The Human Side
of Productivity
Setting the Scene
Peter Gal
Senior Economist
OECD Global Forum on Productivity
Joint work by the OECD GFP team
and with contributions from GFP member countries
4th Annual Conference of the Global Forum on Productivity
21 June 2019
Sydney, Australia

• Productivity challenge: Great expectations vs dismal
reality
• Low productivity growth despite rise in skills and rapid
technological change
• Firm heterogeneity is key: Persistent differences
across firms
• Most existing cross-country firm-level work
takes the firm largely as a `black box’…
• The ‘Human Side of Productivity’ opens this up,
with new data sources on the people in the firm
 This is where country experiences with LEED
will be crucial in this session
How can the ‘Human Side’
contribute to productivity research?

The black box of the firm…
Firm
Adoption
Productivity
Public Policies
(competition, skills,
mobility, governance)
Structural and technological change
(digitalisation, trade, demographics)
Innovation Efficiency
Owners Managers Workers
Organization
Firm

… should be opened up so that
we can look at the ‘Human Side’
Firm
Adoption
Productivity
Public Policies
(competition, skills,
mobility, governance)
Structural and technological change
(digitalisation, trade, demographics)
Innovation Efficiency
Owners Managers Workers
Organization

Firm
• Owners select and control
managers
• Managerial ability
• Principal agent issues
• Hence owner’s incentives and
ability matter
• Investment horizon
• Risk-willingness
• Knowledge
• Owners are diverse
• Index funds
• Hedge funds
• Family ownership, …
Key players and mechanisms (1)
Owners
Share of firms held by institutional owners
Source: Demmou, Franco and Stefanescu, 2019
(preliminary)
0%
10%
20%
30%
40%
50% Average 2012-2014 period
Average 2000-2002 period

Firm
• Managers matter both at
top and medium levels
• Strategy
(Bertrand and Schoar,
2003)
• Management practices
(Bloom et al., 2016)
• HR & pay policies
(Lazear and Shaw, 2007)
• Large dispersion in
measured aspects, namely
management practices
(Bloom et al., 2007, 2014)
• Both across and within
countries
Key players and mechanisms (2)
Managers
Management practices scores across countries
Source: Bloom et al (2014)
2.0
2.3
2.5
2.8
3.0
3.3
3.5
3.8
4.0

Firm
• Workforce composition
matters
(Iranzo et al., 2008; Bender et
al., 2018; Parrotta et al., 2012)
• Skill-level & dispersion
• Diversity
(Age / Gender / Cultural
background)
• Organization of diverse
workforce matters
• O-ring vs. superstars
(Rosen, 1981; Kremer,
1993)
• Communication vs.
information
(Garicano and Rossi-
Hansberg, 2006)
Key players and mechanisms (3)
Workers
OECD PIAAC database (2015)
Technological literacy
% of high-performer adults on technologically demanding problems
20%
25%
30%
35%
40%
45%
50%

How to measure the ‘Human Side’?
Modules and required data sources
Medium
performers
Laggards
Leaders
1. Workforce
composition
along skills /
occupations
2. Workforce
diversity across
demographic
groups
3. Management
practices
4. Firm
organisation
A) Firm productivity
data
B) Linked
employer-
employee
data
(LEED)
C) Management
survey
D) Ownership
information
(+B +C)
Note: 1-4 are measurement modules; A-D are the required data sources

Early findings from 2 ‘pilot’ countries
Portugal and Denmark (many thanks!)
0%
5%
10%
15%
20%
25%
30%
35%
High skilled Low skilled
Frontier Medium Laggard
Portugal, 1990-2009
Based on occupation categories
0%
5%
10%
15%
20%
25%
30%
35%
High skilled
Frontier Medium Laggard
Denmark, 2009-2016
Based on educational attainment
Employee skill levels by firm productivity segments
 Pattern confirmed by including many other human side characteristics
(demographics, share of managers) and firm size in regressions

Portugal
The change in high-skilled occupation share of firms between 1990 and 2009
The rising importance of skills, especially at the frontier
0%
2%
4%
6%
8%
10%
12%
14%
16%
Frontier Medium Laggard
 Higher returns from skills to productivity, especially at the top?
Early findings from 2 ‘pilot’ countries
Portugal and Denmark (many thanks!)

1. Broaden and deepen the descriptive
analysis
• More countries, sectors and productivity
measures
• Include ownership and board composition using
pending data access (potentially)
2. The role of policies
• Through three broad angles:
incentives, capabilities and dynamism
• Touching on a range of policy areas:
skills, mobility, competition, governance, …
Next steps

Thank you
For more information, please visit
OE.CD/GFP