Without a doubt, the productivity of an economy is what produces economic growth in the long term. At the end of the day, productivity increases the standard of living of society: we produce more and better with fewer resources.
But not all countries are equally productive.
In the following graph, we will measure productivity as the amount of GDP per worker, and measure its growth since 1991.
GDP per person employed 2017 PPT $. Base 100 1991. World Bank. Elaboración propia Anchor Capital Advisors.
Germany and France are larger economies in terms of GDP than Spain and Italy and also their GDP per person employed grows faster.
Another indicator that we must look at is the GDP per hour worked. Although the hour worked is difficult to measure, it also gives us an idea of which countries are more productive.
OECD (2020), GDP per hour worked (indicator). doi: 10.1787/1439e590-en. Base 100 1999. Elabracón Propia Anchor Capital Advidors.
Again, we see France and Germany with higher growth, but this time, Spain is closer to them.
Finally, we are going to measure productivity as all GDP growth that does not come from an increase in capital and labor inputs. An example would be an increase in economies of scale or better business organization, which makes the company's available resources better managed and generates more value.
OECD (2020), Multifactor productivity (indicator). doi: 10.1787/a40c5025-en. Base 100 1995. Elabracón Propia Anchor Capital Advidors.
Again, we see that Germany and France surpass Spain and Italy. In these last two countries, this indicator has been decreasing since the beginning of the 21st century.
There are many reasons why some countries are more productive than others. The more developed countries are capable of producing goods and services with a higher value, which translates into higher productivity. However, this does not necessarily mean that your productivity grows more, but it is higher at an absolute level.
As mentioned in this Harvad Business Review article, we don't always measure productivity the right way, and many times we only look at one part of the equation.
In any case, we can conclude that, as we already suspected, Europe is also divided in terms of productivity: beyond the fact that France and Germany have a larger GDP, productivity in these two countries grows more if we compare it with its southern neighbors.
