Sustained wage moderation and continued progress with labour market reforms are likely to have contributed to these developments, leading firms to shift to more labour-intensive production following earlier substitution policies in favour of capital during the 1980s and early 1990s.
5 In addition to the transitory impact on productivity via lower capital deepening, policies designed to increase the employment of low-skilled workers may have depressed average labour quality growth. Available evidence provides some support for the view that labour quality increased more moderately in recent years than in the first half of the 1990s.