A Secular Decline in Capital Productivity in G7 Countries

There is a commonly held notion that higher fixed investment allows one to have it all — a higher labour productivity, a higher wage growth and higher or at least sustained returns on capital. However, experience shows that capital accumulation has led to a decline in total capital productivity with...

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Bibliographic Details
Published in:Inter economics 2019-11, Vol.54 (6), p.385-390
Main Author: Morkunaite, Kristina
Format: Article
Language:English
Subjects:
Adoption of innovations
Capital stock
Compensation
Contributions to capital
Economic growth
Economic indicators
Economic models
Economic Policy
Economics
Economics and Finance
Employment
European Integration
Investments
Labor Economics
Labor productivity
Manufacturing
Productivity
Secularism
Social Policy
Technological progress
Value added
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Summary:There is a commonly held notion that higher fixed investment allows one to have it all — a higher labour productivity, a higher wage growth and higher or at least sustained returns on capital. However, experience shows that capital accumulation has led to a decline in total capital productivity with resulting pressures on capital returns — which have been largely offset by keeping wage growth subdued. This suggests that more policy focus should instead be placed on investment aimed at boosting total factor productivity through innovation and diffusion of technological progress so that gains in productivity and remuneration may be felt by both labour and capital.
ISSN:1613-964X
0020-5346
1613-964X
DOI:10.1007/s10272-019-0857-5