The Productivity Decline: Demographics, Robots, or Globalization?

Laura  Alfaro; Hayley  Pallan

Teaching Note | HBS Case Collection | September 2017

The Productivity Decline: Demographics, Robots, or Globalization?

by Laura Alfaro and Hayley Pallan

Abstract

In the early 21st century, there was a noticeable trend of declining productivity growth. Despite the persistent decline in productivity growth, a consensus on its explanation had not been reached. Some of the debate focused on the technicalities of productivity measurement, and the structural shift involved with the increased usage and introduction of robots in place of workers, garnering the interest of academic economists, businesses and policymakers. Another contention was whether declining productivity was the result of secular stagnation, a more permanent economic state of low growth and lack of economic progress, or whether it was the result of deleveraging and the post-Global Financial Crisis period, a mere cyclical phase. Distilling the sources and drivers of productivity decline was further complicated by the rise in economic integration across countries, and even more so considering research findings that research and innovation was becoming less productive and more difficult. What, if anything, was the role of government? Should businesses play a role? If so what should they do? Teaching Note for HBS No. 718-013.

Keywords: Performance Productivity; Measurement and Metrics; Technological Innovation; Economic Slowdown and Stagnation; Globalization; Business and Government Relations;

Language: English

Format: Print

17 pages

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Alfaro, Laura, and Hayley Pallan. "The Productivity Decline: Demographics, Robots, or Globalization?" Harvard Business School Teaching Note 718-014, September 2017.

For decades, Chile enjoyed the stability of being the world’s largest producer of copper. Keynes would have advised that this period of growth would have been the time for the government to save, that “the boom, not the slump, is the right time for austerity at the Treasury.” If this wisdom has proven true on multiple occasions since Keynes’s statement in 1937, why do countries continue to conduct procyclical fiscal and monetary policies? Economists have documented this phenomenon across countries and found that particularly for emerging markets, capital inflows tend to coincide with expansionary macroeconomic policies while periods of capital outflows correspond with contractionary policies. Why is it so difficult for governments of emerging market countries to save during economic booms? By analyzing economic and social factors that contributed to unrest in Chile, students will wrestle with economic and ethical questions about balancing the needs of current and future generations.

Case | HBS Case Collection | June 2018 (Revised January 2020)

Renegotiating NAFTA

Laura Alfaro, Haviland Sheldahl-Thomason and Sarah Jeong

January 1, 2019 marked the 25th anniversary of the North American Free Trade Agreement (NAFTA). Twenty-five years after the landmark trade pact was signed by the United States, Canada, and Mexico, considerable debate surrounded it. Trade and trade agreements were a focal point of the 2016 U.S. presidential election. NAFTA came into effect on January 1, 1994, after being backed by the Republican administration of U.S. President George H. W. Bush and the Democratic administration of U.S. President Bill Clinton during its implementation. It created the largest free trade area in the world at the time. Since implementation, total trade between NAFTA countries grew 280%; in comparison while trade to non-NAFTA partners grew by 195%. Critics of NAFTA claimed that it had contributed to a loss of manufacturing jobs to Mexico, increased inequality in all countries, and undercut environmental laws. Those who supported NAFTA, however, noted that in addition to trade, output, and overall employment, investment among the three nations increased, and productivity also grew. Furthermore, the agreement led to lower prices. By 2018, all countries experienced low unemployment rates. With changes in NAFTA looming, many questioned whether the accord had brought more benefits than costs to its signatories. Could the costs be minimized under a new agreement without reducing the benefits? Did buying local goods help create the most jobs in a country? What was the role of business? Everyone wondered about the potential ramifications of the new NAFTA.

Keywords: Trade; Negotiation; Agreements and Arrangements; Cost vs Benefits; Auto Industry; United States; Mexico; Canada;

Citation:

Alfaro, Laura, Haviland Sheldahl-Thomason, and Sarah Jeong. "Renegotiating NAFTA." Harvard Business School Case 318-143, June 2018. (Revised January 2020.) View Details

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On January 16, 2020, the Senate passed a landmark trade deal that would replace the 26-year-old North American Free Trade Agreement (NAFTA). Until the United States-Mexico-Canada Agreement (USMCA) was signed, considerable debate had surrounded it. The new agreement made significant changes to the auto and dairy industries, instigating the nickname of “the cows and cars deal”. With changes to NAFTA looming, many questioned whether the accord had brought more benefits than costs to its signatories. Why had the countries signed the original agreement? Could the costs be minimized under a new agreement without reducing the benefits? Did buying local goods help create the most jobs in a country? What was the role of business? Everyone wondered about the potential ramifications of the new NAFTA. [Teaching Note for "Renegotiating NAFTA" HBS No. 318-143]

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