Growth Accounting in Items of Turbulence and Death: Efficiency, Technology, Capital Accumulation and Human Capital 1929-1950
40 Pages Posted: 25 Jul 2007
Date Written: March 2007
We employ a non-parametrical approach to growth accounting (Data Envelopment Analysis, DEA) to disentangle the proximate sources of labour productivity growth in 41 nations between 1929 and 1950 by decomposing productivity growth into four components: technological change, efficiency catch-up (movements towards the production frontier), capital accumulation and human capital accumulation. We show that efficiency catch-up generally explains productivity growth, whereas technological change and factor accumulation were limited and distorted by the effects of war. War clearly hampered efficiency. Moreover, an unbalanced ratio of human capital to physical capital (a gap to the technological leader) was crucial for efficiency catching-up.
Keywords: DEA, growth accounting, productivity, interwar period
JEL Classification: N10, N40, O47
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