The decomposition above clarifies how partial analyses of productivity performance within individual sectors (e.g., manufacturing)can be misleading when there are large differences in labor productivities (yi,t) across economic activities. In particular, a high rate of productivity growth within an industry can have quite ambiguous implications for overall economic performance if the industry’s share of employment shrinks rather than expands. If the displaced labor ends up in activities with lower productivity, economy-wide growth will suffer and may even turn negative
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