The Productivity Paradox

Why has aggregate productivity growth slowed across OECD countries and emerging economies over recent years? What was the relative importance of structural and cyclical factors in driving this trend? This chapter sets out to answer these questions by examining the evolution of the great productivity slowdown that has taken place in OECD countries since the turn of the millennium, and subsequently spread to prominent emerging markets. It highlights the paradox of slowing aggregate productivity at a time of fast technological change before going on to consider possible causes of this phenomenon. In particular, it looks in greater depth at the role played by the divergence in productivity performance between global frontier firms and poorer-performing nonfrontier firms, and at the pronounced discrepancies between the productivity growth rates of different regions. The chapter suggests that structural policy settings limiting competition may have been an important contributor to the trends described.