Jane Bourke

Last month, as the UK called time on the EU, the Health Research Board (HRB) released a sobering report on the harm and cost of alcohol consumption in Ireland. Using data from the hospital in-patient reporting system, the authors examine the patterns and effects of alcohol consumption and the impact on Irish society.

The report is extensive and thorough, with headline figures, such as:

In 2014 Irish drinkers consumed on average 11 litres of pure alcohol, with 50% of drinkers consuming alcohol in a harmful manner. Among 36 OECD countries, Ireland has the fourth highest alcohol consumption.
The number of people discharged from hospital whose condition was totally attributable to alcohol rose by 82% between 1995 and 2013. Three people died each day in 2013 as a result of drinking alcohol and in 2014 one-in-three self-harm presentations were alcohol-related.
In 2013, alcohol-related discharges accounted for 160,211 bed days in public hospitals – 3.6% of all bed days that year. €1.5 billion is the cost to the tax-payer for alcohol-related discharges from hospital. That is equal to €1 for every €10 spent on public health in 2012 (This excludes the cost of emergency cases, GP visits, psychiatric admissions and alcohol treatment services).The estimated cost of alcohol-related absenteeism was €41,290,805 in 2013.

The full report is here, with a summary of findings in graphical form here.

A recent OECD report “The Future of Productivity” (pdf) presents a new perspective on what drives national productivity growth. The OECD explains that in every world economy there are some ‘frontier firms’ which are internationally competitive and match global high standards in productivity. However, the majority of firms – up to 80 per cent – are not in this category. These firms may have a more domestic market orientation, and much lower average productivity and the OECD calls them ‘non-frontier firms’. The OECD illustrate the productivity gap between frontier firms and non-frontier firms over the last decade for OECD countries. Productivity growth in frontier firms has been around 3.5-5.0% per annum compared to -0.1 to 0.5% per annum in non-frontier firms (see graph below).

Source: ‘The Future of Productivity’, OECD, 2015, Figure 11

The OECD explains that the ‘productivity slowdown is not so much a slowing of innovation by the world’s most globally advanced firms, but rather a slowing of the pace at which innovations spread through the economy: a breakdown of the diffusion machine … the gap between those high productivity firms and the rest has risen’.

What should policy-makers take from these findings? The frontier firms have a competitive advantage from their investments in knowledge-based capital, but also how they tacitly combine computerised information, innovative property and economic competencies in the production process. These firms are leaders in new-to-the-market innovations. But it is not only new-to-the-market innovation which matters for productivity. Policy-makers must focus on improving the take up of new innovations by the vast number of non-frontier firms which are more likely to find success with ‘me-too’ or ‘new-to-the-firm’ innovations. To maximise productivity gains we must aid the acceleration of the diffusion of innovations to non-frontier firms. The diffusion of innovations is good for growth, and the OECD argue that more effective diffusion may also promote inclusiveness. A recent study by Card et al. (2013) suggests that the observed rise in wage inequality appears to at least reflect the increasing dispersion in average wages paid across firms. Thus, raising the productivity of laggard (late adopter) firms could also contain increases in wage inequality, while reducing costs and improving the quality and variety of goods and services.