Centrale Bank van Curaçao en Sint Maarten Research Department Shekinah Dare … · Shekinah Dare March 23, 2018 Table of Contents 1. Introduction 2. Measuring labor productivity

Labor productivity as a driver of growth

Centrale Bank van Curaçao en Sint Maarten Research Department

Shekinah Dare March 23, 2018

Table of Contents

1. Introduction

2. Measuring labor productivity

3. Labor productivity as a driver of growth

4. Ways to improve labor productivity

5. Labor productivity in Curaçao

6. Curaçao’s productivity in an international perspective

7. Conclusion

2

Introduction

Ethan Harris

Bank of America Merrill Lynch’s top global economist

3 3 3

“High productivity growth means a strong potential or sustainable growth rate for the economy. It lowers unit labor costs, boosting profits, and helping contain price inflation. And productivity is the basis for longer-term improvements in standards of living.”

“High productivity growth means a strong potential or sustainable growth rate for the economy. It lowers unit labor costs, boosting profits, and helping contain price inflation. And productivity is the basis for longer-term improvements in standards of living.”

Measuring labor productivity

GDP/GVA per capita

GDP/GVA per worker

4 4

GDP/GVA per hour

Labor productivity as a driver of growth

4 Economic growth

Government:

-Tax revenues

Consumers:

-Wages

-Jobs

Businesses:

-Profits

-Investments

5 Economic growth

Ways to improve labor productivity

6 6

Organization

-specific

Business & policy environment

Global factors

Organization

-specific

Business & policy environment

Global factors

Labor productivity in Curaçao

7 4

Research conducted by the CBCS (updated by March 2018)

Measuring labor productivity in Curaçao

Contribution of labor productivity and employment/hours to growth Decomposition labor productivity growth

-Have sectors become more or less productive?

-Have employment shares shifted to more or less productive

sectors?

7


Data from the Central Bureau of Statistics

Three 5-year periods during 2004-2016

GDP/GVA at constant prices (2000 = 100)

2010/2012: linear interpolation for # workers and hours

8 8


No significant differences between the two methods…

9 4 9 -8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Change in GDP per hour

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Change in GDP per worker

Average change in GDP per hour (GDP per worker): -1.1% (-1.3%)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Change in GDP per worker

Real GDP growth

Average change in GDP per hour (GDP per worker): -1.1% (-1.3%)

-3

-2

-1

0

1

2

3

4

2004-2008 2008-2012 2012-2016

Employment growth

Labor productivity growth

GDP growth

-3

-2

-1

0

1

2

3

4

2004-2008 2008-2012 2012-2016

Employment growth


GVA growth


…Negative contribution of labor productivity

10 4 10

where Labor productivity is measured as GDP/GVA per worker/hour GDP/GVA growth is the sum of employment/hours growth and GDP/GVA per worker/hour Similar to the Conference Board, the variables are measured in log differences.

-3

-2

-1

0

1

2

3

4

2004-2008 2008-2012 2012-2016

Hours growth


GDP growth

-3

-2

-1

0

1

2

3

4

2004-2008 2008-2012 2012-2016

Hours growth


GVA growth

10


𝑃𝑡−𝑃𝑡−1

𝑃𝑡−1=

𝑃𝑖𝑡−𝑃𝑖𝑡−1

𝑃𝑖𝑡−1𝑥𝑌𝑖𝑡−1

𝑌𝑡−1

𝑛𝑖=1

+ 𝑃𝑖𝑡−1

𝑃𝑡−1𝑥

𝐿𝑖𝑡

𝐿𝑡−𝐿𝑖𝑡−1

𝐿𝑡−1

𝑛𝑖=1

+ 𝑃𝑖𝑡−𝑃𝑖𝑡−1

𝑃𝑡−1𝑥

𝐿𝑖𝑡

𝐿𝑡−𝐿𝑖𝑡−1

𝐿𝑡−1

𝑛𝑖=1

(Within effect)

(Static shift effect)

(Dynamic shift effect)

(Overall labor productivity growth)

11

where 𝑃𝑡 is the productivity level of Curaçao in period 𝑡;

𝑌𝑡 = 𝑌𝑖𝑡𝑛𝑖=1 is the total value added of Curaçao in period 𝑡;

𝐿𝑡 = 𝐿𝑖𝑡𝑛𝑖=1 is the total employment of Curaçao in period 𝑡; and

𝑖 = 1,… , 𝑛 is the 𝑖𝑡ℎ economic sector of Curaçao


12 4 11

-3

-2

-1

0

1

2004-2008 2008-2012 2012-2016

Within effect

Static shift effect

Dynamic shift effect


- Within effect

- Dynamic shift effect

+ Static shift effect

12


13 12 13 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0

Agriculture, fishery, and mining

Manufacturing

Utilities

Construction

Wholesale and retail trade

Hotels and restaurants

Transportation, storage, and communication

Financial intermediation

Real estate, renting, and business activities

Public administration and defense

Education

Health and social work

Private households

Other services

Percentage point contribution to productivity growth

-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0

Agriculture, fishery, and mining

Manufacturing

Utilities

Construction

Wholesale and retail trade

Hotels and restaurants

Transportation, storage, and communication

Financial intermediation

Real estate, renting, and business activities

Public administration and defense

Education

Health and social work

Private households

Other services

Percentage point contribution to productivity growth

2012-2016

12

3

4

5

6

7

8

9

10

11

12

13

14

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0 10 20 30 40 50 60 70 80 90 100 110 120

Pe

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Average productivity level at constant prices, in thousand NAf. (2000=100)

Agriculture, fishery, and mining (1)

Manufacturing (2)

Utilities (3)

Construction (4)

Wholesale and retail trade (5)

Hotels and restaurants (6)

Transportation, storage, and communication (7)

Financial intermediation (8)

Real estate, renting, and business activities (9)

Public administration and defense (10)

Education (11)

Health and social work (12)

Private households (13)

Other services (14)

Aggregate average productivity level


14 4 13 14

1

2

3

5

6

7

8

9

10

11

12

13

14

-0.4

-0.2

0.0

0.2

0.4

-25% -15% -5% 5% 15% 25% 35% 45%

Pe

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Average productivity growth, in %

Agriculture, fishery, and mining (1)

Manufacturing (2)

Utilities (3)

Construction (4)

Wholesale and retail trade (5)

Hotels and restaurants (6)

Transportation, storage, and communication (7)

Financial intermediation (8)

Real estate, renting, and business activities (9)

Public administration and defense (10)

Education (11)

Health and social work (12)

Private households (13)

Other services (14)

Aggregate average productivity growth


15 14 15


16 4

Static: financial intermediation, manufacturing, and real estate, renting, and business activities sectors

Dynamic: manufacturing sector

Tourism sector

Below-average productivity levels in all periods

Below-average growth rate (negative) in the last period

15 16

17 16

Research conducted by the CBCS (forthcoming)

Curaçao’s labor productivity performance in a Latin American

and Caribbean context

Curaçao’s labor productivity in an international perspective

17

Data from the Central Bureau of Statistics and World Bank

Sample period: 1999-2016

Hours data for Curaçao start from 2002

GDP at constant prices (2010 = 100)

2010/2012: linear interpolation of # workers and hours

18 8 18


19 4 17 2006-2016

GDP per worker GDP per capita GDP per hour

Netherlands 0.5% 0.8% 0.6%

United States 0.9% 0.6% 0.9%

Argentina 0.9% 1.7 % 1.0%

Brazil 0.6% 1.3% 1.0%

Chile 1 .3% 2.7 % 2.0%

Colombia 1.6% 3.1% 2.1%

Costa Rica 1.2% 3.0% 1.6%

Ecuador 1.8% 1.9% 2.6%

Mexico 0.1% 1.1% 0.4%

Peru 3.5% 4.6% 3.9%

Uruguay 2.7 % 4.1% 3.1%

Barbados 1.3% 0.3% 1.7 %

Jamaica -0.4% -0.5% 0.0%

St. Lucia 0.9% 1.3% 1.3%

Trinidad & Tobago 1.2% 2.0% 1.6%

Curaçao -1.8% -0.9% -1.9%

Caribbean

Latin Am erica

Key trading partners

2011-2016

GDP per worker GDP per capita GDP per hour

Netherlands 0.8% 0.6% 0.8%

United States 0.7 % 1.3% 0.3%

Argentina -0.2% -0.1% -0.2%

Brazil -0.9% -0.5% -0.5%

Chile 1 .4% 2.6% 2.1%

Colombia 1.5% 3.0% 2.0%

Costa Rica 0.6% 2.7 % 1.4%

Ecuador 1.0% 2.0% 1.6%

Mexico 1.0% 1.5% 1.0%

Peru 2.9% 3.6% 3.3%

Uruguay 2.4% 2.8% 2.8%

Barbados 0.9% 0.3% 1.2%

Jamaica -0.3% 0.1% 0.0%

St. Lucia -0.2% 0.5% 0.2%

Trinidad & Tobago -0.9% 0.2% -0.5%

Curaçao -1.4% -1.4% -1.1%

Latin Am erica

Caribbean

Key trading partners

19


20 18

Trend productivity growth has remained negative…

20

-4%

-2%

0%

2%

4%

6%

8%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Barbados

Caribbean

Curaçao

Jamaica

Latin America

St. Lucia

Trinidad and Tobago

BP filter

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Barbados

Caribbean

Curaçao

Jamaica

Latin America

St. Lucia

Trinidad and Tobago

HP filter


21 4

Conclusion

What have we seen so far?

Labor productivity is a key driver of economic growth!

However, Curaçao’s labor productivity:

…has been declining for years

…contributed negatively to economic growth

…showed a shift from more productive to less productive sectors

What is next?

Focus on improving labor productivity to generate economic growth

19 21

Thank you for your attention!

22

Documents

Centrale Bank van Curaçao en Sint Maarten Research Department Shekinah Dare … · Shekinah Dare March 23, 2018 Table of Contents 1. Introduction 2. Measuring labor productivity