--- canonical_url: "https://csls.ca/ipm-archive/ipm-issue-25/productivity-or-employment-is-it-a-choice/" title: "Productivity or Employment: Is It a Choice?" author: name: "CSLS" url: "https://csls.ca/author/cslc/" date_published: "2026-07-13T07:37:46+00:00" date_modified: "2026-07-13T07:37:46+00:00" post_type: "ipm" summary: "" ipm_issue_period: - "Spring 2013" ipm_keyword: - "Canada" - "efficiency frontier" - "employment" - "endogeneity" - "hours worked" - "labour supply" - "OECD" - "productivity" - "TFP" - "trade-off" ipm_research_theme: - "Labour" ipm_country_focus: - "Canada" - "International" - "OECD" - "United States" featured_image: "https://csls.ca/wp-content/uploads/2026/06/IPM_50_banner.webp" status: "publish" --- # Productivity or Employment: Is It a Choice? Canonical URL: https://csls.ca/ipm-archive/ipm-issue-25/productivity-or-employment-is-it-a-choice/ # Productivity or Employment: Is It a Choice? [Download full PDF article](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-25-5-Michelis-Estevao-Wilson.pdf) Cite this article × Cite this article as: De Michelis, Andrea, Marcello Estevão, and Beth Anne Wilson. 2013. “Productivity or Employment: Is It a Choice?” International Productivity Monitor, No. 25 (Spring 2013): 41–60. https://www.csls.ca/ipm-archive/ipm-issue-25/productivity-or-employment-is-it-a-choice/ ## Authors: - Andrea De Michelis Federal Reserve Board; International Monetary Fund - Marcello Estevão International Monetary Fund - Beth Anne Wilson Federal Reserve Board; International Monetary Fund ## IPM Issue 25 Spring 2013 pp. 41–60 ## Related IPM articles [Is the SNA Still Useful? 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We approach the relationship between TFP and labour input differently, raising the possibility that in response to labour supply shocks firms adjust production efficiency. TFP would, thus, be endogenous to firms’ production decisions. We present cross-country evidence of a strong negative correlation between growth in TFP and labour inputs over the medium to long run. This result is robust to changing datasets, sample periods, and industry composition. To address the question of causality, we use instruments to capture changes in hours worked that are independent of TFP movements and find that TFP growth falls (increases) following a pickup (decline) in hours growth. These results have important policy implications. RÉSUMÉ Traditionnellement, les chocs de la productivité totale des facteurs (PTF) sont considérés exogènes, et la réponse de l’emploi est déterminée par leur effet sur la demande agrégée. Nous abordons la relation entre la PTF et l’apport de travail différemment, en soulevant la possibilité qu’étant donné les chocs sur l’offre de main-d’œuvre, les entreprises réduisent leurs efforts visant à accroître l’efficacité. La PTF serait par conséquent endogène aux décisions de production des entreprises. Nous présentons des preuves, sur plusieurs pays, d’une forte corrélation négative entre la croissance de la PTF et les intrants de travail à moyen et à long terme. Ce résultat résiste à l’évolution des ensembles de données, des périodes d’échantillonnage et de la composition des industries. Pour remédier à la question de la causalité, nous utilisons des instruments pour saisir l’évolution des heures travaillées indépendament des mouvements de la PTF et constatons que la croissance de la PTF diminue à la suite d’un gain de la croissance du nombre d’heures. Ces résultats ont d’importantes incidences de politique. Traditionnellement, les chocs de productivité multifactorielle (PMF) sont considérés comme exogènes et la réponse de l’emploi est déterminée par leur effet sur la demande globale. Nous abordons la relation entre la PMF et les intrants de main-d’œuvre différemment, soulevant la possibilité qu’en réponse aux chocs d’offre de main-d’œuvre, les entreprises ajustent leur efficience de production. La PMF serait ainsi endogène aux décisions de production des entreprises. Nous présentons des données probantes transnationales d’une forte corrélation négative entre la croissance de la PMF et les intrants de main-d’œuvre à moyen et long terme. Ce résultat est robuste aux changements d’ensembles de données, de périodes d’échantillonnage et de composition industrielle. Pour aborder la question de la causalité, nous utilisons des instruments pour capter les variations des heures travaillées indépendantes des mouvements de PMF et constatons que la croissance de la PMF diminue (augmente) à la suite d’une hausse (baisse) de la croissance des heures. [Download full PDF](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-25-5-Michelis-Estevao-Wilson.pdf)