay” to themselves: the user costs of capital. In other words, the user cost of capital reflects the amount that the owner of a capital good would charge if he rented out the capital good under competitive conditions.
After computing the contributions of labour and capital inputs to output growth, the so-called multifactor productivity can be derived. It represents the efficiency of the combined use of labour and capital in the production process and is measured as the residual growth that cannot be explained by changes in labour and capital inputs. Multifactor productivity is often perceived as a pure measure of technical change, but, in practice, it should be interpreted in a broader sense that partly reflects the way capital and labour inputs are measured. Changes in multifactor productivity reflect also the effects of changes in management practices, brand names, organisational change, general knowledge, network effects, spillovers from one production factor to another, adjustment costs, economies of scale, the effects of imperfect competition and measurement errors.
Gains in productivity also influence the development of unit labour costs, one of the most commonly used indicators to assess a country’s international competitiveness. However, the ability of unit labour costs to inform policies targeting international competitiveness may be limited. This relates to the increasing need to take into account the growing international fragmentation of production, the effects of which on competitiveness may not be captured sufficiently by unit labour costs.
The OECD Productivity Statistics (database)
The indicators presented in this publication are drawn from the OECD Productivity Statistics (database), which provides a consistent set of annual estimates of labour, capital and multifactor productivity growth, unit labour costs and many other related indicators as a tool to analyse the drivers of economic growth in OECD member countries and emerging economies. The database includes the following indicators:
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GDP per capita and labour productivity levels
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Growth in labour productivity
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Measures of labour input, such as total hours worked and total persons employed
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Measures of capital input, as an aggregate and by type of capital good
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Share of labour costs in the total cost of production
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Multifactor productivity growth
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Unit labour costs and labour compensation
Chapter 8. presents the definition of each indicator and the computation method.
Country, time and industry coverage
Most countries covered in this publication produce their national accounts on the basis of the System of National Accounts 2008 (2008 SNA), which recognised, among other changes, that expenditures on research and development should be treated as investment (Chapter 8. ). However, at the time of publication the indicators computed for Colombia reflect the 1993 SNA standards, meaning that some care is needed in comparing across countries. For the Russian Federation, the indicators reflect a mix between the two systems, 1993 SNA (until 2010) and 2008 SNA (from 2011 onwards).
The OECD Compendium of Productivity Indicators includes data for the following countries depending on data availability. The figures in this publication use ISO codes for country names as listed below.
This publication looks at longer term trends in productivity growth but also at productivity patterns before and after the global crisis. To this end, indicators are typically presented for distinctive time periods: 1995-2017; 2001-2017; 2001-2007; and 2010-2017. For each country, the average value in the different periods only takes into account the years for which data are available for the respective indicator and its components.
Throughout this publication, the sectoral breakdown follows the International Standard Industry Classification of all Economic Activities (ISIC). Indicators by industry are presented according to its latest version, ISIC Rev.4, or the European equivalent, NACE Rev.2 (Nomenclature statistique des activités économiques dans la Communauté européenne).
Data are provided for the total economy and for selected sectors in the “non-agricultural business sector, excluding real estate” (ISIC Rev.4-codes B-N excluding L). These include: B - Mining and quarrying; C - Manufacturing; D - Electricity, gas, steam and air conditioning supply; E - Water supply; sewerage, waste management and remediation activities; F - Construction; as well as G-N excluding L - Business sector services, excluding real estate.
Business sector services (ISIC Rev.4 codes G-N, excluding L) include: G - Wholesale and retail trade; repair of motor vehicles and motorcycles; H - Transportation and storage; I - Accommodation and food service activities; J - Information and communication; K - Financial and insurance activities; M - Professional, scientific and technical activities; N - Administrative and support service activities. Real estate activities (ISIC Rev.4, code L) are excluded, as their value added includes the imputation made for the dwelling services provided and consumed by home-owners.
The business sector also excludes activities that are often provided by non-market producers. This reflects the fact that non-market activities are often measured on a sum-of-costs approach in current prices, with an implicit imputation made for labour productivity growth (usually zero) for volume estimates, together with an assumption of zero net operating surplus. These activities comprise: O - Public administration and defence; compulsory social security; P – Education; Q - Human health and social work activities; R - Arts, entertainment and recreation; S - Other service activities; T - Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use; U - Activities of extraterritorial organisations and bodies.
This year edition presents indicators for more detailed economic activities according to ISIC Rev. 4.