Productivity Growth and Value Chains in Four European Countries

IMF Working Papers, January 31, 2020

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Title: Productivity Growth and Value Chains in Four European Countries
Authors: Izabela Karpowicz, Nujin Suphaphiphat
Date: January 31, 2020
Geographic focus: Austria, Denmark, Germany, the Netherlands
Data source / approach: Firm-level data; analysis covers the past two decades
Core research question: Determinants of productivity slowdown and the role of participation in global value chains (GVCs)

Advanced economies have experienced a pronounced slowdown of productivity growth since the global financial crisis, accompanied in recent years by a withdrawal from trade integration processes.
Participation in global value chains appears to have affected productivity positively.
The positive effect of GVC participation on productivity operates, in part, through its effect on total factor productivity (TFP) when facilitated by higher investment in intangible assets (a proxy for firm innovation).
Other contributors to productivity growth at the firm level identified in the paper include:
- workforce aging
- access to finance
- skills mismatches

Scope: Four closely integrated European countries (Austria, Denmark, Germany, the Netherlands) analyzed using firm-level data over the past two decades.
Mechanism emphasized: GVC participation → higher investment in intangible assets (firm innovation proxy) → positive effect on TFP → productivity gains.