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Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?

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  • Paul Beaudry
  • Fabrice Collard

Abstract

This paper is motivated by a set of cross-country observations on labor productivity growth among industrial countries over the period 1960-1997. In particular, we show that over this period, the speed of convergence among industrialized countries has decreased substantially while the negative effect of a country's own employment growth (or labor force growth) on labor productivity has increased dramatically. The main contribution of the paper is to show how these observations are consistent with the view that industrialized countries have been undergoing a particularly drastic technological revolution over the recent past. In effect, we show how the process of endogenous technological adoption, following the diffusion of a general purpose technology, can explain these observations by causing the emergence of an AK accumulation phase where demographic factors temporarily become an major determinant of labor productivity growth. Our estimation of the model implies that the AK phase has been in effect since the early to mid-seventies, but that this phase may now be coming to an end. An important contribution of the paper is to analyze growth experiences across advanced industrialized countries within an open economy framework and to evaluate the explanation by estimating a multicountry dynamic general model.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8754.

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Date of creation: Jan 2002
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Handle: RePEc:nbr:nberwo:8754

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  1. Trajtenberg, M. & Bresnahan, T.F., 1992. "General Purpose Technologies: "Engines of Growth"," Papers 16-92, Tel Aviv.
  2. Maurice Obstfeld & Kenneth Rogoff, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Working Papers 7777, National Bureau of Economic Research, Inc.
  3. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  5. Acemoglu, D., 1996. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," Working papers 96-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
  7. E Berman & J Bound & Stephen Machin, 1997. "Implications of Skill-Biased Technological Change: International Evidence," CEP Discussion Papers dp0367, Centre for Economic Performance, LSE.
  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  9. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  10. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  11. Paul Beaudry & David Green, 1998. "What is Driving US and Canadian Wages: Exogenous Technical Change or Endogenous Choice of Technique?," NBER Working Papers 6853, National Bureau of Economic Research, Inc.
  12. Paul Beaudry & David Green, 2000. "The Changing Structure of Wages in the US and Germany: What Explains the Differences?," NBER Working Papers 7697, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Short-Run Costs of Labor market Liberalization
    by Mark Thoma in Economist's View on 2008-04-15 22:51:29
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Cited by:
  1. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO.
  2. Emilia Herman & Maria-Ana Georgescu, 2012. "Is there a trade-off between employment and labour productivity in new EU member states?," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 303-318, December.
  3. Beaudry, Paul & Collard, Fabrice & Green, David, 2003. "Changes in the World Distribution of Output-per-Worker 1960-98 : How a Standard Decomposition tells an Unorthodox Story," IDEI Working Papers 190, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037 - 1078.
  5. Christopher Gust & Jaime Marquez, 2002. "International comparisons of productivity growth: the role of information technology and regulatory practices," International Finance Discussion Papers 727, Board of Governors of the Federal Reserve System (U.S.).
  6. Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade.
  7. Dew-Becker, Ian & Gordon, Robert J, 2008. "The Role of Labour Market Changes in the Slowdown of European Productivity Growth," CEPR Discussion Papers 6722, C.E.P.R. Discussion Papers.
  8. Kerstin Enflo, 2010. "Productivity and employment—Is there a trade-off? Comparing Western European regions and American states 1950–2000," The Annals of Regional Science, Springer, vol. 45(2), pages 401-421, October.
  9. Beaudry, Paul & Collard, Fabrice, 2006. "Globalization, returns to accumulation and the world distribution of output," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 879-909, July.
  10. Beaudry, Paul & Collard, Fabrice, 2003. "Globalization, Gains from Specialization and the World Distribution of Output," IDEI Working Papers 199, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. Enrico Marelli & Marcello Signorelli, 2010. "Employment, productivity and models of growth in the EU," International Journal of Manpower, Emerald Group Publishing, vol. 31(7), pages 732-754, November.
  12. Paul Beaudry & Fabrice Collard & David A. Green, 2002. "Decomposing the Twin-peaks in the World Distribution of Output-per-worker," NBER Working Papers 9240, National Bureau of Economic Research, Inc.
  13. Albert van der Horst & Hugo Rojas-Romagosa & Leon Bettendorf, 2009. "Does employment affect productivity?," CPB Discussion Paper 119, CPB Netherlands Bureau for Economic Policy Analysis.
  14. Yogo, Urbain Thierry, 2008. "Croissance et Emploi en Afrique Subsaharienne:Evidence théorique et Faits Empiriques
    [Growth and Employment In Subsaharan Africa: Theoretical Evidence and Empirical Facts]    ," MPRA Paper 10474, University Library of Munich, Germany, revised 17 Sep 2008.

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