François Villeroy de Galhau: Productivity - a collective enigma? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bank of France - France Stratégie Conference, Paris, 1 February 2017. * * * Welcome to all of you. It gives me great pleasure to be able to open this conference on French productivity, organised in conjunction with France Stratégie. The subject is one that is both topical and of great importance to central banks: productivity is one of the principal drivers of growth, and its dynamics are a strong determinant of potential growth, that which is compatible with price stability. As you can see [ slide], after the major wave of expansion witnessed during Les Trente Glorieuses, which was particularly marked in the case of France, productivity growth in advanced countries has slowed in successive stages since the 1970s. Today, it has fallen back to a pace that is historically weak. What are the common factors behind this slowdown in productivity? And is there anything specific to France? I don’t believe so: if there is one thing that is specific to France, it is the high level of hourly productivity – one of the highest in the world, alongside that of the United States and Germany. So, rather than being a French enigma, the enigma we are looking at this morning seems to me to be more of a collective phenomenon.
By way of introduction, I would just like to go back over the three collective hypotheses at the heart of today’s debate, before nonetheless going on to examine a few factors that are indeed specific to France. * * * 1. Does the problem lie in the measurement of growth? The first theory is that there is in fact no slowdown, as we are not measuring growth properly due to the rise of the digital economy. On 16 January this year, the Banque de France held a conference1 that notably discussed this issue in relation to the US economy. The main sources of measurement errors were: first, the estimation of quality-adjusted prices for new technology, as falls in prices tend to be underestimated in US national accounts; and second, product entry and exit, which makes it difficult to estimate changes in prices over time. This could lead to a significant upward revision to US productivity since 1983: by 1.1 percentage points per year at the top end of estimates, according to Philippe Aghion and his co-authors. Nevertheless, even allowing for these corrections, there has still been a slowdown since the mid-2000s. Indeed, the measurement errors were just as significant before this period. That said, this work does provide some grounds for optimism. First, growth in hi-tech sectors, and therefore technological progress, is stronger than we previously thought. Second, some of the gains in well-being linked to new technologies fall outside the scope of the market economy and, as a result, are not recognised in national accounts.