Factor Accumulation Story: Any Unfinished Business?

CERGE-EI Working Paper No. 220

Posted: 26 Apr 2005

See all articles by Michal Kejak

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

David Vavra

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: February 2004

Abstract

We construct a new measure of knowledge capital as an aggregate production factor in the sense of Lucas and employ it in a standard growth and variance accounting exercise. We base this new measure on the available data on educational attainment using the empirically confirmed relationship between the level of education and productivity growth. Decomposing the post war growth record we find that most of the growth in income per worker has been explicable in terms of factor accumulation. Overall, the scope for technology residual remained negligible, although there are important differences among various country groups. Unlike the results on growth accounting, explaining the variation in the average growth performance of the individual countries through the variation in the rates of growth of the production factors still leaves a substantial part of the variation unexplained. Yet, this part is significantly smaller than what other studies have ascribed to the variation of the technology residual. Lastly, we also demonstrate how the new measure of knowledge stock may be used to test theoretical predictions regarding the recent convergence experience in the EU periphery. The good fit of the theory can be interpreted as an indication that the theory provides a reasonable candidate explanation for total factor productivity growth.

Keywords: Human capital, endogenous growth, total factor productivity and growth accounting

JEL Classification: O00, O47

Suggested Citation

Kejak, Michal and Vavra, David, Factor Accumulation Story: Any Unfinished Business? (February 2004). CERGE-EI Working Paper No. 220, Available at SSRN: https://ssrn.com/abstract=707381

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

David Vavra (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic
+420/2/2400-5111 (Phone)
+420/2/2422-7143 (Fax)

HOME PAGE: http://www.cerge-ei.cz

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