Productivity in the Global Economy 1

During the last three decades, the global economy has undergone significant transformation due to a number of dynamics, including the emergence of China and India as major growth contributors, the higher degree of globalization, and the increased penetration of information and communication technology (ICT). These factors have helped the global economy to achieve remarkable labor productivity growth, primarily driven by emerging market economies. However, the pace of global labor productivity growth has slowed drastically since the beginning of the current decade. This chapter attempts to understand the proximate sources of global labor productivity growth, and documents that the decline in labor productivity growth is primarily driven by decline in total factor productivity growth. The chapter discusses various explanations, including the ones already available in the literature, for the ongoing declines in the global productivity, and provides insights on potential strategies that can change the gear toward improving productivity growth.