Growth Accounting Research Articles

Quantifying consumption-based environmental productivity from “Energy-Environment Footprints”

Addressing the challenge of climate change through accounting is crucial for sustainable development, which is influenced by factors such as productivity growth, technical change, efficiency change, and environmental accounting. However, previous studies have predominantly focused on production-based growth accounting, neglecting the significant impact of consumption on growth accounting levels. In response, this study introduces a synthetic index termed as consumption-based environmental productivity. This innovative index utilizes the Luenberger Productivity Index (LPI) and the Logarithmic Mean Divisia Index (LMDI) models, relying on a Multi-regional Input-output (MRIO) footprint instead of direct emissions. Our empirical research found that from 2000 to 2014, certain economies bore a considerable portion of undesirable emissions imported from abroad. This supports the argument that the footprint approach is a valid alternative to direct emissions assessments. Further analysis revealed an overall growth trend in environmental productivity (EP) of 0.79%. Efficiency change (EC) contributed negatively (-0.35%), while technical progress (TP) positively influenced EP by 1.14%. Additionally, our study points out that reductions in NOX and SO2 emissions were primarily due to energy intensity improvements. Conversely, CO2 emissions were driven by individual production factors and economic growth. These results underscore that establishing clear responsibility for emissions is the foundational step in implementing emission reduction policies in an equitable manner. Concurrently, it is crucial to improve the efficiency of energy consumption and mitigate undesirable emissions to significantly enhance productivity, especially for developing economies, policies should prioritize the development of energy cleanliness and energy efficiency. Furthermore, it is imperative for all economies to refrain from pursuing unnecessary economic growth that could lead to excessive emissions.

Tracing thermal power emissions footprint in a global value chains perspective

The power sector has become one of the biggest challenges to global climate mitigation through fuel-based generation. Using a database of 35,000 thermal-power plants worldwide, this study measures thermal-power-emissions footprint through global value chains (GVCs) analysis and explores drivers of footprint change by LMDI. The main findings show that international trade induces over 20% of global thermal-power-emissions and biomass-power-emissions grows by almost 20% p.a., while other fuel-power-emissions grows by less than 2.5% p.a. Furthermore, the results of thermal-power-emissions considered on the producer and consumer side vary considerably, and forced by further consumption demand growth in high-income economies, low and middle-income economies remain in negative thermal-power-emissions transfer in 2019, deteriorating further in complex GVC and traditional trade. Per capita demand and population growth account for most thermal-power-emissions growth. Reducing effects are strongest in extreme event years when power demand falls, followed by rising clean-power shares and unit generation costs. In addition, biomass-power with weak abatement constraints contributes up to a quarter of global thermal-power-emissions growth, or 7% of global carbon emissions growth. Based on these findings, recommendations such as establishing eco-cooperation for low-carbon generation techs and improving cross-border access to clean-power are proposed to achieve a globally efficient and practical effect of thermal-power mitigation.

Estimation of total factor productivity by growth accounting: Evidence from the Central Asian region

Estimation of total factor productivity by growth accounting: Evidence from the Central Asian region

The Contribution of Total Factor Productivity on Economic Growth in Selected Southeastern European Countries

This paper delves into the impact of capital accumulation, effective employment, and total factor productivity (TFP) on the economic growth of five Southeastern European countries: Albania, Croatia, North Macedonia, Serbia, and Slovenia. The examination is based on the Solow-Swan neoclassical growth model and the Cobb-Douglas production function, which dissects economic growth into capital, labour, and productivity inputs. The analysis pays particular attention to the growth dynamics of North Macedonia over the entire period (1998-2019) and two sub-periods (1998-2008 and 2009-2019). The article seeks to provide a comprehensive evaluation of the primary drivers of economic growth in Southeastern European countries, emphasising the evolving roles of capital, labour, and productivity over time. Through a detailed analysis of these determinants, the study offers insights into the necessary policy actions to ensure sustainable long-term growth, especially in transition economies. The empirical analysis utilises the growth accounting framework and employs regression analysis to estimate the output elasticities of capital and labour inputs. The data analysis covers the period of 1998-2019, specifically focusing on two sub-periods to investigate shifts in growth drivers over time. Each factor's contributions are presented in absolute terms (percentage points) and relative terms (percentages) to provide a comprehensive understanding of their roles. The findings indicate that capital accumulation has been the predominant growth driver in most countries, especially Albania, Croatia, and North Macedonia. However, in Serbia and Slovenia, total factor productivity (TFP) played a more significant role, contributing substantially to growth. In North Macedonia, TFP showed strong contributions during 1998-2008 but declined sharply in 2009-2019, leading to increasing reliance on capital and labour inputs for growth. This study is valuable in emphasising the shift in growth drivers over time and highlighting the importance for Southeastern European countries to concentrate on productivity enhancements, innovation, and labour market reforms to sustain long-term growth. These findings provide significant insights for policymakers seeking to improve economic performance in transition economies.

A Novel Decomposition Framework for Agricultural Growth Accounting: A Global Supply Chain Perspective

ABSTRACTIn this article, we delve into the traditionally opaque total factor productivity (TFP) “black box” by dissecting it into its constituent elements—technology and efficiency—based on input–output variables from a global supply chain vantage point. Utilizing growth accounting methods, the article seeks to discern the variety of routes through which technology (frontier movement) and efficiency (catch‐up effects) propagate their effects on TFP. Our primary objective is to identify the most potent mechanism for fostering productivity enhancement, a task that previously eluded systematic examination. The methodology involves creating an empirical approximation of the agricultural production frontier from a selection of national data. Bounded‐adjusted linear programming techniques are subsequently employed to disentangle the observed TFP growth within the agricultural sector of each country into its technology and efficiency facets. It is important to note that this study also integrates resource and environmental footprints as additional input–output variables, quantified via the multi‐region input–output (MRIO) model. The analysis, spanning from 2000 to 2016, reveals that the most advanced nations demonstrate the most vigorous growth in agricultural productivity, with a global upward trend in agricultural productivity over the sampled years.

Measuring Total Factor Productivity in General Technical Progress Framework

The classical Solow's total factor productivity accounting assumes that technical progress is Hicks neutral, which is a special situation in the reality of world economy. This paper expands the setting of technical progress into general technical progress framework, which can cover Hicks neutral technical progress, Harrod neutral technical progress, Solow-neutral technical progress, and various factor-biased technical changes. According to the principle of statistical index number, this paper decomposes the output index into a total factor input index and a total factor productivity index, and adopts normalized CES production function with factor-augmenting technical progress to derive the calculation formulas of the total factor input index and the total factor productivity index, and constructs a new economic growth accounting system, and finds the counteraction and compensation mechanism for diminishing marginal returns. If the factor substitution elasticity is 1 or there is no technical progress bias and factor allocation bias, then the new accounting equation degenerates into the classic Solow growth accounting equation. The new accounting system can measure the influence of total factor input and total factor productivity to economic growth, but also can measure the influences of factor input intensity and factor allocation bias in the growth rate of total factor input, and the influences of technical progress intensity and technical progress bias in the growth rate of total factor productivity. Therefore it is more precise and accurate than classical method.

Technological Progress as a Catalyst for Energy Efficiency: A Sustainable Technology Perspective

Enhancing energy efficiency through sustainable technological progress is imperative for pursuing sustainable development, particularly in developing countries where economic growth is strongly linked to higher energy consumption. In Tunisia, an open and developing economy, fossil energy consumption can be reduced without compromising economic growth by focusing on diminishing energy intensity. This study investigates the effects of technological progress on the overall energy intensity in Tunisia from 1980 to 2019, examining the role that technological advancements may play in attaining sustainable development goals. This study is based on a growth accounting model that uses time-series analysis and a cointegration estimation approach. Our empirical results suggest the presence of a long-term connection between the variables. The attainment of enhanced energy efficiency is contingent on the growth rate of technological progress, which should exceed capital and labor productivity. The results reveal that the net impact of technological advancements is estimated at -0.0163, which signifies that aggregate energy intensity tends to decrease by an annual average of 1.63% in the long term. These findings underscore the need for developing economies to restructure their energy policies and support sustainable technological initiatives and green entrepreneurship. Developing countries can reduce their energy intensity while boosting their economic growth by fostering technological innovation. This study demonstrates how technological progress and green entrepreneurship can be leveraged to enhance energy efficiency and drive sustainable development in developing nations.

Enhancing environmental quality and economic growth through potential effects of energy efficiency and renewable energy in Asian economies

This study examines the potential impacts of energy efficiency and renewable energy on economic growth proxies by gross domestic product and environmental quality proxies by carbon dioxide emissions across eight selected Asian countries from 2000 to 2020. This study contributes by calculating green total factor productivity and carbon total factor productivity based on the famous Solow’s residual via employing a modified extensive growth accounting model that internalized ignored factors such as energy efficiency and renewable energy. The employed panel cointegration techniques confirm that all variables are co-integrated with carbon dioxide emissions and economic growth. The pooled mean group/autoregressive distributed lag model analysis results indicate that energy efficiency is positively associated with both environmental quality and economic growth. Renewable energy hurts economic growth but has a positive effect on environmental quality which suggests the necessity of implementing an effective strategy for renewable energy alongside energy efficiency measures to enhance economic growth and environmental quality in the selected Asian countries. The findings from the fully modified ordinary least squares estimator are consistent with the environmental quality model. The average growth rate of green total factor productivity is positive despite negative contributions from energy efficiency and renewable energy. Similarly, the average growth rate of carbon total factor productivity is negative despite positive contributions from labor and capital. This discrepancy may be attributed to the beneficial effects of labor and capital as input productivity-driven. Embracing renewable energy sources can take significant steps toward improving environmental quality for future generations. Focusing on green technologies that enhance energy efficiency can substantially promote environmental quality and stimulate sustainable economic growth through innovation and climate change integration to achieve Sustainable Development Goals.

A decomposition of economic growth decompositions

This paper critically compares the ability of all three decomposition techniques that explain economic growth and its variation between regions and nations. Old time shift-and-share analysis (S&S) presumes that industry mix and regional competitiveness are all important. Structural decomposition analysis (SDA) presumes that final demand growth and input–output coefficient changes are all that matter. Growth accounting (GA) presumes the same for the growth of production factors and technological progress. This paper concludes that an econometric estimation of a GA equation without its residual factor productivity growth component, but with industry mix and demand components from S&Ss and SDAs, respectively, offers the best approach to explain longer term economic growth and variations therein.

Enterprise information and communications technology software pricing and developer productivity measurement

AbstractThe 1999 addition of business sector software and services spending to the National Income and Product Accounts was an important innovation, achieving a novel focus on the measurement of intangible asset investment. Over the intervening years, enterprise information and communication technology (ICT) has fundamentally changed. The transformation has raised questions about the extent of the decline of ICT function software prices. As a software producing sector, the business sector ICT function now has a much wider array of production factor choices. In addition, labor and multifactor software development productivity, an important sources of value creation, varies widely from year to year. With the use of a two‐sector model and a standard growth accounting framework, a business sector ICT function shadow price is estimated, finding that software price declines have been underestimated by 4.4 percentage points (ppt) over 2015 to 2021. The impact on GDP growth is a 0.1 ppt underestimate. Correcting the underestimate increases software spending from 19.6% to 24.7% of nonresidential fixed investment, and from 47.4% to 59.9% of real intellectual property product spending.

City-level green growth accounting: Evidence from China's thirteen urban agglomerations

Cities play a pivotal role in achieving 'Carbon Peak' and 'Carbon Neutrality' objectives through the implementation of strategies aimed at mitigating environmental risks. While the environmental impacts of industrial production activities have been widely examined, the nuances of their internal structures remain obscure. This study delves into the industrial sector across the 'thirteen urban agglomerations (TUAs)' in mainland China, covering the years 2006–2016, by developing a comprehensive (source-specific and variable-specific) decomposition framework for Malmquist productivity index. The framework is utilized to discern whether efficiency changes or technological advancements drive productivity growth, considering input/output variables such as capital and labor. Findings show that the average annual environmental productivity gain during the examined period was 2.6 %, suggesting a general enhancement in productivity within TUAs' industrial sectors. A detailed breakdown of productivity changes indicates that a combined contribution of 1.8 % to environmental productivity growth stemmed from energy use and pollutant variables, with emissions of industrial sulfur dioxide being the most significant at 0.9 %. Conversely, the 'catch-up effect,' or environmental efficiency change, was negative (−0.2 %), indicating the TUAs' inability to emulate the productivity levels of more advanced areas. Industrial energy use and capital inputs were the primary contributors to this negative trend, each accounting for a −0.2 % impact. The results underscore the importance of facilitating technology transfers from more developed to less advanced regions, especially regarding renewable energy and capital investment, to bolster environmental performance and productivity in the TUAs' industrial sectors.

Analyzing the Impact of Montreal’s Réseau Express Vélo (REV) on Surrounding Bike Lanes’ Ridership and the COVID-19 Cycling Recovery

Amidst the COVID-19 pandemic, Montreal implemented pro-cycling measures and enhanced its cycling infrastructure, notably by the introduction of the Réseau Express Vélo (REV), an extensive network of separated high-capacity bike lanes inaugurated in 2020. This paper delves into the pandemic’s impact on Montreal’s cycling network, with specific focus on the Berri/Lajeunesse/Saint-Denis REV route, evaluating its influence on the recovery of adjacent bike lanes and its effectiveness in attracting new cyclists. Using data from sensors installed along Montreal’s bike lanes between 2018 and 2023, our analysis reveals an initial average 28% decline in cycling volumes at the onset of the pandemic. However, from 2021 onwards, disparities began to emerge. While sensors on adjacent parallel bike routes to REV recorded further declines in ridership, those elsewhere in the city showed signs of cycling recovery, suggesting a shift in the cycling patterns towards the REV. Distinguishing between cyclists displaced from other parallel bike lanes and those representing a pent-up demand, our study indicates that the displaced cyclists accounted for 64% of the REV’s ridership at the southernmost sensors and only 7% at the northernmost sensors in 2023. These findings have significant policy implications, as cyclists comprised within the pent-up demand category correspond to those having transitioned from not using bike lanes to utilizing safer cycling infrastructure and account for the net growth in the cycling mode share directly attributable to the REV. Both of these observations are pivotal in fostering a shift away from cars and steering Montreal towards achieving its cycling mode share goal of 15% by 2027.

World Productivity: 1996–2014

We use a new growth accounting method to quantify the drivers of world total factor productivity (TFP) growth during 1996–2014 and uncover four main results. World productivity growth is volatile from year to year. This mainly reflects reallocation of labor across country-industries. The contribution of country-industry level productivity growth to world productivity is relatively constant over time. This constancy masks that the increased importance of emerging economies offsets a productivity slowdown in advanced economies. After 2008, this offsetting effect dissipated and world TFP growth declined. These conclusions are robust to the inclusion of markups in the analysis. (JEL E23, E32, O30, O47)

Technological innovation and profit

This study examines the effect of technological innovation on economic performance. Solow’s growth accounting measures the contribution of productivity to economic growth, but the active role of technological change in attaining economic growth is ignored. Kaldor emphasizes capital accumulation in technological process, but does not cover the dynamic process of technological innovation. Schumpeter explains the dynamic process by focusing on capital accumulation and efficiency. Following Schumpeter’s view of innovation, we empirically analyze the dynamics of technological innovation measured in terms of capital turnover and return on sales. Capital turnover represents process and organizational innovation, and return on sales reflects product innovation. For the empirical analysis, a large panel data set of 445 Korean firms during the period 2000–2015 is used. The empirical study performs panel regression analysis by using fixed effects model, FGLS model, dynamic GMM model, and a split sample method. The empirical results support the positive relationship between technological innovation and profitability.

A supermultiplier demand-led growth accounting analysis applied to the Spanish economy (1998–2019)

In this paper, we analyse the demand-led determinants of Spanish economic growth from 1998–2019. We apply the supermultiplier demand-led growth accounting methodology by Freitas/Dweck (2013) with two modifications: First, we incorporate consumption out of public transfers, following Haluska et al. (2021) and Haluska (2023). Second, we incorporate consumption out of public wages as a source of autonomous demand, theoretically suggested by Serrano/Pimentel (2019). Our demand-led growth decomposition highlights: (i) public demand and exports as important stable growth drivers, and a decreasing supermultiplier that reduces growth rates; (ii) the indirect effect of a real estate boom in the economic expansion of 1998–2008 caused by increasing public revenues and opening space to the expansion of public demand; and (iii) the incapacity of exports to lead the recovery alone, as the latter started only with the resumption of the public and private demand.

Factors Influencing Economic Growth in Nigeria: A Growth Accounting Framework Analysis

This research examines the drivers of economic expansion in Nigeria from 1960 to 2017, employing the growth accounting methodology based on the classical neoclassical production function. The focus is on assessing the contributions of capital, labor, and total factor productivity (TFP) to Nigeria's economic growth. Furthermore, to determine the interrelations among capital, labor, TFP, and economic growth, correlation coefficients among these variables were calculated. The correlation analysis indicated positive associations between the growths of capital, labor, TFP, and economic growth. Moreover, findings from the growth accounting analysis highlighted capital as the primary contributor to economic growth in Nigeria throughout 1961-2017. In specific sub-periods, capital remained the dominant growth driver in the initial phase (1961-1980), while labor took precedence in the 1981-2000 period, with capital following and TFP growth showing a decline, as evidenced by its negative contribution. Nonetheless, TFP emerged as the critical factor driving economic growth from 2001-2017. Consequently, the study suggests the implementation, maintenance, and enhancement of policies that promote physical capital, human capital, and technological advancements through both domestic and foreign investments, recognizing their essential roles in fostering economic growth and development.

The growth contribution of colonial Indian railways in comparative perspective

AbstractRailways were an important driver of global economic growth in the nineteenth and early twentieth centuries. Whilst their role is well documented in industrial economies, we know less about their macro‐economic impact in developing countries. In this paper, we first estimate the aggregate growth impact of Indian railways, one of the largest networks in the world in the early twentieth century. Then, we compare their impact in India to four emerging Latin American economies (Argentina, Brazil, Mexico, and Uruguay) and the Cape colony. Using growth accounting techniques common to the cross‐country estimates, we argue that the aggregate growth impact of Indian railways was significant, increasing Indian gross domestic product (GDP) per capita by 13.5 per cent by 1912. We also find that the growth impact of Indian railways was similar to Brazil and Mexico, but smaller than Argentina and the Cape. Compared with the latter, India had a smaller size of railway freight revenues in the economy and lower wages to fares leading to lower passenger time savings. Railways were the most important infrastructure driver of economic growth in India during the first era of globalization from 1860 to 1912, but they contributed less than in richer and more dynamic developing economies.

Sources of Algeria's economic growth, 1979–2019: Augmented growth accounting framework and growth regression method

This paper examines the sources of economic growth in Algeria, studying the key drivers of their slow and weak economic performance, during the period of 1979–2019 from the perspective of the augmented growth accounting framework and the growth regression method. More specifically, the paper uses the augmented growth accounting framework to decompose the aggregate growth of an individual economy to determine the contribution of various inputs and the total factor productivity. The growth regression method, then, links the growth performance of a given country to a set of economic, social, and institutional variables to identify the deep drivers of its economic growth. Results of the accounting framework show that Algeria's growth performance has been weak and modest for decades. This is due, mainly, to labor growth with weak gain in capital accumulation and to sharp losses in the total factor productivity growth. Furthermore, results of the econometrics study stress the importance of the political, institutional, and economic variables and the macroeconomic stability as potential factors that may affect growth in Algeria. These findings highlight the need for policymakers to identify and to target these determinants to improve the long‐run economic growth in Algeria.

Total factor productivity, transitional dynamics and endogenous growth accounting for Latin America: Evidence from two centuries’ data

AbstractThis study investigates the sources of economic growth for Latin American economies. With two centuries of data and extended growth accounting methods, the study shows that poor total factor productivity (TFP) growth is the key to understanding Latin America's low economic growth relative to other economies. Using a functional form of TFP growth, based on second‐generation growth models, furthers analyses to show some empirical evidence for growth induced by R&D, knowledge spillovers, educational attainment and the distance to the frontier. However, the magnitude effect is very small and when compared to the OECD countries, the gap between the TFP growth generating factors is very substantial. An intricate policy structure should be implemented for Latin America to foster an environment that is conducive to aid permanent TFP and economic growth.

Opening up in the 21st century: A quantitative accounting of Chinese export growth

China’s rapid export growth has spurred extensive research investigating its effects on other economies. The exact causes of the boom as well as the slowdown in Chinese exporting after 2007 are less well-understood. We quantify the drivers of Chinese export growth using a general equilibrium model estimated with detailed trade and production data that capture rich heterogeneity across destinations, firm ownership types, production locations, and sectors. We find that the three key drivers of Chinese export growth overall are rising foreign demand, improvements in access to imported intermediates, and factor productivity growth within China. Weakening foreign demand and a lack of further improvements in imported inputs access largely explain the slowdown in exporting after 2007. Furthermore, important differences especially across sectors and firms of different ownership types caution against any single narrative.