How Important are Capital and Total Factor Productivity for Economic Growth?

Baier, Scott L.; Dwyer, Gerald P.; Tamura, Robert

How Important are Capital and Total Factor Productivity for Economic Growth?

Economic Inquiry, Vol. 44, No. 1, pp. 23-49, 2006

27 Pages Posted: 5 Jun 2006

See all articles by Scott L. Baier

Scott L. Baier

Clemson University - John E. Walker Department of Economics

Gerald P. Dwyer

Clemson University; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Robert Tamura

Clemson University - John E. Walker Department of Economics; Federal Reserve Bank of Atlanta

There are 2 versions of this paper

Abstract

We examine the relative importance of the growth of physical and human capital and the growth of total factor productivity (TFP) using newly organized data on 145 countries that spans more than 100 years for 23 of these countries. For all countries, only 14% of average output growth per worker is associated with TFP growth. We use priors from theories to construct estimates of the relative importance of the variances of aggregate input growth and TFP growth across countries. Much of the importance of the variance of TFP growth across countries is associated with negative TFP growth.

JEL Classification: O47, O50, O57, O30, N10

Suggested Citation: Suggested Citation

Baier, Scott Leonard and Dwyer, Gerald P. and Tamura, Robert, How Important are Capital and Total Factor Productivity for Economic Growth?. Economic Inquiry, Vol. 44, No. 1, pp. 23-49, 2006, Available at SSRN: https://ssrn.com/abstract=906366