Dynamics Of Total Factor Productivity Research Articles

Technological progress and economic dynamics: Unveiling the long memory of total factor productivity

This study aims to explore the dynamics of total factor productivity (TFP) in 40 advanced economies and its implications for economic stability, growth patterns, and technological integration. Understanding the concept of long memory in TFP is crucial in comprehending the diverse paths of economic development and technological advancement in different nations. The study endeavors to clarify the concept of long memory in TFP and analyze its impact on economic stability, growth patterns, and technological integration on a global scale. The research employs a sophisticated methodological framework that integrates a combination of unit root tests, non-parametric methods, fractional integration techniques, and ARFIMA models. This multifaceted approach provides a nuanced understanding of the persistence in TFP series and helps distinguish between stable and mean-reverting TFP dynamics across different nations. The analysis highlights the varying trajectories of TFP across these economies, which sheds light on the diverse paths of economic development and technological advancement. The findings of this research are pivotal in comprehending the role of TFP in shaping growth convergence, influencing business cycle fluctuations, and technological progress. The study contributes to policy discourse by proposing strategic policy measures that harness the long-term trends of TFP. These recommendations encompass key areas such as labor, capital, institutional frameworks, and innovation policies. Countries can optimize sustainable economic development and foster effective technological integration in an increasingly interconnected global economy by implementing these measures.

Fiscal adjustments and TFP dynamics: addressing reverse causality within a heterogeneous panel framework with global shocks

PurposeThe purpose of this study is to provide new insights into the relationship between fiscal policy and total factor productivity (TFP) while accounting for several economic and econometric issues of the phenomenon like non-stationarity, fiscal feedback effects, persistence in productivity, country heterogeneity and unobserved global shocks and local spillovers affecting heterogeneously the countries in the sample.Design/methodology/approachThe paper is empirical. It builds an Error Correction Model (ECM) specification within a dynamic heterogeneous framework with common correlated effects and models both reverse causality and feedback effects.FindingsThe results of this study highlight some new findings relative to the existing related literature. The outcomes suggest some relevant evidence at both the academic and policy levels: (1) the causal effects going from fiscal deficit/surplus to TFP are heterogeneous across countries; (2) the effects depend on the time horizon considered; (3) the long-run dynamics of TFP are positively impacted by improvements in fiscal budget, but only if the austerity measures do not exert slowdowns in aggregate growth.Originality/valueThe main originality of this study is methodological, with possible extensions to related phenomena. Relative to the existing literature, the gains of this study rely on the way econometric techniques, recently proposed in the literature, are adapted to the economic relationship of interest. The endogeneity due to the existence of reverse causality is modelled without implying relevant performance losses of the models. Moreover, this is the first article that questions whether the effects of fiscal budget on productivity depend on the impact of the former on aggregate output growth, thus emphasising the importance of the quality of fiscal adjustments.

FOREIGN DIRECT INVESTMENT, INFORMATION TECHNOLOGY, AND TOTAL FACTOR PRODUCTIVITY DYNAMICS IN SUB-SAHARAN AFRICA

The potential for information technology penetration in sub-Saharan Africa (SSA) is very high compared to other regions. Unfortunately, productivity levels in the area are also deficient. This study investigates the importance of information technology in influencing the effect of foreign direct investment (FDI) on total factor productivity (TFP) dynamics. The focus is on 25 countries in SSA. Information technology is measured with mobile phone and internet penetration, while the engaged TFP productivity dynamics are TFP, real TFP, welfare TFP, and real welfare TFP. The empirical evidence is based on the Generalized Method of Moments. The findings show that except regressions about real TFP growth for which the estimations do not pass post-estimation diagnostic tests, it is apparent that information technology modulates FDI to positively influence TFP dynamics (i.e., TFP, welfare TFP, and welfare real TFP). Policy and theoretical implications are discussed.

What is the State of Groundnut Production in India? Uncovering the Productivity and TFP Dynamics of the Major Oilseeds: Evidence from Andhra Pradesh, India

The purpose of this research is to examine the variations in productivity and the trends of Total Factor Productivity (TFP) of the major oilseeds grown in the state of Andhra Pradesh, with a focus on Groundnut. The study utilizes secondary data sources, including the National Statistical Office (NSO) and India Stat, to analyze and interpret the data using descriptive statistics, One-Factor ANOVA analysis, and TFP calculations. The findings of the study indicate that Groundnut has been one of the highest yielding oilseeds in Andhra Pradesh and has exhibited positive trends in TFP over the past two decades, specifically highlighting the years 2009-2010, 2019-2020, and 2020-2021, during which the TFP of Groundnut was particularly high, reflecting an increase in production efficiency. This research provides a comprehensive examination of the productivity of oilseeds in Andhra Pradesh and sheds light on the significance of Groundnut in the state's oilseed production, offering valuable insights into the trends of TFP in Groundnut production and the importance of continuing to monitor and improve efficiency in the sector.

Sustainable Growth, Growth Potential : Tendencies of Potential Growth in the European Union

In economic terms, growth theory is an essential dimension of sustainability. The structurally sustainable performance of an economy, that is the sustainable (equilibrium) level of output is expressed in terms of potential output, and its sustainable dynamics in terms of growth potential. In the EU Member States the main structural determinant of potential growth is the dynamics of total factor productivity (TFP). In this respect the level and dynamics of performance vary greatly across the EU. Narrowing the performance gaps compared to the leading economies through major structural reforms can be a crucial factor in strengthening the growth potential. This paper reviews the fundamental correlations for Europe’s growth potential based on quantitative analyses carried out within the referred theoretical framework. Analysing the determinants of growth potential can help justify the inevitable structural reforms and macroeconomic adjustments, and can thereby contribute to the development of an economic theory of sustainability.

Совокупная факторная производительность в сельском хозяйстве регионов России

The Russian agricultural sector needs to improve production technologies, increase the share of high added value products in the structure of production, reduce unit costs, improve labour efficiency, and implement effective management innovations. Issues of unit cost reduction deserve special consideration. In this regard, the present study examines the development of the agricultural sector by using an indicator of total factor productivity (TFP) as a measure of efficiency. The article aims to determine the differentiation of Russian regions by TFP based on the author’s assessment methodology. An analysis of TFP dynamics revealed some regions that achieved indicators exceeding the national average, as well as leading and lagging regions. The highest total factor productivity growth in 2011–2020 was observed in Pskov, Penza, Oryol, Ryazan oblasts, Kamchatka krai, etc. The average Russian value of this indicator is characteristic of Sverdlovsk and Astrakhan oblasts. Tyumen and Sakhalin oblasts, Primorsky and Stavropol krais, the Republic of Karelia, Chelyabinsk oblast, Jewish Autonomous oblast, Chukotka Autonomous okrug, and the Republic of Ingushetia are in the group of lagging regions. Factors contributing to Russia’s long-term agricultural growth include effective investment, technological progress, and growing TFP rates. An increase in farmers’ demand for advanced technologies necessary for market share maintenance and survival can be a driver of innovative development. However, if major innovations are poorly implemented, high growth rate of total factor productivity is difficult to sustain; it will gradually decline as the quality of innovation activities decreases.

The role of value added across economic sectors in modulating the effects of FDI on TFP and economic growth dynamics

PurposeThis study investigates (1) the effect of foreign direct investment (FDI) on total factor productivity (TFP) and economic growth dynamics and (2) the relevance of value added from three economic sectors in modulating the established effect of FDI on TFP and economic growth dynamics.Design/methodology/approachThe geographical and temporal scopes are respectively 25 Sub-Saharan African countries and the period 1980–2014. The empirical evidence is based on non-interactive and interactive generalised method of moments.FindingsThe following main findings are established. First, FDI has a positive effect on gross domestic product (GDP) growth, GDP per capita and welfare real TFP. Second, the effect of FDI is negative on real GDP and TFP while the impact is insignificant on real TFP growth and welfare TFP. Third, values added to the three economic sectors largely modulate FDI to produce negative net effects on TFP and growth dynamics.Practical implicationsPolicy implications are discussed with particular emphasis on the need to complement added value across various economic sectors in order to leverage on the benefits of FDI in TFP and economic growth.Originality/valueTo the best of the authors’ knowledge, this is the first study to assess how value added from various economic sectors affect the relevance of FDI on macroeconomic outcomes.

Foreign Direct Investment, Information Technology and Total Factor Productivity Dynamics in Sub-Saharan Africa

Foreign Direct Investment, Information Technology and Total Factor Productivity Dynamics in Sub-Saharan Africa

Firm productivity gains in a period of slow trade liberalization: evidence from Brazil.

Existing literature recognizes the possible role of trade policy and firms’ exposure to international trade as determinants of productivity. A strand of the literature sheds light on the effects of trade policy changes on firm-level productivity. Another strand studies the relationship between firms’ trade status (exporting production or importing intermediates, but usually not both simultaneously) and firm-level TFP dynamics. However, the analyses that integrate both strands are scarce. This paper aims to disentangle the impact of input and output tariffs on firms’ productivity. Further, it analyses whether the impact of changes in tariffs is conditioned by the trade status of the firm (exporting and/or importing). At difference to most previous papers, we carry out our analysis for a large developing country in a period of slow trade liberalization. Thus, in the empirical part, we use data from firms belonging to Brazilian industrial sectors (manufacturing and mining) during 2000–2008. After estimating total factor productivity (TFP) at the firm level using updated methodologies, we estimate both the impact of trade policy and firms’ trade status on TFP dynamics. Our results suggest that trade liberalization (through reductions in input or output tariffs) increases TFP, being the effect associated to a reduction in input tariffs greater. Furthermore, the impact of trade policy on TFP spreads among all firms, which could be consistent with the existence of spillovers from trading firms to non-trading firms or with the notion that trade liberalization exerts competitive pressure on all firms, regardless of their initial exposure to international trade. Finally, we also find evidence of a positive effect of both the import and export statuses on TFP.

Asymmetries in the euro area and TFP growth: evidence from three major European economies

PurposeIn this paper, the authors study the long-run determinants of total factor productivity (TFP) in three major European economies over the period 1983–2017, namely Germany, France and Italy.Design/methodology/approachThe authors focus on the capital misallocation effects, scale effects and labor misallocation effects. To this end, the authors study how real interest rate shocks, real exchange rate shocks, real wage shocks and changes in labor regulation affected TFP in major European countries over the last decades. The authors employ a theoretical and an empirical model to investigate the issue. The empirical results are obtained using a VAR model for estimation.FindingsA stripped-down model of labor market in open economy with technology progress allows to identify the relevant variables affecting TFP. On the empirical ground, the authors find a positive relationship between TFP and real interest rate in the long run. Importantly, the authors detect a positive relationship between TFP and real exchange rate. Further, the authors show that the TFP can respond positively to a stricter labor market regulation and to a higher real compensation per employee. The results provide support to the idea that TFP has a positive relation with prices in the long run, while it may be biased along the cycle because of price rigidity.Research limitations/implicationsThe present model is stylized and may not capture all of the details of reality. The analysis should be extended to a larger number of countries. Technology progress could be proxied using different variables, as the R&D expenditure or the number of patents. Micro data, for specific sectors and industries, can improve the quality of the empirical investigation.Practical implicationsMainly the authors find that TFP has a positive relationship with price changes in the long run, while it may be biased along the cycle because of price stickiness. Capital misallocation and labor misallocation can negatively affect TFP. Thus, the observed divergences in European TFP can be traced back to the misallocation effects attributable to the decrease of real interest rate and real wages, together with the raising labor flexibility. Mainly, the authors detect a positive long-run relationship between TFP and real exchange rate. This outcome strengthens the supply-side view of the relationship between productivity and real exchange rate.Social implicationsThe authors believe that the present setup can be helpful to reflect critically on the nodes at the core of the productivity slowdown and asymmetries in the eurozone. The aim is to implement renewed policies in order to favor economic growth, convergence and stability in the euro area.Originality/valueThis research addresses the issue of asymmetries among European economies by focusing on the role played by real prices in the long run. Traditionally, the dynamics of TFP have been attributed only to technological components, human capital and knowledge. This work shows that the dynamics of prices such as the real interest rate, the real exchange rate and the real wage can also influence the technological process by pushing the production system toward choices that are not always optimal for economic growth. An interesting result of this research concerns the positive relationship between real exchange rates and TFP in the long term, evidence of an important supply-side effect on the technological process.

LONG‐RUN FACTOR ACCUMULATION AND PRODUCTIVITY TRENDS IN ITALY

AbstractIn this article, we employ a novel historical reconstruction of labour and capital stock data since 1861 in order to reassess the proximate causes of Italy's economic development in a historical perspective. Amongst many new findings, our estimates slightly reduce the role of industry in Italy's first growth spurt at the beginning of the 20th century and amplify the severity of the Great Depression years relative to the existing literature. In general, Italy's post‐unification development was hindered by the large size of its poorly productive primary sector and by sluggish total factor productivity (TFP); expanding manufacturing and strong TFP dynamics were instead the main drivers of the country's impressive post‐World War II growth spurt. The disappointing performance of the Italian economy since 1993 is explained largely by slow labour productivity dynamics in the now dominant services sector and, more generally, by weak aggregate TFP growth and subdued capital accumulation.

Enhancing ICT for productivity in sub-Saharan Africa: Thresholds for complementary policies

The purpose of this research is to investigate the relevance of enhancing information and communication technology (ICT) on dynamics of total factor productivity (TFP) in 25 sub-Saharan African countries using data covering the period 1980–2014. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, while enhancing ICT overwhelmingly has net positive effects on productivity, the corresponding marginal effects are negative. Second, an extended analysis is performed to establish thresholds for complementary policies. These thresholds are: 100% mobile phone penetration for TFP; between 101.214% and 101.419% mobile phone penetration for welfare TFP and 15% internet penetration for welfare real TFP. It follows that approximately 100% mobile penetration and 15% internet penetration are thresholds at which ICT should be complemented with other macroeconomic policies for favorable outcomes on productivity dynamics. Other policy implications are discussed.

On the simultaneous openness hypothesis: FDI, trade and TFP dynamics in Sub-Saharan Africa

This study assesses the simultaneous openness hypothesis that trade modulates foreign direct investment (FDI) to induce positive net effects on total factor productivity (TFP) dynamics. Twenty-five countries in Sub-Saharan Africa and data for the period 1980 to 2014 are used. The empirical evidence is based on the Generalized Method of Moments. First, trade imports modulate FDI to overwhelmingly induce positive net effects on TFP, real TFP growth, welfare TFP and real welfare TFP. Second, with exceptions on TFP and welfare TFP where net effects are both positive and negative, trade exports modulate FDI to overwhelmingly induce positive net effects on real TFP growth and welfare real TFP. In summary, the tested hypothesis is valid for the most part. Policy implications are discussed.

Financial Access and Productivity Dynamics in Sub-Saharan Africa

ABSTRACT The purpose of this study is to investigate whether enhancing financial access influences productivity in Sub-Saharan Africa. The research focuses on 25 countries in the region with data for the period 1980–2014. The adopted empirical strategy is the Generalised Method of Moments. The credit channel of financial access is considered and proxied by private domestic credit while four main total factor productivity (TFP) dynamics are adopted for the study, namely: TFP, real TFP, welfare TFP and real welfare TFP. It is apparent from the findings that enhancing financial access positively affects welfare TFP whereas the effect is not significant on TFP, real TFP and welfare TFP. Policy implications are discussed. The study complements the extant literature by engaging hitherto unemployed dynamics of TFP in Sub-Saharan Africa.

The Drivers of the Total Factor Productivity

The Total Factor Productivity (TFP) is now widely recognized as an important factor in both long-term economic growth and short-term growth fluctuations. Researchers of the International Monetary Fund came to the conclusion that the growth of the TFP was the most important long-term factor in raising the living standards. Therefore, the IMF and academics from different countries has been scrutinizing the reasons for the slowdown in TFP and investigating the underlying factors. The low rates of GDP grow in Ukraine call for finding the drivers, one of which is TFP growth. It raises the importance of analysis of the factors promoting this growth in Ukraine. 
 The purpose of this work is to define TFP drivers, which would be most effective for Ukraine. TFP drivers in foreign countries are analyzed, TFP dynamics for Ukraine is calculated by use of Solow model, and TFP drivers over 2000–2017 are determined. 
 The analysis of publications about TFP drivers at global level shows that they include: international transfer of knowledge and technologies, activities of small innovative fast-growing firms, the enhanced quality of quality of education, the increased expenditures on R&D and innovations, especially by business sector, the increased investments in intangible assets, the intensified patent activity, access of enterprises to lending.
 The TFP dynamics in Ukraine, calculated by the Solow model, is characterized by high growth rates by 2012, a sharp fall in 2013-2015, and a return to the growth path in 2016-2017, but, as in the whole world, by very moderate pace. The factors contributing to this return are capital investment in intangible assets, the increasing patent activity of Ukrainian researchers, the intensified innovation in the high-tech sector. Factors constraining the TFP and the contribution of innovation to economic growth are a significant proportion of technology transfer in the form of “know-how, agreements for the acquisition (transfer) of technologies”, which holds back the widespread introduction of cutting-edge technologies, and the reduction of funding for R&D and innovation.
 Further studies should be focused on searching for political decisions promoting implementation of structural reforms aimed to solve the existing problems and eliminate their consequences, especially in of the innovation and education field.

Real Exchange Rate and Competitiveness of National Economy

The article presents the results of empirical investigation devoted to assessing the degree of impact of real exchange rate on economic growth and the dynamics of total factor productivity for various groups of countries, including the CIS countries, countries exporting raw materials, developing countries targeting inflation, in the period 1990-2017 years, using the system generalized method of moments.

Downstream electric utility restructuring and upstream generation efficiency: Productivity dynamics of Indian coal and gas based electricity generators

This paper investigates the producer-level temporal dynamics of total factor productivity and operational performance changes in coal- and gas-based generators during the 2000–20013 period of major structural reforms in the downstream utilities in India. The total factor productivity is estimated using a recently developed improvement in the Stochastic Frontier panel method that controls for time-invariant unobserved heterogeneity, and the productivity change is decomposed into components of changes in technology frontier, efficiency, scale and allocation. A unique dataset of station-level data for coal and gas plants, that represents about two-thirds of all power generation in India during this period, is constructed for the analysis. The study shows that while there is improvement in the coal generator productivity at the mean rate of 0.20% per year that converges towards a point of higher efficiency for most plants, the gas generators show a trend of stagnant efficiency and declining total factor productivity at the mean rate of −0.80% per year. Unbundling and multi-dimensional utility reform indices are significantly associated with improvement in thermal efficiency and capacity utilization for coal generators. In contrast, utility reforms shows no significant positive influence on gas generators, instead a decline in capacity utilization is observed following unbundling.

Financial Access and Productivity Dynamics in Sub-Saharan Africa

The purpose of this study is to investigate whether enhancing financial access influences productivity in Sub-Saharan Africa. The research focuses on 25 countries in the region with data for the period 1980-2014. The adopted empirical strategy is the Generalised Method of Moments. The credit channel of financial access is considered and proxied by private domestic credit while four main total factor productivity (TFP) dynamics are adopted for the study, namely: TFP, real TFP, welfare TFP and real welfare TFP. It is apparent from the findings that enhancing financial access positively affects welfare TFP whereas the effect is not significant on TFP, real TFP and welfare TFP. Policy implications are discussed. The study complements the extant literature by engaging hitherto unemployed dynamics of TFP in Sub-Saharan Africa.

Łączna produktywność czynników produkcji (TFP) i jej zróżnicowanie w krajach członkowskich Unii Europejskiej

Łączna produktywność czynników produkcji (Total Factor Productivity – TFP) jest syntetycznym miernikiem efektywności procesu produkcyjnego w kraju, wynikającej z postępu technicznego. Celem artykułu jest oszacowanie (za pomocą metod ekonometrycznych) poziomu i dynamiki TFP w poszczególnych krajach Unii Europejskiej w latach 2000–2014 oraz wskazanie kierunku zmian jej zróżnicowania w analizowanej grupie krajów. W artykule podejmuje się także próbę odpowiedzi na pytanie, czy w krajach Unii Europejskiej możliwa jest konwergencja produktywności, mająca istotny wpływ na ich proces konwergencji realnej.

Business investment in EU countries

The article analyses recent developments in business investment for a large group of EU countries, using a broad set of analytical tools and data sources. We find that the assessment of whether or not investment is currently low varies across benchmarks and countries. At the euro area level and for most countries, the level of business investment is broadly in line with the level of overall activity. However rates of capital stock growth have slowed down since the crisis. The main cyclical determinants of investment developments in the euro area include foreign and domestic demand, uncertainty and financial conditions. Uncertainty seems to have played a negative role during the financial and sovereign debt crises; however, given its low levels more recently, it has not acted as a drag on business investment overall during the recovery. Credit constraints appear to have hindered investment during the twin crises, especially in stressed countries. Aside from cyclical developments, important secular factors – relating to demographics, the changing nature and location of production, and the business environment – have influenced investment. Another factor that may have amplified the decline in private investment, particularly in countries that were hit hardest by the sovereign debt crisis, is the low level of public investment. This is because when public investment enhances the productivity of the private sector, there may be positive spillovers from the former to the latter, including across countries. Finally, intra-sector capital misallocation, measured as the within-sector dispersion across firms in the marginal revenue product of capital, has been increasing in Europe since 2002, which may in turn have exerted a significant drag on total factor productivity dynamics, and hence on aggregate output growth. JEL Classification: E32, E52, E62, D24, D61