Technology and Labor Productivity | World Bank Institute (WBI)

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Technology and Labor Productivity

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From the issue of 04/01/2011
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Worldwide, labor has become nearly twice as productive over the last 20 years—and even more so in the developing countries, with Asia in the lead. Labor productivity is critical to economic success; and productivity growth has three main sources:

 

  • capital deepening: the increase in capital per worker, with ICT particularly important. Capital deepening requires improving the business environment to enhance investors’ confidence and make investment opportunities more attractive.
  • growth in labor quality: the increase in the proportion of workers with high levels of education and experience, and
  • total factor productivity (TFP)
  • growth: reorganizing production processes using more and better technology and management.

     

    Policies to boost productivity growth must be strategic and must foster simultaneous improvements in all three areas. This means:

     

    • investing in human capital and improving technology for better access to information,
    • making education more accessible and affordable, and
    • investing in ICT as a strategy of choice for boosting economic growth and competitiveness.

 

Dale Jorgenson is a professor at Harvard University.

Dr. Vu Minh Khuong is an assistant professor at the Lee Kuan Yew School of Public Policy.

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