Productivity and long term growth

Going for Growth 2018 - Going for greener growth - what can indicators tell us?


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A clean and healthy environment is essential for supporting economic activity and well-being in the long-term. Practically every economic and leisure activity – as well as life itself - has broadly-defined environment as a key input and could not exist without it. However, the relationship between the environment and GDP growth per se is more complex. For example, looking at the contributions to GDP growth in OECD and large emerging market economies (Argentina, Brazil, Russia, India, Indonesia, China and South Africa) over the past two decades, the main source has been multifactor productivity growth, followed by capital deepening (Figure 2.1).

A framework developed at the OECD allows evaluating the sources of growth in a broader sense - adjusting growth outcomes for “bad” outputs air emissions (greenhouse gasses and air pollutants) and calculating the contribution of subsoil asset use – that is, distinguishing to what extent classically measured growth has been higher (lower) due to increased pollution or increased exploitation of natural subsoil assets. Still, the adjustment for emissions is sizeably negative only for China, India, Korea, Costa Rica, Turkey and Mexico, indicating a significant part of growth in these countries was achieved at the expense of the environment. This adjustment is negligible for other countries, or even positive in countries where the pollution performance improved. In Russia, Chile, China, Israel, China and Australia a considerable share of GDP growth was owed to increased subsoil resource extraction. For most other countries, underground mineral resources did not play a driving role in GDP growth.


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