the external pressures and disciplines on them to perform well incentives — the human resources and knowledge systems, the institutions and capabilities — infrastructure, needed to devise productivityenhancing changes and support them effectively the scope to make the necessary changes. flexibility — The Commission has characterised the as a of ‘incentives’ channel ‘driver’ productivity improvements, and the other two as All three are strongly ‘enablers’. interactive. Together, they influence the motivation and the ability of organisations to make the changes needed to enhance productivity. The contribution of information technology to productivity growth illustrates this well. Both theory and evidence demonstrate that competition provides a powerful incentive for the development and uptake of IT. But new business models at the firm level, including changed work arrangements and skill sets, are needed to fully exploit the new technologies (PC 2004a). Key implications of this framework are that policy needs and priorities could be expected to vary over time and there is unlikely ever to be a A related ‘silver bullet’. implication is that productivity is unlikely to improve if policy advances in one channel are countermanded by backsliding in others. A agenda ‘proproductivity’ needs to proceed on all three fronts. Policy consistency is also needed to convey the right signals for the managers and owners of enterprises to single-mindedly pursue productivity improvements and undertake the necessary (risky) innovations and investments. In more recent years, the signals have become blurred again, prompting a resurgence of rent-seeking behaviour from firms and industries under market pressure. The Lists All three channels of policy influence have been a focus for government initiatives over the years, commencing with the progressive liberalisation of international trade and capital flows from the 1980s. But while governments have hardly been idle on the productivity front, there have also been important omissions and A number of these have been ‘blind spots’. identified by the Commission as requiring action, and should continue to be on the list of things for governments to do.
incentives — the external pressures and disciplines on them to perform well capabilities — the human resources and knowledge systems, the institutions and infrastructure, needed to devise productivityenhancing changes and support them effectively flexibility — the scope to make the necessary changes. The Commission has characterised the ‘incentives’ channel as a ‘driver’ of productivity improvements, and the other two as ‘enablers’. All three are strongly interactive. Together, they influence the motivation and the ability of organisations to make the changes needed to enhance productivity. The contribution of information technology to productivity growth illustrates this well. Both theory and evidence demonstrate that competition provides a powerful incentive for the development and uptake of IT. But new business models at the firm level, including changed work arrangements and skill sets, are needed to fully exploit the new technologies (PC 2004a). Key implications of this framework are that policy needs and priorities could be expected to vary over time and there is unlikely ever to be a ‘silver bullet’. A related implication is that productivity is unlikely to improve if policy advances in one channel are countermanded by backsliding in others. A ‘proproductivity’ agenda needs to proceed on all three fronts. Policy consistency is also needed to convey the right signals for the managers and owners of enterprises to single-mindedly pursue productivity improvements and undertake the necessary (risky) innovations and investments. In more recent years, the signals have become blurred again, prompting a resurgence of rent-seeking behaviour from firms and industries under market pressure. The Lists All three channels of policy influence have been a focus for government initiatives over the years, commencing with the progressive liberalisation of international trade and capital flows from the 1980s. But while governments have hardly been idle on the productivity front, there have also been important omissions and ‘blind spots’. A number of these have been identified by the Commission as requiring action, and should continue to be on the list of things for governments to do.
productivity-policies.docx