The Role of Production Factor Quality and Technology Diffusion in 20th Century Productivity Growth

43 Pages Posted: 8 Apr 2016

See all articles by Antonin Bergeaud

Antonin Bergeaud

Banque de France

Gilbert Cette

Banque de France

Remy Lecat

Banque de France

Date Written: April 2016

Abstract

20th century growth has been an exceptional period in the history of mankind, relying mostly on increase in total factor productivity (TFP). Using a 1890-2013 17-OECD country database, this paper improves the measurement of TFP by taking into account production factor quality, i.e. the education level of the working-age population for labor and the age of equipment for the capital stock. However, our main contribution is to assess the role of technology diffusion to TFP growth through two emblematic general purpose technologies, electricity and information and communication technologies (ICT).

Using both growth decomposition methodology and instrumental variables estimates, this paper finds that, among factor quality, education levels have posted the largest contribution to growth, while the age of capital has a significant, although limited, contribution. Quality-adjusted production factors explain less than half of labor productivity growth in the largest countries but Japan, where capital deepening posted a very large contribution. As a consequence, the “one big wave” of productivity growth (Gordon, 1999), as well as the ICT productivity wave for the countries which experienced it, remains only partially explained by quality-adjusted factors, although education and technology diffusion contribute to explain the US earlier wave in the 1930s-1940s. Finally, technology diffusion, as captured through our two general purpose technologies, leaves between 0.6 and 1 point of yearly growth, as well as a large share of the two 20th century technology waves, unexplained. These results support both a significant lag in the diffusion of general purpose technologies and a wider view on growth factors, encompassing changes in the production process, management techniques or financing practices.

Keywords: Productivity, Total factor productivity, Education, Technological Change, Technology diffusion, Global History

JEL Classification: N10, O47, E20

Suggested Citation

Bergeaud, Antonin and Cette, Gilbert and Lecat, Remy, The Role of Production Factor Quality and Technology Diffusion in 20th Century Productivity Growth (April 2016). Banque de France Working Paper No. 588, Available at SSRN: https://ssrn.com/abstract=2759837 or http://dx.doi.org/10.2139/ssrn.2759837

Antonin Bergeaud

Banque de France ( email )

Paris
France

Gilbert Cette (Contact Author)

Banque de France ( email )

Paris
France

Remy Lecat

Banque de France ( email )

Paris
France

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