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Published: 17 October 2008

Development of productivity in the national economy 1970-2007*

Based on preliminary national accounts data, the growth rate of labour productivity in the whole national economy was 2.8 per cent in 2007, having been 3.3 per cent in 2006 and 1.5 per cent in 2005. The respective growth rate of total factor productivity was 2.2 per cent, having been 2.8 per cent in 2006 and 0.9 per cent in 2005. The contribution of capital intensity growth has been 0.6 percentage points in the whole national economy for the last three years.

The HP filtered long-term growth trend indicates that the pace of growth in labour productivity has slowed down to around 2 to 2.5 per cent in the whole economy since 1995, whereas during the preceding time period between 1975 and 1995 it was around 3 per cent per annum. The respective long-term growth trend for total factor productivity shows that total factor productivity fluctuated between 1.5 and 2.5 per cent before the year 1993. Between 1993 and 2000, total factor productivity grew at the average rate of 2 to 3 per cent per annum. After 2000, the growth trend of total factor productivity fell temporarily to 1.2 per cent in 2003, after which it has returned to around 2 per cent. Before 1993, the change in the growth trend of capital intensity was around 1 to 1.5 per cent, but it slowed down clearly in the 1993 to 2000 period. Since 2000, the annual growth rate of capital intensity has remained at approximately 0.7 per cent.

Figure 1. Development of productivity in the whole national economy 1970-2007*, %

The most important factor in the growth of value added of the whole national economy has been the growth of total factor productivity. According to preliminary national accounts data, the contribution of total factor productivity to the growth of value added was 2.2 percentage points in 2007, having been 2.8 percentage points in 2006 and 0.9 percentage points in 2005. The contribution of capital input has been steady and in 2007 it amounted to 1.3 percentage points, having been 1.1 percentage points in 2006 and 1.0 percentage points in 2005. The contribution of labour input to the growth of value added was 1.2 percentage points in 2007, having been 1.0 percentage points in 2006 and 0.7 percentage points in 2005.

Figure 2. Contributions to value added, percentage points

The effect of the structural change in labour input as well as ICT capital on economic growth had been estimated at the level of the whole national economy. The contribution of the structural change in labour input to growth in value added has averaged 0.2 per cent per annum in 1995-2004. The contribution of ICT capital to growth in value added increased strongly during the IT boom in 1995-2000 and stood at 0.7 per cent per annum. During the 2000s the contribution of ICT capital has averaged 0.5 per cent per annum.

Table 1. Average growth of gross value added and its components 1970-2007

	1970-1989	1989-1995	1995-2000	2000-2007
Gross Domestic Product	3,44	0,54	4,61	3,25
Hours worked	-0,04	-2,88	1,92	0,90
Labour productivity	3,48	3,42	2,69	2,35
Change in capital input	1,16	0,68	0,98	1,07
Non-ICT capital	0,97	0,30	0,28	0,6
ICT capital	0,19	0,37	0,70	0,47
- Computers	0,04	0,11	0,13	-0,04
- Communication equipment	0,02	0,04	0,19	0,19
- Software	0,07	0,07	0,21	0,29
- Other ICT	0,06	0,15	0,17	0,03
Change in labour input	-0,04	-2,15	1,27	0,58
Total factor productivity1)	2,32	2,01	2,36	1,6
of which structural change in labour input	-	-	0,19	0,252)
1) Total factor productivity does not account for structural change in labour input.
2) Years 2000-2004

Besides figures on productivity, the publication also contains a methodological description of the KLEMS productivity calculations used in the Productivity Review, information about the comparability of ICT capital, the satellite accounts of research and development activities, the national accounts revisions as well as information about the growth of the business sector in the Nordic countries and data on the productivity of the public sector.

Source: Productivity Review 2008. Statistics Finland

Inquiries: Mr Antti Pasanen +358 9 1734 2629, firstname.lastname@stat.fi

Director in charge: Mr Ari Tyrkkö

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Last updated 17.10.2008