The productivity problem of the Dutch economy: Implications for economic and social policies and business strategy

Abstract

This paper provides an overview of productivity issues in relation to the performance of the Dutch economy since the 1980s. It looks in particular at the reasons for the slowdown in productivity growth during the second half of the 1990s. Productivity measures are analyzed in relation to per capita income, labour market indicators and various measures of efficiency. The paper then provides a detailed sectoral perspective of productivity growth, with a focus on the role of technology (ICT) and innovation. Considerable attention is also given to the role of intangible inputs, including human capital, knowledge capital and organizational capital. The Dutch policy environment is discussed from the perspectives of macroeconomic and structural policies to support productivity growth. The paper concludes that the potential for faster productivity growth in the Netherlands is quite substantial, in particular in (service) industries that are intensive users of ICT. However, a restructuring of the economic environment is a crucial condition to realize this potential. The paper also stresses the need for business strategies that exploit the combined effects of innovation and investment in ICT and intangibles. * Acknowledgements: This paper makes extensive use of earlier work done for DG Enterprise at the European Commission concerning the construction of EU Sectoral Productivity Database, together the National Institute of Economic and Social Research (O’Mahony et al, 2003); a project on the economics of knowledge for the Italian Communications Authority (van Ark, 2003); and a study for the Netherlands Ministry of Economic Affairs on service innovation (van Ark, Broersma and den Hertog, 2003). I am also grateful to Berenschot Groep B.V. for financial support to work on the conceptualization and measurement issues concerning intangible capital. None of the organizations mentioned above bear any responsibility for the content or viewpoints expressed in this paper. I am grateful to Robert Inklaar, Edwin Stuivenwold and Gerard Ypma for statistical assistance.