Output Collapses and Productivity Destruction

55 Pages Posted: 25 Apr 2011

See all articles by Juan Blyde

Juan Blyde

Inter-American Development Bank (IDB)

Christian Daude

Inter-American Development Bank (IADB)

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB)

Date Written: January 2009

Abstract

This paper analyzes the long-run relationship between output collapses—defined defined as GDP falling substantially below trend—and total factor productivity (TFP), using a panel of 71 developed and developing countries during the period 1960-2003 to identify episodes of output collapse and estimate counterfactual post-collapse TFP trends. Collapses are concentrated in developing countries, especially African and Latin American, and were particularly widespread in the 1980s in Latin America. Overall, output collapses are systematically associated with long-lasting declines in TFP. The paper explores the conditions under which collapses are least or most damaging, as well as the type of shocks that make collapses more likely or severe, and additionally quantifies the welfare cost associated with output collapses.

Suggested Citation

Blyde, Juan and Daude, Christian and Fernandez-Arias, Eduardo, Output Collapses and Productivity Destruction (January 2009). IDB Working Paper No. 557, Available at SSRN: https://ssrn.com/abstract=1821908 or http://dx.doi.org/10.2139/ssrn.1821908

Juan Blyde

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Christian Daude

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States
202-623-3783 (Phone)
202-623-2481 (Fax)

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