After a period of high productivity growth throughout the 1990s and the early 2000s Ireland now has one of the highest levels of productivity, as measured by output per hour, amongst advanced economies. However Ireland has not... [ view full abstract ]
After a period of high productivity growth throughout the 1990s and the early 2000s Ireland now has one of the highest levels of productivity, as measured by output per hour, amongst advanced economies. However Ireland has not been immune from the global productivity slowdown, with the pace of growth in both labour and multifactor productivity on a downward trend throughout the 2000s. Very little research has been carried out on productivity in Ireland before, and even less so with microdata. Therefore, using the OECD MultiProd model, and based on the latest vintage of firm-level data from the Central Statistics Office, the paper adds to the literature by identifying productivity patterns and trends at various percentiles of the productivity distribution from 2006 to 2014. The MultiProd model enables an analysis of productivity, both labour and multifactor, distributed by productivity percentile, age, size, and ownership (i.e. domestic and foreign), as well as measures of the efficiency of resource allocation. In manufacturing, a decline in labour and multifactor productivity across all groups of firms in the productivity distribution is found, coinciding with the onset of the crisis. The subsequent recovery is skewed towards the most productive firms, causing a widening in the productivity gap between frontier firms and the rest by the end of the period. For services, the patterns in Ireland differ, with productivity levels declining during the crisis across all cohorts of firms, and failing to recover. Allocation of resources in manufacturing appears highly efficient in Ireland compared with other countries, based on the Olley-Pakes method, though less so in services. However, results in manufacturing are driven by the impact of foreign dominated sectors, with foreign firms typically larger and more productive. These results have important implications for enterprise policy in Ireland.
