Low productivity growth: China’s Shenzhen airport Terminal Three, Italy’s slowdown

In macroeconomics we talk a lot about total factor productivity.  Tyler Cowen in Marginal Revolution points today to two good productivity related articles.  The first is on a pretty expensive infrastructure project whose depreciation may make the NPV negative.  Shenzhen’s  airport Terminal Three can (via Shenzhen airport Terminal Three: – The Independent):

handle 45 million passengers a year, 30 per cent more than Terminal Five. It cost $1bn £612m, just one-seventh the cost of the Heathrow project.

The problem, according to the article, is that few airlines are using the terminal. It appears to have been constructed because it “could” be constructed, not because there was pent-up demand for an enormous terminal in Shenzhen.

In Italy, meanwhile, Fadi Hassan and Gianmarco Ottaviano blame poor management practices for Italy’s apparently quite large productivity slowdown since the 1990s.

The types of management practices Italian firms get wrong are precisely those that Bloom, Sadun, and Van Reenen (2012) have shown to hinder ICT penetration and exploitation. Combined with the prominent role that ICT had on productivity growth in the last 20 years, this can be a relevant explanation for the Italian stagnation. Reducing labour-market rigidity is not enough in the presence of rigid non-meritocratic management practices. Italy is unlearning to produce because it seems not to manage change properly.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
This entry was posted in Politics. Bookmark the permalink.