Conventional Growth Accounting Research Articles

Embodied Growth Accounting with Recombinant Innovation: A New Approach

This paper formulates a novel growth accounting framework that attempts to achieve several objectives. The first is to build a bridge between growth accounting and growth theory by resolving their asymmetric interpretations of technical change and the fundamental “sources” of growth. This effort is based on the proposition that rather than the interpretation of technical change being framed by the functional form and parameterization of an economic model, the modeling exercise should be framed by scientific processes and historically-based interpretations of change, including technical change. An implication of this reinterpretation – that change results from recombinations of existing functions and forms – implies that innovation, both physical innovation and brain-centered human innovation must be conveyed through the process of physical and human capital investment. Accordingly, the paper devises a model of embodied growth accounting, omitting the Solow residual, and reliant on relevant elements of the Kennedy-Samuelson-Acemoglu model of factor-augmenting adjustment. Using data for the U.S. during 1950-2000, the model is tested against the conventional growth accounting model.

Macroeconomic Determinants of Saudi Total Factor Productivity

Traditionally, labor productivity has been modelled as driven by capital accumulation, and the technology issue is exogenous. However, this model has been unable to sufficiently explain growth, and recent thinking on growth has given prominence to other factors such as technological advancement, human capital, and research and development. This has led to new growth models. This study employed the conventional growth accounting framework and aimed to estimate the total factor productivity in Saudi Arabia from 1970 to 2015. Additionally, it aimed to explore the macroeconomic determinants that affect total factor productivity. The results confirmed that economic stability, trade openness, and human factor development have positive impacts on total factor productivity. Interestingly, private credit by banks has a negative impact on Saudi total factor productivity. Negative relationships were also found between total factor productivity and the variables of population growth and government consumption.

Sources of long run economic growth in Russia before and after the global financial crisis

Abstract Although productivity decline in the global economy was observed before 2008, the global financial crisis of 2008 stimulated study of its source. In this context, recent literature mentions inefficient investments in machinery, human capital, and organizational processes. This can include skill mismatch and the lack of technology diffusion from advanced to emerging industries and firms. To what extent is this global view helpful in understanding recent productivity decline in the Russian economy? The present study reports that at least some of these sources can be observed in Russia as well. Using conventional industry growth accounting, it compares pre- and post-crisis sources of growth for the Russian economy. Specifically, it presents aggregate labor productivity growth as the sum of capital intensity and total factor productivity (TFP) growth in industries, and the contribution of labor reallocation between industries. It shows that the stagnation of 2008–2014 is more the result of the TFP decline and the deterioration of the allocation of labor than the lack of capital input. Moreover, the TFP decline started in Russia a few years before the crisis, as it did in major global economies, such as the United States, OECD countries, China, and Brazil. At the same time, relatively stable capital intensity made the Russian pattern to some degree similar to resource abundant Australia and Canada. Furthermore, the contribution of information and communications technology capital to labor productivity growth in Russia declined after 2008, which could have also hampered technology diffusion. Finally, the structure of the flow of capital services in Russia changed after 2008. Before the crisis, the contribution of machinery and equipment dominated, while after the crisis, construction provided the lion's share of capital input.

Sources of Long Run Economic Growth of the Russian Economy Before and after the Global Financial Crisis

Although a productivity slowdown of the global economy was observed before 2008, it was the 2008 crisis that stimulated studies on its origins. Recent literature suggests inefficient investments in machinery, human capital and organizational processes. This includes skill mismatches and a lack of technology diffusion from advanced to laggard industries and firms. To what extent is this global view helpful in understanding recent productivity slowdown of the Russian economy? The present study reports that at least some of these origins can be observed in Russia. Using conventional industry growth accounting, it compares the pre- and post-crisis sources of growth in the Russian economy. Specifically, it represents aggregate labour productivity growth as the sum of capital deepening and total factor productivity (TFP) growth in industries, and the contribution of labour reallocation between industries. It shows that the stagnation of 2008-2014 is more an outcome of the TFP slowdown and a deterioration of the allocation of labour rather than a lack of capital inputs. The TFP slowdown started in Russia a few years before the crisis, as in other major global economies, such as OECD countries, China and Brazil. Russia demonstrated relatively stable capital deepening makes the Russian pattern similar to resource abundant Australia and Canada. Next, the contribution of information and communication capital to labour productivity growth in Russia after 2008 declined, which could have hampered technology diffusion. Finally the structure of the flow of capital services in Russia changed after 2008. Before the crisis the contribution of machinery and equipment dominated, while after the crisis construction provided the most capital inputs.

Growth Decomposition of Indian Economy, 1981-2007

The present paper attempts to evaluate the economic performance of India for the period of 1981-2007, using the conventional growth accounting technique, also known as “Solow growth model”. In particular, it examines the relative contributions of factor accumulation and productivity growth in the economic growth of the economy. The main objective is to check if the growth is sustainable. Also, an attempt is made to find the proximate explanation of any major ups and downs that happened in the economy during this period. The paper concludes by arguing that the recent spectacular performance of the Indian economy is mainly fuelled by improvement in TFP.

Trends in the regional allocation of public investment in the post-bubble Japanese economy

With reference to the assumptions presented by Yamano and Ohkawara (J Reg Sci 40:205–229, 2000) on the specification of a production function with region-specific individual effects on public capital, this paper introduces a new benchmark index in order to analyze the Japanese government’s investment allocation policy across subnational regions, with an emphasis on efficiency, equity, and/or redistribution under trade-off restrictions. This index, termed the equity–growth allocation share of public investment herein, is derived from a conventional Solow growth accounting approach. Specifically, it is defined as a region’s share of the periodic change in the nation’s public capital, where its growth contribution with its interregional spillover effects to overall output growth is the same across subnational regions. We apply this index to the post-bubble Japanese economy, which was beset by efficiency–equity trade-offs between Tokyo’s unipolar development and balanced growth given a prolonged recession. We find a shift from a pro-efficiency to a non-pro-efficiency allocation policy in the mid-1990s. This finding therefore rules out the inference that the government chose an inverse policy direction thereafter and instead implies that it rather attempted to balance efficiency and redistribution.

Intangible Investment and Regional Productivity in Great Britain

Melachroinos K. A. and Spence N. Intangible investment and regional productivity in Great Britain, Regional Studies. Investment in intangible assets is considered to be an important driver of territorial competitiveness and wealth creation. Nevertheless, conventional growth accounting analyses treat most intangibles as intermediate expenditure and thus fail to capture the full effect of intangibles on output expansion and productivity dynamics. This situation has changed recently as a result of research that approaches a wider range of intangibles as capital. Based on such a national study, this paper investigates the significance of intangibles as a source of regional economic growth in Great Britain and the effect of these assets on the productivity performance between 1995 and 2004. Melachroinos K. A. and Spence N. 无形投资与区域生产力在英国，区域研究。无形资产的投资被视为地域竞争力与财富创造的驱动力。但传统的成长会计分析将大多数的无形资产视为居中花费，因而无法掌握无形资产之于产量扩张与生产动力的整体效益。此一情况由于最近将广泛的无形资产视为资本的研究而有了转变。本文根据上述的全国性研究，探讨无形资产做为英国区域经济成长来源的显著性，以及这些资产在 1995 至 2004 年间之于产能表现的效益。 无形资产 全要素生产力 英国 区域 Melachroinos K. A. et Spence N. L'investissement incorporel et la productivité régionale en Grande-Bretagne, Regional Studies. On considère que l'investissement dans les immobilisations incorporelles est une force motrice importante de la compétitivité territoriale et de la création de richesse. Cependant, les analyses classiques de la comptabilité de croissance traitent la plupart des immobilisations incorporelles comme des dépenses intermédiaires et, par la suite, ne traduisent pas suffisamment l'effet global des immobilisations incorporelles sur l'accroissement de la production et la dynamique de la productivité. Récemment, la situation a changé suite à la recherche qui considère une gamme plus grande d'immobilisations incorporelles comme du capital. A partir d'une telle étude nationale, cet article cherche à examiner l'importance des immobilisations incorporelles comme source de la croissance économique régionale en Grande-Bretagne et l'impact de ces actifs sur la productivité entre 1995 et 2004. Immobilisations incorporelles Productivité totale des facteurs Grande-Bretagne Régions Melachroinos K. A. und Spence N. Investition in immaterielle Vermögenswerte und regionale Produktivität in Großbritannien, Regional Studies. Die Investition in immaterielle Vermögenswerte gilt als wichtiger Faktor der territorialen Konkurrenzfähigkeit und Vermögensbildung. Dennoch werden die meisten immateriellen Vermögenswerte in herkömmlichen Wachstumszerlegungsanalysen als intermediäre Ausgaben behandelt, weshalb der vollständige Effekt dieser Vermögenswerte auf die Produktionsexpansion und Produktivitätsdynamik nicht erfasst wird. Diese Situation hat sich vor Kurzem aufgrund von Forschungsarbeiten geändert, in denen ein breiteres Spektrum von immateriellen Vermögenswerten als Kapital aufgefasst wird. Auf der Grundlage einer solchen nationalen Studie wird in diesem Beitrag die Signifikanz von immateriellen Vermögenswerten als Quelle des regionalen Wirtschaftswachstums in Großbritannien und die Auswirkung dieser Vermögenswerte auf die Produktivitätsleistung im Zeitraum von 1995 bis 2004 untersucht. Immaterielle Vermögenswerte Gesamtfaktorproduktivität Großbritannien Regionen Melachroinos K. A. y Spence N. Inversión intangible y productividad regional en Gran Bretaña, Regional Studies. Las inversiones en activos intangibles se consideran un factor importante de la competitividad territorial y la creación de riqueza. Sin embargo, en los análisis convencionales sobre la compatibilidad de crecimiento, la mayoría de activos intangibles son tratados como gastos intermedios y, por tanto, no se capta todo el efecto de los activos intangibles sobre la expansión de la producción y las dinámicas de la productividad. Esta situación ha cambiado hace poco como resultado de un estudio que aborda una gama más amplia de activos intangibles como capital. Basándonos en un estudio nacional de este tipo, en este artículo analizamos cuál es la importancia de los activos intangibles como una fuente de crecimiento económico regional en Gran Bretaña y el efecto de estos activos en el rendimiento de productividad entre 1995 y 2004. Activos intangibles Productividad total de los factores Gran Bretaña Regiones

The anatomy of growth in the OECD since 1870

Abstract Conventional growth accounting exercises are extended in this paper to allow for endogeneity of capital, demographic transitions, age dependency, and employment rates, among other factors. Using data for the OECD countries in the period 1870–2006 it is shown that growth has been predominantly driven by demographics and TFP growth. TFP has, in turn, been driven by R&D, knowledge spillovers through the channel of imports, educational attainment, and the interaction between educational attainment and the distance to the technology frontier. The estimates suggest permanent growth effects of R&D and human capital.

S-Shaped Transition and Catapult Effects

Among today's rich economies, per capita output levels had diverged before converging to the levels of the frontier economy. Many non-rich countries also appear to follow this pattern of growth. Since frontier economies have grown at stable rates, non-frontier economies display an S-shape transition path. Along this transition, there are catapult effects: longer episodes of divergence are associated with faster subsequent rates of convergence to the frontier. We construct and quantitatively assess a model of S-shaped transition with catapult effects. Deviations in per capita output from frontier levels are endogenous, while conventional growth accounting would classify these as TFP differences.

Comment on “China's Recent Economic Performance and Future Prospects”

Comment on “China's Recent Economic Performance and Future Prospects”

Interindustry effects of productivity growth in Japan: 1960–2000

Abstract Combining conventional sectoral growth accounting and the static open input–output price model, we analyze the sources of growth of product prices in Japan during the period 1960–2000. Using the input–output framework, we take into account not only the effects of factor costs and productivity within a sector, but also their impacts outside of the sector. We find that Japan's deflation in the 1990s was characterized by low growth of wage rates, low productivity growth, and a low rate of return on capital. Until 1990, productivity improvements compensated for factor cost pressures on output price, especially the rapid growth of labor cost. In contrast, during the 1990s, decreasing rates of return on capital, not productivity improvements, canceled out the inflationary effect of wage growth. J. Japanese Int. Economies 19 (4) (2005) 568–585.

Investment-Specific Technological Change and Growth Accounting

Greenwood, Hercowitz and Krusell have claimed that the Jorgenson form of growth accounting is conceptually flawed and severely understates the role of technological progress embodied in new capital goods ('embodiment') in explaining US growth. To the contrary, this paper shows that in its technology aspects their model is a special case of the Jorgensonian growth-accounting model. What they call investment-specific technological change is shown to be closely related to the more familiar concept of TFP growth: statements about the one can be translated into statements about the other. Empirically, they claim that the proportion of US growth accounted for by embodiment is about twice as large as estimated by conventional growth accounting. But the difference between these estimates is found to be due more to data than to methodology.

Sources of Economic Growth in East Asia: A Nonparametric Assessment

The conventional growth-accounting approach to estimating the sources of economic growth requires unrealistically strong assumptions about either competitiveness of factor markets or the form of the underlying aggregate production function. This paper outlines a new approach utilizing nonparametric derivative estimation techniques that does not require imposing these restrictive assumptions. The results for East Asian countries show that output elasticities of capital and labor tend to be different from the income shares of these factors and that the growth of total factor productivity over the period 1960-95 has been an important factor in the overall growth performance of these countries.

A frontier approach to measuring total factor productivity growth in Singapore’s services sector

Although an East Asian miracle, Singapore has been singled out for experiencing insignificant total factor productivity (TFP) growth, thereby reflecting limited potential for long‐term growth. Examines the validity of this statement for the services sector, which is an important engine of growth for Singapore. This is done using panel data with a stochastic frontier model, which, unlike the conventional growth accounting model used by previous studies, not only decomposes output growth into input growth and TFP growth but further decomposes TFP growth into technological progress and changes in technical efficiency. In addition, the stochastic frontier model incorporates the more realistic non‐neutral shifting production frontier, as opposed to the commonly assumed Hicks‐neutral production technology underlying a production function.

Assessing the Effect of Incentive Regulation on Productive Efficiency in Telecommunications in the United States

The use of incentive regulation in telecommunications in the United States requires accurate measurement of the change in productivity. An approach to measuring productivity change, the Malmquist index approach, is introduced that not only provides a measure of that change but also allows for a decomposition into two mutually exclusive and exhaustive components—changes in technical efficiency over time and shifts in technology over time. Using annual data on four output measures and six input measures for the period 1988 to 1999 for nineteen local exchange carriers, the results indicate that productivity increased by about 5.5 percent per year. This growth is due primarily to innovation rather than improvements in efficiency. Of the nineteen LECs in the sample, eleven were operating efficiently throughout the entire 1988–1999 period. Of the remaining eight, four showed a slight improvement in efficiency while the efficiency of four declined. In the aggregate, however, there was virtually no change in efficiency. Finally, a comparison is made between two methods of estimating the change in productivity. The conventional growth accounting approach yields a lower estimate of the rate of change in productivity than the Malmquist index approach yield. The difference between these estimates is interpreted as the lower bound of the bias associated with the conventional growth accounting approach to measuring the growth in productivity.

The Measurement of the Change in Productivity in Telecommunications

The use of incentive regulation in telecommunications in the United States requires accurate measurement of the change in productivity. An approach to measuring productivity change, the Malmquist index approach, is introduced that not only provides a measure of that change but also allows for a decomposition into two mutually exclusive and exhaustive components --- changes in technical efficiency over time and shifts in technology over time. Using annual data on four output measures and six input measures for the period 1988---1999 for nineteen local exchange carriers, the results indicate that productivity increased by about 5.5% per year. This growth is due primarily to innovation rather than improvements in efficiency. Of the nineteen LECs in the sample, eleven were operating efficiently throughout the entire 1988---1999 period. Of the remaining eight, four showed a slight improvement in efficiency while the efficiency of four declined. In the aggregate, however, there was virtually no change in efficiency. Finally, a comparison is made between two methods of estimating the change in productivity. The conventional growth accounting approach yields a lower estimate of the rate of change in productivity than does the Malmquist index approach.

Sources of Economic Growth in East Asia: A Nonparametric Assessment

The conventional growth-accounting approach to estimating the sources of economic growth requires unrealistically strong assumptions about the competitiveness of factor markets and the form of the underlying aggregate production function. This paper outlines a new approach utilizing nonparametric derivative estimation techniques that does not require imposing these restrictive assumptions. The results for East Asian countries show that output elasticities of capital and labor are different from the income shares of these factors, and that the growth of total factor productivity over the period 1960-95 has been an important factor in the overall growth performance of these countries.

Sources of Economic Growth in East Asia: A Nonparametric Assessment

The conventional growth-accounting approach to estimating the sources of economic growth requires unrealistically strong assumptions about the competitiveness of factor markets and the form of the underlying aggregate production function. This paper outlines a new approach utilizing nonparametric derivative estimation techniques that does not require imposing these restrictive assumptions. The results for East Asian countries show that output elasticities of capital and labor are different from the income shares of these factors, and that the growth of total factor productivity over the period 1960-95 has been an important factor in the overall growth performance of these countries.

The Green Revolution and the productivity paradox: evidence from the Indian Punjab

AbstractContrary to a widespread belief, total factor productivity (TFP) growth, as measured by the conventional growth accounting approach, contributed little to economic growth during the Green Revolution in the Indian Punjab. This paper shows that this‘productivity paradox’ arises because of a fundamental problem with conventional measures of TFP growth. When technical change is not Hicks‐neutral, it is impossible to separate the contribution of technical change from that of factor accumulation. Simple exercises to assess the magnitudes involved in the Punjab case show that the bias in conventional TFP estimates is severe:‘corrected’ measures of productivity growth are between 100 and 200% higher per year during the Green Revolution.

The Green Revolution and the productivity paradox: evidence from the Indian Punjab

Contrary to a widespread belief, total factor productivity (TFP) growth, as measured by the conventional growth accounting approach, contributed little to economic growth during the Green Revolution in the Indian Punjab. This paper shows that this‘productivity paradox’ arises because of a fundamental problem with conventional measures of TFP growth. When technical change is not Hicks-neutral, it is impossible to separate the contribution of technical change from that of factor accumulation. Simple exercises to assess the magnitudes involved in the Punjab case show that the bias in conventional TFP estimates is severe:‘corrected’ measures of productivity growth are between 100 and 200% higher per year during the Green Revolution.