Total Factor Productivity in the Bogota Manufacturing Industry, 1985-2005

Abstract

The objective of this article is to measure and to analyze total factor productivity – TFP- growth in the Bogota manufacturing industry over the period 1985-2005. From the early 90s Colombia applied several policy actions aiming at increasing trade openness of its economy. Taking this into account, this article analyzes performance of several subsectors of the Bogota manufacturing industry before and after trade liberalization. TFP growth is measured by using Harberger’s Two-Deflator Method, which although it is a robust method, is not difficult to use, and the amount of data needed for calculations is easier to handle with, compared with traditional methods. The results of the paper show most of the subsectors analyzed had positive TFP growth rates during the period 1990-2005, which corresponds to a period of more openness of the Colombian economy, compared to eight out of the twenty subsectors with negative TFP growth rates in the period pre-trade liberalization, 1985-1990. On this basis, the results suggest a possible positive effect of trade liberalization of the Colombian economy on TFP of manufacturing industry of Bogota.

Keywords: Economic Growth, Growth Accounting, Manufacturing Industry, Total factor productivity, Two-Deflator Method.