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Productivity Measurement with Natural Capital

Author

Listed:
  • Nicola Brandt

    (OECD)

  • Paul Schreyer

    (OECD)

  • Vera Zipperer

    (OECD)

Abstract

Traditional measures of multi-factor productivity (MFP) growth generally do not recognise natural capital as inputs into the production process. Since productivity growth is measured as the residual between output and input growth, it will pick up the growth in unmeasured inputs, which can lead to a bias. The purpose of this paper is to gain a better understanding of the role of natural capital for productivity measurement and as a source of economic growth. To this aim, aggregate economy productivity measures mostly from the OECD Productivity Database are extended by incorporating natural capital as an additional input factor into the production function. More specifically, this paper considers oil, gas and various minerals as natural capital inputs, drawing on data from the World Bank. Results suggest that failing to account for natural capital tends to lead to an underestimation of productivity growth in countries where the use of natural capital in production is declining because of a dwindling natural capital stock. In return, productivity growth is sometimes overestimated in times of natural resource booms, if natural capital is not taken into account as an input factor. The direction of the adjustment to productivity growth depends on the rate of change of natural capital extraction relative to the rate of change of other inputs. The extended framework also makes the contribution of natural capital to economic growth explicit. This can be useful for countries relying on nonrenewable resources to better understand the need to develop other sources of growth, for example by investing in human or productive capital, to prepare for times when resources endowments become scarce. While the measurement of natural capital remains very incomplete, leaving out natural forests, water and soil, the measurement framework can readily be applied to more encompassing data on the natural capital stock, once it becomes available. Productivité multi-factorielle avec capital naturel Des mesures traditionnelles de croissance de la productivité multifactorielle, en général, ne prennent pas en compte le capital naturel en tant que facteur de production. Comme la croissance de productivité est la différence entre la croissance de la production et des intrants, cette mesure sera biaisée dès qu’il y aura des intrants non-mesurés, comme par exemple le capital naturel. L’objectif de ce rapport est donc de mieux comprendre le rôle du capital naturel dans les mesures de productivité, et comme source de croissance économique. Ainsi, il enrichit des mesures de productivité à l’échelle de l’économie agrégée, pour la plupart extraites de la base de données de productivité de l’OCDE, en intégrant explicitement le capital naturel comme facteur de production. Plus spécifiquement, le rapport considère le pétrole, le gaz naturel et des minéraux variés comme des éléments du capital naturel, en se servant des données de la Banque Mondiale. Les résultats suggèrent qu’ignorer le capital naturel a tendance à mener à une sous-estimation de la croissance de productivité dans les pays où l’utilisation du capital naturel est en déclin à cause des réserves en voie de disparition. En revanche, la croissance de productivité est parfois surestimée pendant des périodes de hausse des prix des ressources naturelles. La direction de la correction de la mesure de croissance de productivité dépend du taux de croissance relatif de l’extraction du capital naturel par rapport au taux de croissance des autres intrants. La mesure de productivité ainsi enrichie permet aussi de mesurer explicitement la contribution du capital naturel à la croissance économique. Ceci peut s’avérer très utile pour des pays dépendant des ressources naturelles non-renouvelables pour mieux comprendre leur besoin d’investir dans le capital humain ou productif pour se préparer pour des périodes de pénurie de leurs ressources naturelles. Même si la mesure de capital naturel utilisée dans ce rapport reste très restreinte, ne prenant en compte ni les forêts vierges, ni l’eau ou le sol, le cadre proposé peut facilement être appliqué à des données plus complètes, dès qu’elles seront disponibles.

Suggested Citation

  • Nicola Brandt & Paul Schreyer & Vera Zipperer, 2013. "Productivity Measurement with Natural Capital," OECD Economics Department Working Papers 1092, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1092-en
    DOI: 10.1787/5k3xnhsz0vtg-en
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    1. World Bank, 2011. "The Changing Wealth of Nations : Measuring Sustainable Development in the New Millennium," World Bank Publications - Books, The World Bank Group, number 2252.
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    Cited by:

    1. Dennis Fixler, 2014. "Priorities and Directions for Future Productivity Research: A BEA Perspective," International Productivity Monitor, Centre for the Study of Living Standards, vol. 27, pages 10-13, Fall.
    2. Calderon,Cesar & Castillo Castro,Catalina, 2019. "Trade Integration and Growth : Evidence from Sub-Saharan Africa," Policy Research Working Paper Series 8859, The World Bank.
    3. Wan-Jiun Chen & Chien-Ho Wang, 2020. "A General Cross-Country Panel Analysis for the Effects of Capitals and Energy, on Economic Growth and Carbon Dioxide Emissions," Sustainability, MDPI, Open Access Journal, vol. 12(15), pages 1-20, July.
    4. David M. Byrne & John G. Fernald & Marshall B. Reinsdorf, 2016. "Does the United States Have a Productivity Slowdown or a Measurement Problem?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 109-182.
    5. McGrath, Luke & Hynes, Stephen & McHale, John, 2020. "Reassessing Ireland’s Economic Development through the Lens of Sustainable Development," Working Papers 309502, National University of Ireland, Galway, Socio-Economic Marine Research Unit.
    6. -, 2018. "The wealth gifted to the large-scale copper mining industry in Chile: new estimates, 2005-2014," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    7. Robi Kurniawan & Shunsuke Managi, 2019. "Linking Wealth and Productivity of Natural Capital for 140 Countries Between 1990 and 2014," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 141(1), pages 443-462, January.
    8. Cárdenas Rodríguez, Miguel & Haščič, Ivan & Souchier, Martin, 2018. "Environmentally Adjusted Multifactor Productivity: Methodology and Empirical Results for OECD and G20 Countries," Ecological Economics, Elsevier, vol. 153(C), pages 147-160.
    9. Voskoboynikov, Ilya B., 2017. "Sources of long run economic growth in Russia before and after the global financial crisis," Russian Journal of Economics, Elsevier, vol. 3(4), pages 348-365.
    10. Antonietti, Roberto & Marzucchi, Alberto, 2014. "Green tangible investment strategies and export performance: A firm-level investigation," Ecological Economics, Elsevier, vol. 108(C), pages 150-161.
    11. Chris McDonald & Ana I. Moreno-Monroy & Laura-Sofia Springare, 2019. "Indigenous economic development and well-being in a place-based context," OECD Regional Development Working Papers 2019/01, OECD Publishing.
    12. Serena Fatica, 2017. "Measurement and Allocation of Capital Inputs With Taxes: A Sensitivity Analysis for OECD Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(1), pages 1-29, March.
    13. Mota, Rui Pedro & Cunha-e-Sá, Maria A., 2019. "The Role of Technological Progress in Testing Adjusted Net Savings: Evidence from OECD Countries," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.

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    More about this item

    Keywords

    comptabilité des ressources naturelles; green productivity; multifactor productivity; natural capital stock; natural resource accounting; productivité multifactorielle; productivité verte; stock de capital naturel;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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