Productivity and long-term growth

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  • http://productivity.plan.be

Growth and Productivity in Belgium [17/10/2017]

The objective of the report is to provide an overview of the main drivers of economic growth and the productivity evolution in Belgium, in comparison with its three neighbouring countries and the US over 1970 and 2015. Recent evolutions, over 2000-2015, are analysed in details in order to shed light on the impact of the great recession. The growth accounting methodology is applied to explain labour productivity growth for the total economy, manufacturing and market services.

Qualitative employment data for Belgium : 1999-2015 [01/06/2017]

In this database, domestic employment, labour volume (hours worked) and the wage costs of wage earners are broken down per industry (A38 of Nace rev. 2) according to gender, age group and education level. The breakdowns of employment and labour volumes are available for domestic employment as a whole and for wage earners and self-employed people separately. The database provides annual results for the period 1999-2015 and corresponds with the last edition of the national accounts (October 2016).

Public Investment in Belgium [27/01/2017]

Belgian government investment, and specifically the part spent on infrastructure, is relatively low both in historical terms and compared to neighbouring countries. A simulation with the European Commission’s Quest III model suggests that increasing government investment permanently by 0.5% of GDP leads to a growth in GDP, private consumption and private investment. The impact of alternative financing mechanisms is compared.

Contact

  • http://productivity.plan.be

The long-term growth of the economy is closely linked to the productivity of the production factors and its evolution. In the last few years, however, growth in labour productivity has decelerated in Europe and in Belgium. This slowdown partially explains the differences in economic performance within the European Union and between Europe and the rest of the world.

Methods and tools

A better understanding of the evolution of productivity requires a specially adapted statistical tool that allows an industry-based analysis of the fundamental trends of the economy. Therefore, the Federal Planning Bureau (FPB) is working with other European institutions on a project, financed by the European Union’s sixth framework programme for research, to develop the EUKLEMS database (see also http://www.euklems.net).

This database contains the variables for analysing the evolution of productivity at industry level according to different methodologies for constructing productivity.

The FPB continues to periodically update the Belgian section of this international database.

Determinants of productivity

In order to forecast productivity, one has to understand its driving factors. The FPB is especially interested in better defining the role of three of these determinants:

  • technology and capital deepening
  • innovation and technical progress
  • entrepreneurship and market functioning

Technology and capital deepening

The quantity and the quality of available capital are both important determinants of labour productivity, the evolution of which conditions long-term economic growth. By investing, companies provide their workers with both more and better equipment, incorporating the latest technological advances.

The FPB studies the impact of investments on the productivity of Belgian companies. Particular attention is given to the contribution of information and communication technologies (ICT).

Innovation and technical progress

The evolution of productivity is closely related to innovation and technical progress. In addition to the technical progress incorporated into a business’s capital from investment, technical progress is also generated by the firm itself through its innovations in products, processes, organisation or marketing. This source of technical progress is important because it is not be governed by the law of decreasing returns and could lead to a sustained long-term improvement in the population’s standard of living.

The FPB analyses the determinants of innovation and evaluates Belgian innovation systems compared with those of our European neighbours.

The FPB, in collaboration with the Walloon Region, has contributed to the development of a database which allows an international comparison of indicators for the Walloon innovation system. Following a similar approach and together with the FPS Science Policy, it is creating a database of the main innovation indicators for Belgium. The database can be consulted on the website www.innovationdata.be.

Entrepreneurship and market functioning

The growth of productivity is partially linked to a country’s capacity to create productive activities, in other words, to create and develop businesses. In that regard, the market structure and the degree of competition play an important role.

The FPB analyses the benchmarks for measuring abstract concepts such as market structure and competition in order to assess possible impediments to competition. It also studies the extent to which market functioning leads to unnecessarily high prices and/or price increases. If market functioning fails, regulation or deregulation are recommended

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