Total Factor Productivity and Efficiency in OECD Countries: Possibility of Convergence in 2000-2012 Period

Abstract

(ProQuest: ... denotes formulae omitted.)1.IntroductionThe Organization for Economic Co-operation and Development (OECD) was established in 1961 and has 34 members. The OECD budget is approximately $357 million. During the study period, total real gross domestic product (GDP) rose by 22 percent, reaching $39 trillion. Capital increased by 8 percent, reaching $7.8 trillion, while labor power increased 11 percent, reaching 610 million people within the same period (https://data.oecd.org/). GDP growth was greater than capital and labor power growth. There was significant total factor productivity growth in OECD countries.Income distribution and differentiation among OECD countries, which are the leading economies of the world, are increasing (http://oecd/idd). The ratio of the top 10 percent to the bottom 10 percent is estimated to be 9.5 percent in 2012; however the relevant figure was 7 percent in 1980. The difference between the rich and the poor requires examining convergence and divergence among the relevant countries.Growth dynamics of countries as well as convergence among those countries have been studied for a long time according to neoclassical growth theories in various studies. A series of studies indicate convergence among OECD countries. The majority of such studies use productivity per worker and total factor productivity in order to analyze convergence. The case of residual is named after Solow (1957); that part of growth is known as Total Factor Productivity (TFP).The economic productivity and convergence issue of OECD countries, the economic structures of which are partially similar to each other and that are representative of relatively advanced economies, has been investigated by our study for the period between 2000 and 2012. In that regard, MI, which is interpreted by Caves et al. (1982), and the data envelopment analysis (DEA) method used by Charnes et al. (1978) are used for TFP. The description is used as inputs and outputs. Physical capital is used as input and is among some of the most important factors that affect technological development and productivity. Gross national product is used as output. All variables are divided into labor unit and necessary analyses are performed. Data sources are provided below. The whole variable value is calculated based on 2005 U.S. dollars. A total of 34 OECD countries are included in the analysis. Although some of the countries were not OECD member during the entire given period, they are still included. Whether there are any differences between these countries will be observed during the analysis process.The aim of this study is to analyze convergence in OECD countries over a reasonable period of time at the beginning of the new millennium. The period between 2000 and 2012 is chosen intentionally in order to examine the results of the financial crisis of 2009. Another reason for the short study period is our effort to include DEA, Malmquist, and convergence analyses together. Including more data sets would have expanded the DEA and TFP tables, which in turn would exceed the limits of this study. The study period has given us the chance to employ all three analyses. The set of values in the study are obtained from OECD StatExtracts. Real physical capital per worker, real human capital per worker, and real GDP per worker are calculated based on 2005 U.S. dollars.The literature and methodology forms the first part of the study while the results of the DEA and Malmquist index (MI) analysis of TFP are given in the following chapter. The conclusion and assessment make up the last part of this study.2.LiteratureIn recent years there have been many studies that examine convergence and economic growth. Barro and Sala-i Martin (1991, 1992) and Fare et al. (2006) are the major contributors to the relevant literature. According to Kruger (2003), experiential growth investigations over the last ten years have been pursued at least three different ways. …