It is hard to overemphasize the role of productivity growth in reducing poverty and raising living standards. Sustained productivity increases have made possible the unprecedented rise in prosperity over the last two centuries. Recent evidence suggests that productivity growth has been on the decline around the world for the last decade, with a few exceptions. Understanding whether this is correct, and, if so, what explains it and what can be done, are now priorities for economists and policymakers.
In the last few years, CSA—which is an approach to agriculture that boosts productivity and resilience, and reduces GHG emissions- has gained momentum as understanding of its critical importance to the food system has risen. Nearly every government representative and farmer I meet during my missions (most recently in Bangladesh, Nepal and Pakistan) expresses genuine interest in making CSA part of their farming routines and agricultural sector.
This momentum is reflected in the Bank’s own actions. Since the Bank started tracking CSA in 2011, our CSA investments have grown steadily, reaching a record US$ 1 billion in 2017. We expect to maintain and even increase that level next year as our efforts to scale up CSA intensify.
Is the era of industrialization and manufacturing exports growth miracles – a period of rapid economic growth exceeding expectations, last seen in East Asian countries, most notably in China – over? If you listen to Harvard’s Dani Rodrik, the answer seems to be: pretty much! Does that mean, Africa, the only continent which hasn’t seen rapid export-led manufacturing growth, would not have many growth miracle stories?
Between 2008 and 2010, we hired a multinational consulting firm to implement an intensive management intervention in Indian textile weaving plants. Both treatment and control firms received a one-month diagnostic, and then treatment firms received four months of intervention. We found (ungated) that poorly managed firms could have their management substantially improved, and that this improvement resulted in a reduction in quality defects, less excess inventory, and an improvement in productivity.
Should we expect this improvement in management to last? One view is the “Toyota way”, with systems put in place for measuring and monitoring operations and quality launch a continuous cycle of improvement. But an alternative is that of entropy, or a gradual decline back into disorder – one estimate by a prominent consulting firm is that two-thirds of transformation initiatives ultimately fail. In a new working paper, Nick Bloom, Aprajit Mahajan, John Roberts and I examine what happened to the firms in our Indian management experiment over the longer-term.
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Recent research shows that
City governments invest a lot in job creation—they plan infrastructure, skills initiatives, and industry support with the goal to improve productivity and generate jobs and growth, especially in the high-skill sectors. Yet, there might be an important input to productivity that cities can pay more attention to: clean air.
Recent research suggests that a 10-unit increase in the air quality index decreases productivity by 0.35%. Seems marginal? This “productivity slow-down” costs the high-skill economy of China $2.2 billion per year for each additional 10 units of the air quality index.
The research in question studied the effect of air pollution on worker productivity in call centers in Shanghai and Nantong in China. The firm analyzed is Ctrip, one of the largest travel agencies in the country, employing more than 30,000 people. 50% of the workers’ pay is based on performance and the measures of productivity are very detailed and high frequency. The study concluded that there is a robust relationship between daily air pollution levels and worker productivity. On average, a 10-unit increase in the Air Quality Index (AQI) led to a 0.35% decline in the number of calls handled by a worker in a day at an AQI of 100. If we translate this to the entire Chinese high-skill industries, a 10-unit reduction of air pollution levels would increase the monetized value of improved productivity by $2.2 billion per year.
“Productivity isn't everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”
— Paul Krugman, Professor of Economics and International Affairs Emeritus at Princeton University and a columnist for The New York Times
Paul Krugman’s conclusion about the importance of productivity is widely shared among economists. Yet productivity growth across the world has been sluggish in recent decades, in both advanced and developing countries, and restarting it is a central priority for the global development agenda.
Taking stock of what we understand about the productivity slowdown, and mapping out potential areas of policy action, was the focus of a recent two-day conference at the World Bank, “Second-Generation Productivity Analysis and Policy.” The conference, co-sponsored by the European Central Bank and the Competitiveness Network, brought together global experts and development practitioners.
“Bringing the most current advice to our clients about accelerating growth” is a top priority, said Jan Walliser, the Vice President who leads the Bank Group's Equitable Growth, Finance and Institutions (EFI) practice group. “The last 15 years have brought about major advances in the measurement and understanding of productivity growth,” said EFI Chief Economist William F. Maloney. The conference agenda thus sought to “sketch the frontier on the issues that are most relevant” to jump-starting productivity growth in the Bank Group's client countries.
Productivity in Cambodia's apparel and garment industry has, in recent decades, enjoyed sustained growth. This photo shows an apparel factory at the Sihanoukville Special Economic Zone. Photo: Chhor Sokunthea / The World Bank.
In 1965, Gordon Moore — co-founder of Intel Corporation — hypothesized that the number of transistors on an integrated circuit will double every 18 to 24 months. This came to be known as Moore’s Law, the ramifications of which are hard to ignore in almost any aspect of our everyday lives. Information has become more accessible to people at lower costs. Today’s work force is globalized and there are few domains that are still untouched by technology.
Yet the very ubiquitous and rapidly evolving nature of information and communication technologies (ICTs) gives rise to fears of displacing more workers and potentially widening the economic gap between the rich and poor. Technological evolution and artificial intelligence are fast redefining the conventional structure of our society.
- Artificial Intelligence
- wage stagnation
- inequality and shared prosperity
- Income Inequality
- information and communication for development (ICT4D)
- jobs market
- Private Sector Development
- Labor and Social Protection
- Information and Communication Technologies
- The World Region
What is the main difference between high-income and developing countries?
Here is my take: People in the former have much more of pretty much everything. Almost everyone living in high-income countries has access to electricity; in poor (low-income) countries, 7 out of 10 people don’t. Most families in rich countries own a car, but only a few people living in the developing world do. On per capita basis, rich economies have 15 times more doctors than poor countries, consume 40 times more energy, have 50 times more ATMs, and so on.