Session 1B: Cyrille Schwellnuss and Giuseppe Berlingieri

1. Conference of the Global Forum
on Productivity, 7 July 2016
Giuseppe Berlingieri, OECD Science, Technology and Innovation Directorate
Cyrille Schwellnus, OECD Economics Department
Divergence in Productivity and
Implications for Inclusion

2. 100
110
120
130
140
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
2
Source: Unweighted average of 25 OECD countries using OECD National Accounts Database; OECD
Earnings Database.
Decoupling of wages and productivity growth
“Wage inequality”
Labour share
Productivity
Real hourly average compensation
Real hourly median compensation

3. Heterogeneity in decoupling across countries
3Source: OECD estimates using OECD National Accounts Database; OECD Earnings Database.
Annual growth differential between real median compensation and labour productivity, 1995-2013
Percentage points
-1.5
-1.0
-0.5
0.0
0.5
1.0
KOR
POL
HUN
USA
AUS
NOR
JPN
CAN
ISR
AUT
DEU
NLD
CHL
SVK
ESP
NZL
GBR
DNK
ITA
FRA
FIN
BEL
SWE
CZE
Contribution of wage inequality
Contribution of labour share
Total decoupling

4. Has the labour share stabilised?
4
Evolution of the labour share, OECD average
Source: Unweighted average of 14 OECD countries using OECD National Accounts database
%
70
72
74
76
78
80
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Trend, 1983-2005

5. 100
110
120
130
140
150
160
1995 1997 1999 2001 2003 2005 2007 2009 2011
Average (based on surveys)
50 percentile (based on surveys)
5
Note: unweighted average of 9 OECD countries.
Source: OECD estimates using OECD National Accounts Database; OECD Earnings Database;
Alvaredo, Atkinson, Piketty, Saez, and Zucman, The World Wealth and Income Database.
Real hourly wages (Index1995=100)
Is the increase in wage inequality under-estimated?
Wage inequality

6. 100
110
120
130
140
150
160
1995 1997 1999 2001 2003 2005 2007 2009 2011
1 percent (based on tax records)
Average (based on surveys)
50 percentile (based on surveys)
6
Note: unweighted average of 9 OECD countries.
Source: OECD estimates using OECD National Accounts Database; OECD Earnings Database;
Alvaredo, Atkinson, Piketty, Saez, and Zucman, The World Wealth and Income Database.
Real hourly wages (Index1995=100)
Is the increase in wage inequality under-estimated?
Wage inequality

7. 100
110
120
130
140
150
160
1995 1997 1999 2001 2003 2005 2007 2009 2011
1 percent (based on tax records)
Average (based on surveys)
50 percentile (based on surveys)
90 percentile (based on surveys)
7
Note: unweighted average of 9 OECD countries.
Source: OECD estimates using OECD National Accounts Database; OECD Earnings Database;
Alvaredo, Atkinson, Piketty, Saez, and Zucman, The World Wealth and Income Database.
Real hourly wages (Index1995=100)
Is the increase in wage inequality under-estimated?
Wage inequality

8. 1
1.2
1.4
1.6
1.8
2
2.2
1.2 1.4 1.6 1.8 2 2.2 2.4 2.6
FRA OECD
DEU
BEL
AUT
FIN
SWE
SVN
POL
GRC
NLD
LUX
IRL
ESP
GBRITA PRT
HUN
DNK
TURJPN
KOR
Is there a link between wage and productivity dispersion?
8Source: OECD Economic Outlook (May 2016) based on ORBIS.
P90/P50 ratio in the firm distribution of average labour income
P90/P50 ratio in the firm distribution of labour productivity
2013

9. Motivation: increase in wage
inequality
Note: The figure plots the year fixed-effects of a regression of log-wage
dispersion (p90-p10 ratio) within country-sector pairs. Data: MultiProd.
Average Trend in between-firm wage dispersion (p90-p10)

10. Motivation: increase in
productivity dispersion
Note: The figure plots the year fixed-effects of a regression of log-productivity
dispersion (p90-p10 ratio) within country-sector. Data: MultiProd.
Differences across
countries:
• magnitude
• components
(bottom vs top)
Average Trend in Productivity Dispersion (p90-p10)

11. Motivation: increase in technology
dispersion vs misallocation?
Note: The figure plots the year fixed-effects of a regression of MFP_Q and
MFP_R dispersion (p90-p10) within country-sector. Data: MultiProd.
Average Trend in MFP_Q and MFP_R Dispersion (p90-p10)

12.  Are these trends intertwined?
 Is increasing earnings inequality linked to growing
productivity dispersion among firms?
 The objective: build a picture across countries and
over time of
 Wage dispersion
 Productivity dispersion
 The link between the two
 Role of Policy?
 The task requires data representative for the entire
distribution of firms: MultiProd project, 16 countries
so far and more to come.
The Questions

13. -0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
2002 2004 2006 2008 2010 2012
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
2002 2004 2006 2008 2010 2012
-1 000
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2002 2004 2006 2008 2010 2012
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
4 000
5 000
2002 2004 2006 2008 2010 2012
Bottom decile 4th-6th decile Top decile
Manufacturing Services
Average Labour Productivity by Decile (Log Change)
Manufacturing Services
Average Wage by Labour Productivity Decile (Absolute Change - $2005)
Example of divergence(s): Sweden

14.  Dispersion Wages Dispersion Productivity
 Link between the two:
 Stronger in manufacturing than services
 Increasing over time for LP, fairly constant for MFP
Thought-provoking initial evidence
Variable Wage Dispersion Prod Dispersion Link
Openness, Import,
Export --- --- +++
Share of ICT in Gross
Fixed Assets +++
Hours of High-
Skilled (share) +++ +++
R&D expenditures +++
Real Min Wage --- --- ---
EPL --- ---
Trade Union --- -- ---
Gov. Intervention in
Wage Bargaining -- --- ++
FactorsPolicies
+++

15. THANK YOU
All comments and questions are welcome
MultiProd@oecd.org