Sources of TFP Growth: Occupational Choice and Financial Deepening

47 Pages Posted: 24 Aug 2005

See all articles by Hyeok Jeong

Hyeok Jeong

University of Southern California - Department of Economics

Robert M. Townsend

MIT - Department of Economics

Date Written: May 2005

Abstract

We develop a method of growth accounting based on the integrated use of transitional growth models and micro data. We decompose total factor productivity (TFP) growth into the occupational-shift effect, financial-deepening effect, capital-heterogeneity effect, and sectoral-Solow-residuals. Applying this method to Thailand, which experienced rapid growth with enormous structural changes between 1976 and 1996, we find that 73 percent of TFP growth is explained by occupational shifts and financial deepening, without presuming exogenous technical progress. Expansion of credit is a major part. We also show the role of endogenous interaction between factor price dynamics and the wealth distribution for TFP.

Keywords: Total Factor Productivity, Occupation Choice, Financial Deepening

JEL Classification: O47, O16, J24, D24

Suggested Citation

Jeong, Hyeok and Townsend, Robert M., Sources of TFP Growth: Occupational Choice and Financial Deepening (May 2005). IEPR Working Paper No. 05.28. Available at SSRN: https://ssrn.com/abstract=786606 or http://dx.doi.org/10.2139/ssrn.786606

Hyeok Jeong (Contact Author)

University of Southern California - Department of Economics ( email )

Robert M. Townsend

MIT - Department of Economics ( email )

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