Why is productivity growth slowing in advanced economies? Policy makers around the world are asking themselves this question because productivity growth is an important pillar of sustained economic growth and ensures the well-being of societies into the future.
To address this core economic and social question, the OECD has launched two projects, MultiProd and DynEmp, which rely on cutting-edge techniques and firm-level data to better understand the relationship between policy and productivity, and the role that start-ups have in boosting productivity, creating jobs and raising innovation in the economy.
The MultiProd and DynEmp databases contain information on productivity and job creation at a high level of disaggregation by industry, size or nationality. This unique data is harmonised across countries and over time, thus enabling comparative analyses.
What we have found is that large divides are emerging within even the same sectors in economies across the OECD, driven by a smaller number of highly productive firms whose performance contrasts strongly with a large group of low-productivity firms. The leading companies also pay higher salaries than the laggard firms, entrenching large wage inequalities among similar firms.
Understanding what drives productivity and the creation of new businesses, as made possible by these two projects, provides policy makers and others with unique insights to inform improved policy approaches. OECD research shows that, in particular, raising the diffusion of digital technologies so that they are taken up by all firms will help raise productivity. Firms also have to invest in the complementary skills and knowledge that make sure new technologies are being used effectively.
MultiProd uses firm-level data collected from over 20 countries to understand the micro-drivers of aggregate productivity, such as firm age, size, market power and digital intensity and other factors that drive firm performance. It also explores the policy factors that drive productivity.
Dynemp uses micro data on employment dynamics from highly representative national sources, such as national business and social security registers. It provides new evidence on business dynamics, particularly of young firms with respect to job creation, and the churn of businesses leaving markets and new firms entering them.
OECD Insights on Productivity and Business Dynamics is a new series of country profiles with a focus on the microdrivers of aggregate productivity and job creation. It will make available analytical material from the MultiProd and DynEmp databases that was prepared for use within the OECD. Profiles for additional countries will follow.
The OECD Global Forum on Productivity (GFP) fosters international co-operation between public bodies promoting productivity-enhancing policies.