Figure 2TFP and growth: average growth in 1980 200010In our empirical estimations we try to correct for human capital.11Indeed for a smaller sample and the period 1970-1991, Beyer (1997) corrects for human capitalaccumulation finding that on average TFP felt 0.48 percentage points ranging from 0.04 to 1.01 percentagepoints.-6%-4%-2%0%2%4%6%8%-0,06-0,04-0,0200,020,040,060,080,10,12GDP growthTFP
22That TFP is very important in economic growth is illustrated more clearly in table1. Since we were able to build TFP for 107 countries in the period 1980 –2000 we take 10years average growth in TFP for each country. This allows us to analyze 214 periods. Weselect the top 10% and bottom 10% of the periods in terms of economic performance andcompare the importance of TFP in explaining the differences in the rate of growth ofGDP.Table 1The Sources of GrowthOutputFactorAccumulationTFP10% Highestgrowth ratesMean7.553.883.6710% Lowestgrowth ratesMean-1.192.29-3.48Difference in Mean8.741.597.15The differences among in the rate of growth in GDP countries is to a great extentexplained by the differences in the rate of growth in TFP. It is important to notice thatdifferences in factor accumulation are only a small part of the story. The extent to whichTFP could differ from period to period and country to country is so significant that abetter understanding of the causes behind the huge differences is worth pursuing.That TFP is an important source of economic growth for every country isconfirmed if we concentrate our results in specific groups of countries. To show this wedo the following exercise. We rank the 107 countries according to its level of GDP percapita in 1980 (the first year of our analysis). To do so we use the Penn Tables. Then forthe group of countries whose GDP per capita is in the top quartile of the ranking we selectthe periods with the highest rate of economic growth and those with the lowest rate ofeconomic growth. In both cases we consider a 25% of the whole sample. The time spansare 1981-1990 and 1990-2000. The next step is to compare the average rates of economic
23growth across the two groups. These calculations are presented in Table 2. In table 3 wedo the same exercise but now for the countries whose GDP per capita is in the bottomquartile of the GDP per capita ranking.Table 2The Sources of Growth: countries with highest GDP per capitaOutputFactorAccumulationTFPHighest periodicgrowth ratesMean4.573.481.09Lowest periodicGrowth ratesMean0.502.79-2.29Difference in Mean4.070.693.38Table 3The Sources of Growth: Countries with lowest GDP per capitaOutputFactoraccumulationTFPHighest periodicgrowth ratesMean220.127.116.11Lowest periodicGrowth ratesMean-0.212.08-2.29Difference in Mean6.431.025.41The rates of growth among “similar” countries may differ substantially from oneperiod to the other or from one country to the other. Moreover we can hardly find in thedifferences in capital accumulation a consistent explanation for these significantvariations. The important discrepancies in the rate of economic growth have to be linked
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- Summer '18
- Sagar Arora
- The Land, TFP