During the decades of globalisation, flows of foreign direct investment have surged in parallel with extensive policy momentum. This column examines whether the net aggregate gain from FDI is positive using a large panel of firms from 30 European countries. It turns out that even very large increases in FDI are not important for country-level productivity growth.

What happens after the crisis ends? This column estimates the long-term effects of the current cyclical downturn on Eurozone economies. In the absence of any real impetus for bold reform, estimates show that the damage will indeed be long lasting, permanently impairing growth for an ageing population that requires higher growth capacity more than ever before.

This paper measures the impact of the minimill, a drastic new technology for producing steel. The authors find that the sharp increase in the industry's productivity is linked to this new technology, and operates through two distinct mechanisms. First, minimills displaced the older technology, called vertically integrated production, and this reallocation of output was responsible for a third of the increase in the industry's productivity. Second, increased competition, due to the expansion of minimills, drove a substantial reallocation process within the group of vertically integrated producers, driving a resurgence in their productivity, and consequently of the industry's productivity as a whole.

If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. This paper examines Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalisation quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.

Worker productivity in the UK and a number of other countries has been persistently weak since the onset of the global crisis. This column argues that, in the UK at least, the weakness in service sector productivity is the biggest puzzle. In most other countries the weakness is more obvious in manufacturing.

With trade barriers rising, the time is right to refresh the evidence that openness to trade comes with substantial benefits. This column focuses on the complementarity between R&D and foreign sourcing. Looking at Norwegian firms from 1997 to 2005, it argues that one fifth of productivity growth came from sourcing more foreign products, while the remaining four fifths came from technical change.

While EU leaders are drafting a fiscal compact, the problem of intra-European real exchange-rate misalignments remains. This column argues that reducing imbalances implies a focus on competitiveness, and hence on the alignment of nominal-wage growth with labour-productivity growth.

Poor countries have access to world markets and rich countries’ technologies. In principle, they should catch up. Yet the record belies this expectation. But this column argues labour productivity in manufacturing displays a clear tendency towards convergence, unconditional on the countries’ institutions or policies. The policies that matter for growth are thus those that bear on the reallocation of labour from nonconvergence to convergence activities.

If rich and poor countries have access to the same technology, shouldn't their productivity levels eventually converge? This would imply that poor countries should grow more quickly until they catch up – but such a tendency has never been proven. CEPR DP8631 shows that this convergence in output does in fact occur – but within manufacturing sectors rather than in economies as a whole.

Portugal was the third member to join the unenviable club of bailed-out Eurozone countries. This column explores one of the central weaknesses of the Portuguese economy – its low productivity. It finds that this is in part the result of the shrinking size of Portugal’s companies, which is in turn caused by distortions in its labour market that need to be fixed.