Productivity in Ireland 2018

Source publication: Estimates of the Capital Stock of Fixed Assets 2018

Get the data: StatBank CSA02, Statbank PIA04 

There have been substantial increases in the quantity of capital in use in the economy since 2000. One way of understanding these increases is in terms of capital stocks per employee. Ireland’s capital stock per employee has increased from 157 thousand euros to 390 thousand per employee between 2000 and 2018, an increase of 150%. The reason for the dramatic increase in 2015 is well documented in the report with large additions to GVA occurring and continuing thereafter. Nevertheless, the capital stock of Ireland was increasing steadily prior to this event.

Source publication: Estimates of the Capital Stock of Fixed Assets 2018

Get the data: StatBank CSA02, StatBank PIA04, Eurostat (capital stocks), Eurostat (employment)

The UK had the lowest level of capital stocks per employee in 2000. Luxembourg had the highest level followed by Austria, Germany and Ireland. However, by 2018 because of significant capital deepening, capital intensity of labour had grown at a much faster rate than many other European countries and the value of capital stocks per employee in Ireland is now second highest among the countries examined, just behind Luxembourg. The United Kingdom has the lowest level of capital stock per employee in 2018.

Source publication: Estimates of the Capital Stock of Fixed Assets 2018

Get the data: StatBank CSA02, Statbank PIA04 

Capital services growth since 2000 is dominated by the extraordinary increase in capital in 2015 associated with international corporate relocations and greatly increased contract manufacturing activities. It is important to note that the asset categories of Transport and Intangible assets have been combined for 2015 and subsequent years to protect the confidentiality of data providers. In 2018, a negative result is reported for this aggregate category, with Transport and Intangibles combined falling by 2%. The reduction in growth has occurred despite the ongoing onshoring of Intellectual Property Products in 2018 as the assets related to the 2015 globalisation events depreciate and produce lower levels of capital services.

Looking briefly at the previous years, capital services grew at 7% or more during the years 2000 to 2007. These large increases were mainly driven by increases in the capital stock of dwellings and other buildings, during the boom period. Capital services growth was positive but lower from 2008 to 2013. Nevertheless, there have been significant increases across almost all assets categories over the entire period, for example, there are additions to transport equipment in almost every year reflecting the increased importance of aircraft leasing activities in Ireland.

Get the data: Statbank PIA05 

The chart above shows capital services broken down by asset class in the Domestic and Other sector. In 2018, capital services growth was due to increased investment in the confidential category, which accounted for over half of capital services growth in 2018. In the years since 2010, Transport has been the main contributor to capital services growth, particularly in 2014, where Transport accounted for 6% of the 8% growth. In the early years, capital services growth was driven predominantly by Dwellings. This was evident during the pre-recession years of 2006 -2008, where a large amount of Construction activity was taking place.

Get the data: Statbank PIA05 

The period to 2018 is difficult to interpret with large swings in globalisation related activity occurring, together with suppression of the asset details to protect confidentiality.  The chart above shows capital services in the foreign dominated sector in the period to 2014. However, unlike the Domestic and Other sector, cultivated assets and Dwellings do not appear in the Foreign sector. This sector is dominated since the early noughties by intangible assets and to some extent investment in Machinery and Equipment. In 2011, intangibles did not feature while in 2012 no investment in Machinery and Equipment was recorded.

Get the data: StatBank CSA02, StatBank PIA04

The chart above shows the relationship between growth in capital stocks and services. Capital services measure the productive use of capital. The volume index of capital services estimates the flow of capital services derived from all the capital assets in the economy. The main difference between the flow of capital services and the growth of capital stocks is the way in which different types and vintages of assets are aggregated together. Capital services tend to grow at a faster rate than capital stocks. This can be better understood from the fact that a capital asset’s value will generally decline more quickly than its overall usefulness. Capital services are composed of the value of capital stocks weighted by the user cost for each asset. The user cost for each asset is based on the allocation of capital compensation in each asset’s sector. More information on calculating capital services can be found in the appendix.

Get the data: StatBank CSA02, Eurostat 

The chart above compares Ireland’s annual average growth in capital stocks to other EU countries from 2000 to 2018. The dramatic growth in Ireland’s capital stock in 2015, associated with the level shift in GVA in the same year, puts capital stock growth for Ireland - Foreign significantly ahead of all other EU countries (where comparable data are available) over the period at 14.2%. This is followed by Ireland - Total recording an annual average growth rate of 6.3%. The Domestic and Other sector comes in at 4^th highest place in the distribution at 4.5%. The countries with the lowest annual average growth rate to 2018 are Germany and Italy.