Dual Economies and International Total Factor Productivity Differences
Louisiana State University, Baton Rouge - Department of Economics
University of Copenhagen - Department of Economics
This paper provides a framework which decomposes aggregate TFP into a component reflecting relative efficiency across sectors, and another component which reflects the absolute level of efficiency. A development accounting analysis suggests that as much as 85 percent of the international variation in aggregate TFP can be attributed to variation in relative efficiency across sectors. Estimation results show that recent findings highlighting the importance of good institutions, and to some extent trade, on levels of TFP, can be explained by their impact on relative efficiency.
Number of Pages in PDF File: 32
Keywords: Total Factor Productivity, Structural Change, Development Accounting, IV estimation, Institutions, Geography, Trade
JEL Classification: O47, C31, O50working papers series
Date posted: June 11, 2003
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