## Gone with the Headwinds: Global Productivity

_Staff Discussion Notes, April 3, 2017_

## Source details

**Canonical URL:** [Gone with the Headwinds: Global Productivity](https://www.imf.org/en/publications/staff-discussion-notes/issues/2017/04/03/gone-with-the-headwinds-global-productivity-44758)

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## Bibliographic details
- Authors: Gustavo Adler, Romain A Duval, Davide Furceri, Ksenia Koloskova, Marcos Poplawski Ribeiro
- Published: April 3, 2017
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9781475589672.006

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### Summary
- Productivity growth—the key driver of living standards—fell sharply following the global financial crisis and has remained sluggish since, adding to a slowdown already in train before.
- The note finds that the productivity slowdown reflects both crisis legacies and structural headwinds.
- Reviving productivity growth requires addressing remaining crisis legacies in the short run while pressing ahead with structural reforms to tackle longer-term headwinds.

### Major findings: crisis legacies and mechanisms
- In advanced economies, the global financial crisis has led to “productivity hysteresis”—persistent productivity losses from a seemingly temporary shock.
- Key crisis-related drivers behind hysteresis:
  - Balance sheet vulnerabilities.
  - Protracted weak demand.
  - Elevated uncertainty.
- These factors jointly triggered an adverse feedback loop:
  - Weak investment → weak productivity → bleak income prospects.

### Major findings: structural headwinds
- Structural headwinds, already present before the crisis, include:
  - A waning ICT boom.
  - Slowing technology diffusion.
  - An aging workforce (as a contributing factor to slowing diffusion).
  - Slowing global trade.
  - Weaker human capital accumulation.

### Policy implications and recommendations
- Short run: Address remaining crisis legacies to interrupt the adverse feedback loop of weak investment and weak productivity.
- Medium to long run: Press ahead with structural reforms to tackle headwinds such as:
  - Policies that boost technology diffusion.
  - Measures to strengthen human capital accumulation.
  - Reforms that mitigate effects of an aging workforce and support trade dynamism.
- Overall approach: Combine crisis-remedial measures with structural reforms to revive productivity growth.

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## Content in this bundle

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_Source: https://www.imf.org/en/publications/staff-discussion-notes/issues/2017/04/03/gone-with-the-headwinds-global-productivity-44758_