Productivity in Ireland 2016

The following terms will be used throughout the publication with a more detailed description of the terminology used to be found in the Appendix.

Capital Input
Capital input is the flow of capital services multiplied by the two-period average of the capital share of GVA. This publication terms capital input as capital services in charts for clarity.

Capital Intensity and Capital Deepening
Capital intensity is capital services per hour worked. Capital deepening is however, the growth in capital services per hour worked.

Capital Productivity
The efficiency at which capital services are utilised in producing output of goods and services, measured as output produced per unit of capital services input.

Capital Services
The flow of services derived from physical assets and intellectual property used to produce output. It is calculated by multiplying the user cost of the assets (this is the price of the capital service or the rental price of a capital good) by the capital stock.

Capital Stock and Productive Stock
Capital stock refers to the amount of capital in the economy. The productive stock is the net constant capital stock.

Constant Prices
Values that have been adjusted to remove the effects of price changes over time, therefore, allowing for meaningful comparison of values from different time periods.

Current Prices
The market value of an item in the period being measured that has not been adjusted to remove the effects of inflation over time.

Domestic and Other Sector
This refers to all sectors not categorised as Foreign sector (see definition of Foreign sector below).

Foreign Sector
These sectors dominated by foreign MNEs include the following: Chemicals and Chemical Products (NACE 20), Software and Communications (NACE 58-63), Reproduction of recorded media, Pharmaceutical products, Electrical equipment and Medical supplies (NACE 18.2, 21, 26, 27, and 32.5).

Gross Value Added (GVA)
GVA is the difference between the value of goods and services produced and the cost of raw materials and other inputs that are used up in the production process. It is closely related to GDP and excludes taxes and subsidies on products and production.

Labour Compensation per Employee
Labour compensation per employee is defined as compensation of employees in national currency divided by the number of employees. Labour compensation of employed persons is the sum of gross wages and salaries and of employers' social security contributions.

Labour Input
Labour input is the change in hours worked multiplied by the two-period average of the labour share of GVA. Hours worked include the hours worked by employees and self-employed.

Labour Productivity
Labour productivity measures output in the economy relative to hours worked. It is calculated as Gross Value Added divided by hours worked.

Multi-factor productivity
Multi-factor productivity (MFP) reflects the overall efficiency with which labour and capital inputs are used together in the production process. Changes in MFP reflect the effects of changes in management practices, brand names, organisational change, general knowledge, network effects, spillovers from production factors, adjustment costs, economies of scale, the effects of imperfect competition and measurement errors. Growth in MFP is measured as a residual, i.e. that part of GVA growth that cannot be explained by changes in labour and capital inputs. In simple terms therefore, if labour and capital inputs remained unchanged between two periods, any changes in output would reflect changes in MFP. This indicator is measured as an index and in annual growth rates.

Nominal Unit Labour Cost
Nominal unit labour cost (ULC) measures employee compensation relative to real labour productivity. Growth in an economy’s unit labour cost suggests that the cost of labour in the economy is rising relative to labour productivity, decreasing competitiveness. On the other hand, a decline in unit labour cost suggests that the cost of labour is declining relative to labour productivity, increasing competitiveness.