Renewed productivity survey - what from here on? 15.10.2021 Statistics Finland

1. Renewed productivity
measures and the results
Nata Kivari, Marja Sauli
Webinar on productivity, 15 October 2021
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17 October, 2021 Statistics Finland

2. Contact details:
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Statistics Finland
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Head of
Department
Katri Kaaja
@katri_maria1
katri.kaaja@stat.fi
Senior Statistician
Marja Sauli
marja.sauli@stat.fi
Researcher
Paolo Fornaro
@PaoloFornaro87
paolo.fornaro@etla.fi
Senior Statistician
Nata Kivari
nata.kivari@stat.fi

3. Outline
• Background
• The Productivity measures of National Accounts
• The Methodology and what has changed
• Some results
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4. Background
• Productivity measures published since 2005 – time for
renewal
• National Accounts change of publication dates affects the
publication of productivity measures
• Eurostat supported countries’ efforts to develop these
calculations
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5. The KLEMS Methodology and what
has changed
• KLEMS is an international framework used to examine productivity measures.
• KLEMS is based on growth accounting method.
• Commonly, the main focus is on capital, labor and multifactorproductivity.
• Statistics Finland produces productivity statistics based on KLEMS framework and
data from National Accounts.
…What has changed?
• The publication of productivity is synchronized with the annual NA.
• Publication timeline is renewed
• Technical system and theoretical methodology has been revised and updated.
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6. Closer look at changes
• Publication twice a year
• Preliminary results synchronized with NA preliminary publication (June, statistical year
t-1)
• Final results based on NA final publication (March, statistical year t-2)
• Non-market producers are excluded (producer type T30)
• Agricultural sector is excluded (industries 01_03 NACE Rev. 2)
• The net stocks of the national accounts were introduced as the basis for calculating
the productive capital stock.
• In calculation of quality adjusted labor input (QALI) the newest 1-2 years are based
on Labor Force Survey (LFS).
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7. KLEMS methodology –
productivity of labor
∆ 𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑
∆ ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
=
(capital′s share ∗ ∆
𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑖𝑛𝑝𝑢𝑡
𝑙𝑎𝑏𝑜𝑢𝑟 𝑖𝑛𝑝𝑢𝑡
+ labour′
s share ∗ ∆quality of labour
+ ∆𝑚𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
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Factors
contributing to
labor
productivity
Productivity of
labour
Capital intensity
Quality of labour
Multifactor
productivity

8. The capital and labour input
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Labour input Capital input
Stock measures Human capital Physical capital
Services to production from
input factors:
Quantity Labour services,
measured as hours
worked
Capital services
Prices Compensation per hour User cost of capital
per unit of capital
service
Differentiation By industry and by type of
labour input
By industry and asset
type
Factor cost or factor income Compensation per hour *
total hours
User cost *productive
capital services

9. Integrated capital measures
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Source: OECD Manual on Measuring Capital

10. Contribution of capital intensity to the
productivity of labour
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• When the productivity of labour changes,
how much of it is due to the fact that the
amount of capital services in use per hour
worked changed?
• Contributions of capital intensity are now a
little bit smaller than in the previous version
(non-market producers not included in the new
series)
- 1,00
- ,50
,00
,50
1,00
1,50
2,00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
OLD NEW

11. Contributions of different assets
Productivity survey National Accounts
Dwellings N111 Dwellings
Other buildings N1121 Buildings other than
dwellings, N1122 Other
structures, N1123 Land
improvements
Machinery and trasport N1131 Transport equipment,
N1139 Other machinery and
equipment
ICT N11321Computer hardware,
N11322 Telecommunications
equipment, N1173 computer
software
R&D N1171 Research and
development
Rest of the assets N114 Weapons systems,
N1151 Animal resources,
N1172 Mineral exploration and
evaluation, N1174
Entertainment, literary or
artistic originals
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-1
-0,5
0
0,5
1
1,5
2
2,5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dwellings ICT Machinery&transport Other buildings Rest of the assets R&D Contr. of capital

12. Quality adjusted
labor input (QALI)
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13. Sources used
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National
Accounts
• Hours worked
• Labor compensation
Distributions
from
Empl.Stat
and LFS
• Data on hours worked and labor
compensation assigned into labor
type groups.

14. Quality adjusted labor input
∆𝑙𝑛𝐿𝑗,𝑡 = σ𝑙 ҧ
𝑣𝑙,𝑗,𝑡 ∆𝑙𝑛𝐻𝑙,𝑗,𝑡= ∆𝑙𝑛𝐻𝑗 + ∆𝑙𝑛𝐿𝐶𝑗
• Interpretation:
1. QALI:
• Tells the magnitude of the contribution of different labor type groups to the total growth of labor input.
• Indicates the development of labor input.
2. Labor quality component:
• Is calculated as residual (weighted hours – unweighted hours, ∆𝑙𝑛𝐿𝑗,𝑡- ∆𝑙𝑛𝐻𝑗)
• Gives the magnitude of the substitution between the different labor types.
• If positive ➔ relative share of high skilled workers or workers with higher relative pay has increased.
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• The sum of weighted hours
worked.
• Labor compensation shares
of each quality group used
as weights, ҧ
𝑣𝑙,𝑗,𝑡 .
QALI Change in
hours worked
Labor quality
component

15. Changes in calculation of QALI
• Incorporation of Labor Force Survey data into calculation of QALI
• Required: data testing and result comparison
• Achievement: accelerated release frequency
• New publication timeline:
• 15.3.2022
• National accounts revised calculations for year 2020
• Final data of Employment Statistics for year 2019 (QALI)
• Year 2020 from LFS (QALI)
• 30.6.2022
• National accounts preliminary data for year 2021
• Years 2021 and 2020 from LFS (QALI)
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16. Growth rates of QALI, %-units
Average growth rates
EMPL.STAT LFS
2000-2020
QALI 0.60 0.44
HOURS WORKED 0.33 0.33
QUALITY COMPONENT 0.27 0.10
2000-2009
QALI 0.89 0.75
HOURS WORKED 0.50 0.50
QUALITY COMPONENT 0.39 0.25
2010-2020
QALI 0.34 0.15
HOURS WORKED 0.18 0.18
QUALITY COMPONENT 0.16 -0.03
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-7,00
-6,00
-5,00
-4,00
-3,00
-2,00
-1,00
0,00
1,00
2,00
3,00
4,00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
%
QALI (Empl.Stat) QALI (LFS)

17. Quality of labor input in the framework of labor
productivity
• Contribution of labor quality reflects, how the changes in
labor quality have affected labor productivity.
• By definition labor productivity (LP) =
∆ 𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑
∆ ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
.
𝐿𝑃𝑗 =
∆𝑙𝑛𝑉𝐴𝑗
∆𝑙𝑛𝐻𝑗
=
∆𝑙𝑛𝐾𝑗
∆𝑙𝑛𝐻𝑗
+
∆𝑙𝑛𝐿𝑗
∆𝑙𝑛𝐻𝑗
+ 𝑀𝐹𝑃
𝐿𝑃𝑗 =
∆𝑙𝑛𝑉𝐴𝑗
∆𝑙𝑛𝐻𝑗
=
∆𝑙𝑛𝐾𝑗
∆𝑙𝑛𝐻𝑗
+ ∆𝑙𝑛𝐿𝐶𝑗 + 𝑀𝐹𝑃
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18. Growth rates of labor productivity
1976-1990 1991-2005 2006-2020
Average Growth of labor productivity 3.198 3.282 0.538
Average Contributions:
Capital intensity 0.604 0.171 0.326
Residential buildings 0.102 -0.010 0.036
Other building and structures 0.058 0.010 -0.006
Machinery and equipment 0.348 -0.084 0.074
IT-assets 0.002 0.051 0.082
R&D capital 0.062 0.203 0.140
Other capital 0.031 0.001 -0.001
Labor quality component 0.332 0.277 0.106
Multifactorproductivity 2.261 2.834 0.107
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-10,00
-8,00
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Annual growth rate of labor productivity and
contributions of components (%-units).
Contribution of capital intensity Contribtion of labor quality
Contribution of MFP Labor productivity

19. Cumulative growth of labor productivity and
cumulative contributions of components
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0
20
40
60
80
100
120
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Growth of labor productivity
Contribution of MFP
Contribution of capital intensity
Contribution of labor quality

20. Publication tables
• the lowest level of calculation: 2-digit industries, market sector production
• Publication tables
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∆ 𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑
∆ ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
∆ 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛
∆ ℎ𝑜𝑢𝑟𝑠 𝑤𝑜𝑟𝑘𝑒𝑑
∆𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑 ∆production
Value added concept Production concept
Labor input, capital
input and their
contribution weights
Intermediate results