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Business and Economics > Production and Operations Management

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Cover IMF Working Papers
Europe’s Productivity Weakness: Firm-Level Roots and Remedies
Oyun Erdene Adilbish
,
Diego A. Cerdeiro
,
Romain A Duval
,
Gee Hee Hong
,
Luca Mazzone
,
Lorenzo Rotunno
,
Hasan H Toprak
, and
Maryam Vaziri
Europe faces a well-known productivity malaise, with a large and widening aggregate productivity gap relative to the U.S. In this paper, we provide a novel diagnosis of the firm-level roots of Europe’s productivity growth slowdown through an analysis of data covering the universe of firms in Europe and the U.S over their life cycles. Compared to their U.S. counterparts, we identify critical performance gaps among both Europe’s frontier firms and young high-growth firms. Our firm-level analyses reveal that smaller markets and limited market-based financing are key bottlenecks for frontier European firms, while skill shortages and insufficient risk capital, such as venture capital, hinder the formation and subsequent growth of young firms in Europe. These findings suggest that removing remaining intra-Europe barriers to accelerate factor and product markets integration, alongside national reforms to facilitate swifter resource reallocation and enhance human capital, could help revive Europe’s productivity growth.
Keywords:
Firm-level productivity; business dynamism.; EU accession; productivity weakness; productivity problem; frontier firm; trade Barries; firm Size; Productivity; Trade balance; Trade barriers; Total factor productivity; Europe
Cover IMF Working Papers
Productivity and Product Markets in Korea: Evidence from Advanced Economies
Mr. Andrew J Swiston
and
Stella Tam
This paper constructs an industry-level dataset of productivity across advanced economies, showing that Korea’s labor productivity and total factor productivity levels are below the median of other advanced economies. We identify sizable industry-level productivity gaps in Korea with respect to the global frontier, especially in market-oriented services. Using the OECD’s Product Market Regulation (PMR) Indicators, we show that tighter PMRs slow industry-level productivity growth, and these effects occur across all areas of PMRs—state control, barriers to entrepreneurship, and barriers to trade and investment—and through several detailed indicators. These effects are transmitted through higher product prices and unit labor costs of industries exposed to regulation. The results confirm the potential for Korea to boost overall productivity and growth through PMR reforms, especially by lowering barriers in service and network sectors, reducing restrictions applying to trade and investment, and evaluating the scope of government involvement in the economy.
Keywords:
Korea; productivity; product markets; regulation; growth; labor productivity distribution; OECD product market regulation; regulation-productivity linkage; OECD PMR indicators structure; IMF Product Market Regulation; PMR indicator; productivity comparison; productivity measurement; Total factor productivity; Commodity markets; Labor productivity; Trade barriers; Global
Cover IMF Working Papers
The Macroeconomic Effects of Structural Reforms in Latin America and the Caribbean
Mr. Antonio David
,
Mr. Takuji Komatsuzaki
, and
Samuel Pienknagura
This paper estimates the macroeconomic effects of structural reforms in Latin America and the Caribbean (LAC) using the dataset constructed by Alesina et al. (2020). We find that large changes in the reform index have positive effects on GDP and employment that reach 2 percent after 5 years. Furthermore, reforms boost investment, exports, imports, and reduce export concentration, in addition to favoring tradable sectors. Nonetheless, the results also indicate that the effects of reforms have not been uniform across different segments of the population. These findings bring to the forefront the need to consider accompanying policies to ensure that reforms promote inclusive growth. Moreover, evidence from country case studies using the synthetic control method point to heterogeneous effects of reforms on income per capita.
Keywords:
WP; reform; product market; liberalization; structural reform; reform index; finance reform; total factor productivity; reform reversal; trade reform index; reforms index lead; reform episode; reform effort; reform convergence; reform impetus; reform agenda; Structural reforms; Employment protection; Commodity markets; Total factor productivity; Trade liberalization; Caribbean; South America; Central America; Global; Latin America; Macroeconomic Effects; product market reform; employment protection reforms index lead; financial market reform
Cover IMF Working Papers
Trade, Productivity and (Mis)allocation
Antoine Berthou
,
John Jong-Hyun Chung
,
Kalina Manova
, and
Charlotte Sandoz
We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions: (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse; (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity; (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access.
Keywords:
WP; math display; total factor productivity; International trade; export demand; import competition; productivity; allocative efficiency; misallocation; aggregate productivity; resource misallocation; employment share; real value; productivity gain; firm productivity; Exports; Imports; Trade liberalization; Competition; Global
Cover IMF Staff Country Reports
Australia: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper investigates the drivers of business investment in Australia, focusing on the non-mining sectors. The paper also identifies aggregate-level drivers for non-mining business investment by looking at long-term trends. It delves into firm-level investment behavior and assesses the role of credit availability and uncertainty in different types of firms. Long-term empirical and simulation-based analyses suggest that global factors such as rising policy uncertainty and weaker commodity prices have been key drivers of the slowdown, while in the short term, a renewed escalation in US–China trade tensions could spill over to investment and growth in Australia. Yet, domestic factors are also at play, including domestic policy uncertainty and financial constraints, especially for smaller and younger firms. The pace of product market reforms can also impact business investment. Australia can promote business investment by reducing domestic policy uncertainty, easing credit constraints for small- and medium-sized enterprises, incentivizing research and development, and continuing with product market and tax reforms.
Keywords:
ISCR; CR; investment; product market; Australia; investment slowdown; product market reform; intangible investment; uncertainty indices; venture capital; Non-mining business investment; R&D investment; panel regression; Private investment; Commodity markets; Trade policy; Productivity; Terms of trade; Global
Cover IMF Working Papers
Deepening the EU’s Single Market for Services
Mr. Christian H Ebeke
,
Jan-Martin Frie
, and
Louise Rabier
The services sector is increasingly important for the euro area economy, but productivity growth in the sector has stalled over the past two decades. Remaining barriers to cross-border trade in services within the EU Single Market contribute to this weak performance. Our empirical analysis suggests that slow progress in tackling these barriers is associated with political economy factors such as weak government support in parliaments, low government efficiency and high markups. To remove the cross-border restrictions on services trade, we suggest combining incentives such as financial support, technical assistance and improved communication on barriers with more effective enforcement.
Keywords:
WP; government; service trade restrictiveness; EU KLEMS; EU work force; EU Services Directive; euro area services sector; STRI EU; Services sector; Trade in services; Legal support in revenue administration; Productivity; Trade liberalization; Global
Cover IMF Working Papers
The Price of Capital Goods: A Driver of Investment Under Threat
Weicheng Lian
,
Natalija Novta
,
Evgenia Pugacheva
,
Mr. Yannick Timmer
, and
Petia Topalova
Over the past three decades, the price of machinery and equipment fell dramatically relative to other prices in advanced and emerging market and developing economies. Using cross-country and sectoral data, we show that the decline in the relative price of tangible tradable capital goods provided a significant impetus to the capital deepening that took place during the same time period. The broad-based decline in the relative price of machinery and equipment, in turn, was driven by the faster productivity growth in the capital goods producing sectors relative to the rest of the economy, and deeper trade integration, which induced domestic producers to lower prices and increase their efficiency. Our findings suggest an additional channel through which rising trade tensions and sluggish productivity could threaten real investment growth going forward.
Keywords:
WP; relative price; import penetration; Relative price of investment goods; trade integration; trade barriers; capital deepening; global value chain; trade cost; price of machinery; investment rate; price of capital goods; Imports; Labor productivity; Producer prices; Tariffs; Trade barriers; Global
Cover IMF Working Papers
Reassessing the Productivity Gains from Trade Liberalization
Mr. JaeBin Ahn
,
Ms. Era Dabla-Norris
,
Mr. Romain A Duval
,
Bingjie Hu
, and
Lamin Njie
This paper reassesses the impact of trade liberalization on productivity. We build a new, unique database of effective tariff rates at the country-industry level for a broad range of countries over the past two decades. We then explore both the direct effect of liberalization in the sector considered, as well as its indirect impact in downstream industries via input linkages. Our findings point to a dominant role of the indirect input market channel in fostering productivity gains. A 1 percentage point decline in input tariffs is estimated to increase total factor productivity by about 2 percent in the sector considered. For advanced economies, the implied potential productivity gains from fully eliminating remaining tariffs are estimated at around 1 percent, on average, which do not factor in the presumably larger gains from removing existing non-tariff barriers. Finally, we find strong evidence of complementarities between trade and FDI liberalization in boosting productivity. This calls for a broad liberalization agenda that cuts across different areas.
Keywords:
WP; input tariff; output tariff; tariff data; Trade; Productivity; Tariffs; Inputs; Liberalization; FDI; Reforms; Growth; tariff rate; complementarity regression; tariff liberalization; Total factor productivity; Foreign direct investment; Trade liberalization; Global; research department; fiscal affair; productivity gains from trade liberalization
Cover Policy Papers
Structural Reforms and Macroeconomic Performance - Country Cases
International Monetary Fund
As a companion piece to the Board paper on Structural Reforms and Macroeconomic Performance: Initial Considerations for the Fund, this paper presents a selection of case studies on the structural reform experiences of member countries. These papers update the Board on work since the Triennial Surveillance Review toward strengthening the Fund’s capacity to analyze and, where relevant, offer policy advice on macro-relevant structural issues. The paper builds on the already considerable analytical work underway across the Fund, setting out considerations to support a more strategic approach going forward.
Keywords:
PP; authority; reform; enterprise; country; structural reform; reform effort; capital market; financial system; labor market; reform experience; reform strategy; country CasesStructural reform; Structural reforms; Total factor productivity; Competition; Trade liberalization; Global
Cover Regional Economic Outlook, May 2005: Sub-Saharan Africa
Regional Economic Outlook, May 2005: Sub-Saharan Africa
International Monetary Fund. African Dept.

Abstract

The five Regional Economic Outlooks published biannually by the IMF cover Asia and Pacific, Europe, the Middle East and Central Asia, Sub-Saharan Africa, and the Western Hemisphere. In each volume, recent economic developments and prospects for the region are discussed as a whole, as well as for specific countries. The reports include key data for countries in the region. Each report focuses on policy developments that have affected economic performance in the region, and discusses key challenges faced by policymakers. The near-term outlook, key risks, and their related policy challenges are analyzed throughout the reports, and current issues are explored, such as when and how to withdraw public interventions in financial systems globally while maintaining a still-fragile economic recovery.These indispensable surveys are the product of comprehensive intradepartmental reviews of economic developments that draw primarily on information the IMF staff gathers through consultation with member countries.

Keywords:
REO; oil-producing country; country group composite; Policy wing of the African Department; Dem. rep.; CFA franc; Exchange rate arrangements; Conventional peg; Floating exchange rates; Exports; Inflation; Africa; Sub-Saharan Africa; East Asia; Global; increase poverty; EEC trade; a number of SSA country; clothing export; Africa's regional trade arrangements; world cotton price; nonfuel commodity price; Oil prices; Total factor productivity; Oil