The World Bank Perspective on Productivity: A Review Article on "Productivity Revisited: Shifting Paradigms in Analysis and Policy"

In 'Productivity Revisited', the World Bank turns its ongoing productivity research program to the issue of the apparent failure of productivity in developing countries to converge to the higher productivity in advanced economies. The World Bank asserts, but provides little evidence, that converge is not taking place The analysis is grounded in the so-called second wave of productivity research which uses firm-level data to disaggregate productivity into gains within firms, across firms through research allocation and through market entry and exit. The disaggregations are found to differ across countries, suggesting convergence policies may need to be shaped to local circumstances rather than generalized across developing countries. A common question arising throughout is why firms, sectors and economies do not do more to emulate the behaviours of the more productive counterparts in advanced economies. Considerable emphasis is placed on managers and entrepreneurs in developing countries not having the right skill set as they have inadequate education and are risk averse. Despite claims that second-wave analysis puts into question traditional policy prescriptions, the World Bank advocates a traditional set of policy recommendations involving creating favourable business conditions, reducing distortions and improving human capital.