OECD Global Productivity Forum
Productivity and Digitalisation 9 July 2021
Outline 1. Productivity: Pandemic effects adding to an already long-lasting challenge 2. Digitalisation: A challenge to policymakers
3. Policies enhancing productivity and digitalisation 4. What role for international cooperation and the G20?
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1. Pandemic effects on productivity growth Channels Hysteresis and human capital
Within-firm reallocation
Reallocation across firms
Increase in digital take-up by individuals; incentive to training from reduced working hours
Potential negative drivers Labour hoarding; erosion in firm-specific human capital; deterioration of workers' skills in case of slow reallocation; disruptions to schooling and training; missing positive spillovers in the workplace.
Investment
Falling investment due negative macroeconomic prospects
Business-specific intangible assets
Business closures destroy e.g. buyer-supplier trust, employer-employee relations, organisational effectiveness
Digitalisation, e-commerce, egovernment and e-health, new Innovation and digitalisation business models, higher automation, teleworking diffusing at large scale
Distraction, addiction and other negative effects of digitalisation
Frictions in global value chains
Higher transaction costs; repatriation of activities might reduce efficiency, curtailed cross-country labour mobility.
Macroeconomic burden
Fiscal/monetary consolidation in the medium term
Firm size
Composition effect (exit of smaller, less productive firms)
Firm churning
Higher firm churning as low-productive Higher concentration/lower competition, decline in earlyfirms exit the market and more stage venture capital reduces innovative start-ups, sizeable productive firms enter or expand. public support might go to "zombie" firms
Financial constraints Reallocation across sectors Changes in sectors’ shares 3
Potential positive drivers
Credit crunch risk, viable illiquid firms becoming insolvent Cross-sector reallocation of economic activity as some sectors shrink and others expand. The sign is difficult to predict due to differences across sectors and countries.
Investment in the G20 Change in investment at the global financial crisis and the COVID-19 crisis across the G20 (2009 vs. 2020)
Change in investment (%)
20
10 0 -10 -20 -30
-40
2009 4 Source: IMF, WEO October 2020
2020 (f)
2. Digitalisation: A challenge to policymakers Historical evidence: Productivity paradox Inequalities
Pandemic experience: Main way to keep economies rolling
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Agglomeration effects Market concentration Possible zero-sum game across and within sectors
It us up to policymakers to ensure that the positive effects predominate
3. Policies enhancing productivity and digitalisation Enhancing competitive environment and ensuring better data access
Investment in innovation, intangible capital and infrastructure
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Ensuring supportive environment and quality institutions
4. What role for international cooperation? Digitalisation as a global common: We were lucky, in a sense…. Digitalisation knows no borders, response should be international Recognising specific country circumstances and internalising spillover effects Toolkit for action: Soft mechanisms: exchange of best practices, ensure transparency, agree on action principles, negotiate non-mandatory rules, outcome evaluation, devise contingency measures Cooperation between independent national agencies endowed with similar mandates: eg. competition authorities, data protection agencies
Common efforts of “clubs” of countries: participation of a critical mass of committed countries leading to an agreement 7
What role for the G20? • Start thinking and discussing a post-pandemic recovery strategy focused on structural reform, investment and productivity; strengthen macroeconomic policy coordination and agree on exit timing and sequencing • Build on lessons learned, ensure continuity of objectives among G20 Presidencies: Digitalisation and productivity should be added to the multiannual G20 work programme • Support fair and transparent distribution of wealth: international taxation
• Work hand in hand with different government sectors, business, civil society, listen to International Organisations’ advice
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Thank you
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Uneven impact across sectors - stronger rebound in manufacturing EU weighted average of observed turnover (solid) and predicted turnover (dash) indexed at 100 in January 2020
120
120
100
100
80
80
60
60
40
40
20
20
10 Source: European Commission calculations
Wholesale & retail (G) Transport (H) Accommodation & food services (I) Information & communication (J)
Dec-21
Oct-21
Aug-21
Jun-21
Apr-21
Feb-21
Dec-20
Oct-20
Aug-20
Jun-20
Apr-20
Dec-21
Oct-21
Aug-21
Jun-21
Apr-21
Feb-21
Dec-20
Oct-20
Aug-20
Jun-20
Apr-20
Feb-20
Manufacturing of food (C10-C12)
Feb-20
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