New developments in total factor productivity measurement reflecting innovative activities: Evidence from the productivity J-curve in advanced countries

Business

Despite digitalisation in the 21st century, productivity growth rates in advanced economies seemed to stagnate in the 2010s. One hypothesis to explain this phenomenon is the ‘productivity J-curve’, which suggests that the high costs associated with digitalisation during an investment boom induce an underestimation of productivity growth. This column tests the hypothesis using data from five advanced economies. It finds evidence that conventional total factor productivity growth rates in