EU KLEMS Growth and Productivity Accounts: First Launch

1. EU KLEMS Growth and Productivity Accounts: First Launch Brussels, 15 March 2007 Bart van Ark (Groningen Growth and Development Centre, University of Groningen) This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

2. Main characteristics of EU KLEMS • EU KLEMS project is 3-year statistical and analytical research project funded by 6th Framework Programme • Purpose is to create a database on growth and productivity accounts by industry (NACE 60+) for EU member states with a breakdown into contributions from capital (K), labour (L), energy (E), materials (M) and service inputs (S) • 16 research institutes, with country contributions from consortium partners and coordination, harmonization and processing at RUG Groningen and NIESR/Univ. of Birmingham • Strong co-operation with national statistical institutes, Eurostat and European Commission services (DG EFCIN) • In final phase conduct a number of analytical research projects on labour market & skills, technology and innovation, and links to micro/firm level research

3. Growth accounts decomposes output growth in inputs and productivity Gross output, GDP or industry value added Energy, Materials & Service inputs (skill, gender, age) Multi factor productivity

4. What is new in EU KLEMS? • Systematic data collection based on national accounts and complementary official sources (LFS and other surveys) • Long time coverage 1970-2004, with greatest detail for post-1995 Harmonized methodologies on industry classification, capital and labour input, deflation and aggregations (e.g. market economy, market services, ICT producing vs. using) • Decomposition of capital and labour input: • Capital assets in 7 asset types • Labour input in 18 categories (3 x skill; 3 x age and gender) • Broad coverage of EU countries: • Growth accounts coverage of “old” EU-10 (excl. GR, IR, LU, SE, PT) plus 5 new member states (incl. PL, SK, HU, CZ and SI) • Limited coverage of other 5 other “old” EU countries and 5 new member states (CY, MT, LT, LV and EE) • Also comparisons with U.S. and Japan • Distinction between analytical module for all countries (with feedback from NSI’s but not official statistics) and statistical modules for individual countries (validated by NSI’s)

5. Sector Contributions to Labour Productivity Growth in Market Economy Confirm Existing View 1995-2004 The EU-US differential is not in manufacturing …

6. Sector Contributions to Labour Productivity Growth in Market Economy Confirm Existing View 1995-2004 … and minor in ICT production

7. Sector Contributions to Labour Productivity Growth in Market Economy Confirm Existing View 1995-2004 … but huge in market services

8. Sector Contributions to Labour Productivity Growth in Market Economy Confirm Existing View 1995-2004 Transitional productivity growth in new member states in manufacturing, agriculture, utilities and distribution

9. Sector Contributions to Labour Productivity in Market Economy Drive Cross Country Differences 1995-2004 Typical “catching up” countries (Ireland and Greece) at top of growth range

10. Sector Contributions to Labour Productivity in Market Economy Drive Cross Country Differences 1995-2004 Several Nordic countries (Finland and Sweden) also at higher end notably due to (ICT production

11. Sector Contributions to Labour Productivity in Market Economy Drive Cross Country Differences 1995-2004 Market services account for productivity growth differential between UK and France/Germany

12. Sector Contributions to Labour Productivity in Market Economy Drive Cross Country Differences 1995-2004 Growth in Spain and Italy is keeping EU average down and is across the board

13. Sources of Growth to GDP in Market Economy also Confirms Existing Views Acceleration in EU labour input growth EU15ex excludes Portugal, Luxembourg, Ireland, Sweden and Greece

14. Sources of Growth to GDP in Market Economy also Confirms Existing Views Slightly smaller contribution from ICT to growth compared to US

15. Sources of Growth to GDP in Market Economy also Confirms Existing Views But EU-US differential Is largely in MFP

16. Market services make up important part of the EU-US story Collapse of MFP in EU vs. strong acceleration in US market services

17. Country variation in sources of growth in market economy points at role of employment and MFP 1995-2004 Germany and Spain are at opposite ends on scale of employment creation

18. Country variation in sources of growth in market economy points at role of employment and MFP 1995-2004 … but MFP contribution makes the big difference between fast and slow growth

19. Future steps in EU KLEMS • Implementation phase: • Development of statistical modules for individual countries • Maintenance and prolongation of analytical module • Extension of database (more country detail, intangibles incl. human capital, link with micro data) • Development of WORLD KLEMS • Other OECD: US, Japan, Canada, Australia • Link to existing projects: Asian ICPA • Emerging economies: China, India, Russia, Latin America • Challenges ahead • Measurement of non-market services • Extended integration with input-output framework • Extended integration with trade and FDI flows • What does MFP really mean? (intangibles, regulations, innovation)