Figure 5. The Policy Frontier

Policy Frontier showing combinations of growth in different drivers that achieve a productivity target of 1%

While lower oil prices shift the frontier outward

Higher oil prices shift the frontier inward

Required Change in Capital-per-Worker

Source: NERA illustration.

Required Change in R&D

Given elasticities of 0.45 for capital-per-worker and 0.50 for R&D, to achieve a full 1% increase in productivity, capital-per-worker needs to grow by about 2.2% or R&D needs to grow by 2%.

+2%

+1.5%

+0.5%

+0.6%

+1.7%

+2.2%