NCC Productivity Statement 2019

Papa, Javier (2019): NCC Productivity Statement 2019. Published in: Ireland's National Competitiveness Council (NCC) (November 2019)

Abstract

Productivity growth is critical for enterprise competitiveness, economic growth, the financing of public services and ultimately improvements of living standards through sustainable wage levels. Aggregate labour productivity figures for Ireland continue to show a strong performance relative to other advanced economies, even when based on GNI*, which excludes globalisation activities from the data. Much of the strong performance can be attributed to the operations of large firms in specific sectors (e.g. ICT, Pharma-Chemicals, Food & Beverages) which continue to show productivity levels well above the Euro Area average. At enterprise-sectorlevel, the latest CSO figures show that in the 2000-2017 period, the annual average growth rate of labour productivity in the Foreign-owned Multinational Enterprise (MNE) dominated sector was 9.3 per cent, compared with 2.3 percent in the Domestic and Other sector, which in turn was higherthan the EU average (1.3 per cent). However, the productivity performance of the Domestic and Other sector is likely to be influenced by a number of traditionally domestic industries (e.g. Food & Beverages) which over time have shown an increasing share of foreign value added or turnover. While there is clear evidence about the direct contribution made by a highly productive and concentrated group of MNEs to the Irish economy, there is less clarity about the productivity performance of an increasingly diverse domestic sector, where both highperforming and low-performing sectors and SMEs seem to co-exist. More access to disaggregated data on productivity by size class and at enterprise level (e.g. on firm characteristics such as exporting, finance, innovation, age, human capital) would be useful for developing enterprise-policy interventions to address national needs. In terms of the indirect contribution made by MNEs, OECD research shows that domestic sourcing by foreign affiliates is relatively low in Ireland, which has consequences for knowledge, skills and ultimately productivity gains to spill over to the rest of the Irish economy, including Irish SMEs. Therefore, policies that facilitate closer economic interactions between SMEs and MNEs (via trade linkages, research collaborations and labour mobility) could help raise the productivity levels of SMEs and should be at the core of sectoral and enterprise strategy, as highlighted in Future Jobs Ireland. This statement recommends that further access to disaggregated data will help our understanding of these interactions and facilitate improvements in policy design.

• Item Type: MPRA Paper
• Language: English
• Keywords: Aggregate Productivity; Heterogeneity; Market Concentration; Ireland
• Subjects: D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; F - International Economics > F6 - Economic Impacts of Globalization > F62 - Macroeconomic Impacts; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

References

NCC (2017) Benchmarking Ireland’s Productivity Performance, 2004-2014;

NCC (April 2012) Ireland’s Productivity Performance, 1980-2011;

NCC (2006) Overview of Ireland’s Productivity Performance, 1980-2005

OECD (2019), OECD Compendium of Productivity Indicators 2019, OECD Publishing, Paris

CSO (2019) Productivity in Ireland 2017, Dublin

Revenue Commissioner (2019) ‘ Corporation Tax 2018 Payments and 2017 Returns’, Dublin.

Papa, J. (2019) “What is behind aggregate productivity growth in Ireland. A granular approach”, Department of Business, Enterprise and Innovarion - Research Paper Series, Dublin.

Gabaix, X. (2011) “The granular origins of aggregate fluctuations”, Econometrica, Vol. 79, No. 3, pp 733–772

Cadestin, C., et al. (2019), "Multinational enterprises in domestic value chains", OECD Science, Technology and Industry Policy Papers, No. 63, OECD Publishing, Paris