Explaining Productivity Growth Research Articles

Is the most unproductive firm the foundation of the most efficient economy? Penrosian learning confronts the neoclassical fallacy

ABSTRACT Edith Penrose’s The Theory of the Growth of the Firm provides an intellectual foundation for a theory of innovative enterprise, which is essential to any attempt to explain productivity growth, employment opportunity, and income distribution. Penrose’s theory of the firm is also an antidote to the absurdity that has been taught by PhD economists to millions of college students for over seven decades: the most unproductive firm is the foundation of the most efficient economy. The dissemination of this ‘neoclassical fallacy’ to a mass audience began with Paul A. Samuelson’s textbook, Economics: An Introductory Analysis, first published in 1948. Over the decades, the neoclassical fallacy has persisted through 18 revisions of Samuelson, Economics and in its countless ‘economics principles’ clones. This essay challenges the intellectual hegemony of neoclassical economics by exposing the illogic of its foundational assumptions about how a modern economy operates and performs. To get beyond the neoclassical fallacy, economists must be trained in a ‘historical transformation’ methodology that integrates history and theory. It is a methodology in which theory serves as both a distillation of what we have learned from the study of history and a guide to what we need to learn about reality as the ‘present as history’ unfolds.

Production environment and managerial techniques in explaining productivity growth in Brazilian beef cattle production

AbstractBrazil is a key player in the global beef markets having generated 15% of global production, and approximately 20% of world exports in 2018. Productivity improvements will be indispensable if the Brazilian beef sector wants to maintain its position as a key player in both the domestic and international markets. In light of the aforementioned, this study makes two key contributions to the agricultural productivity literature on Brazil. First, it estimates the production technology used in the Brazilian beef cattle sector using stochastic production frontier methods that account for exogenous factors that impact the production environment. Second, using the estimated coefficients as weights, it decomposes a total factor productivity (TFP) index that tracks various sources of productivity growth including: technical efficiency, technological change, scale efficiency, and environmental efficiency. By utilizing farm‐level data this study generates deeper insights into the dynamics driving beef cattle production at the most disaggregated level. Results indicate that TFP growth averaged 1.73% per annum and was primarily driven by scale efficiency, which increased at 1.39%. Meanwhile, technical efficiency declined at a rate of −0.03% per annum. [EconLit Citations: D24, O13, Q15].

Kaldor–Verdoorn’s law and institutions: evidence from Brazilian municipalities

Abstract Recent works on economic growth stress the importance of institutions as the main determinant of productivity growth. Yet, this literature disregards the effects of demand growth on productivity growth, as suggested by Kaldor–Verdoorn’s law. The objective of this paper was to test the direct and indirect impacts of institutions on productivity growth, controlling for human and physical capital, as well as for demand growth. Tests were performed for Brazilian municipalities and two measures of institutions were explored. Instrumental variables were used to cope with the endogeneity between economic performance and institutions. The regression results suggest that both supply-side factors and demand growth are important to explain productivity growth. Most importantly, by considering the interaction between demand growth and institutions, the results indicate that in municipalities with inclusive institutions and higher human capital, productivity growth responds more strongly to demand growth.

Measuring and explaining productivity growth of renewable energy producers: An empirical study of Austrian biogas plants

This study explores productivity growth of 65 Austrian biogas plants from 2006 to 2014 using Data Envelopment Analysis. Productivity growth is measured by calculating the Malmquist productivity index, and the contributions of technical change, efficiency change, and scale change to productivity growth are isolated. The results reveal that the average annual productivity growth between 2006 and 2014 is 1.1%. The decomposition of the Malmquist productivity index shows that the annual scale change, technical change, and efficiency change for the average plant is 0.6%, 0.3%, and 0.3%, respectively. These results indicate that the exploitation of returns to scale is a major driver of productivity growth and technical change is rather low. A second-stage regression analysis reveals that rising feedstock prices incentivized efficiency improvements but initial capital subsidies did not have an impact on technical change and productivity growth.

Is the Most Unproductive Firm the Foundation of the Most Efficient Economy? Penrosian Learning Confronts the Neoclassical Fallacy

Edith Penrose’s 1959 book The Theory of the Growth of the Firm [TGF] provides intellectual foundations for a theory of innovative enterprise, which is essential to any attempt to explain productivity growth, employment opportunity, and income distribution. Properly understood, Penrose’s theory of the firm is also an antidote to the deception that is foundational to neoclassical economics: The theory, taught by PhD economists to millions upon millions of college students for over seven decades, that the most unproductive firm is the foundation of the most efficient economy. The dissemination of this “neoclassical fallacy” to a mass audience of college students began with Paul A. Samuelson’s textbook, Economics: An Introductory Analysis, first published in 1948. Over the decades, the neoclassical fallacy has persisted through 18 revisions of Samuelson, Economics and in its countless “economics principles” clones. This essay challenges the intellectual hegemony of neoclassical economics by exposing the illogic of its foundational assumptions about how a modern economy functions and performs. The neoclassical fallacy gained popularity in the 1950s, during which decade Samuelson revised Economics three times. Meanwhile, Penrose derived the logic of organizational learning that she lays out in TGF from the facts of firm growth, absorbing what was known in the 1950s about the large corporations that had come to dominate the U.S. economy. Also, during that decade, the knowledge base on the growth of firms on which economists could subsequently draw was undergoing an intellectual revolution, led by the business historian, Alfred D. Chandler, Jr. He was engaged in the first stage of a career that would span more than a half century, during which Chandler documented and analyzed the centrality to U.S economic development of what he would come to call “the managerial revolution in American business.” In combination, the works of Penrose and Chandler form intellectual foundations for my own work on the Theory of Innovative Enterprise—an endeavor that has enabled me, as an economist, to recognize not only the profound importance of organizational learning for economic theory but also the illogic of the neoclassical theory of the firm for our understanding of the central institution of a modern economy, the business corporation. In this essay, I argue that the key characteristic of the innovative enterprise is fixed-cost investment in the productive capabilities of the company’s employees to engage in organizational learning. The purpose of this investment in organizational learning is to develop a higher-quality product than was previously available. When successful, the development of the higher-quality product enables the firm to capture a large extent of the market, transforming high fixed cost into low unit cost. The result is sustainable competitive advantage that enables the growth of the firm, contributing to the growth of the economy as a whole. I argue that to get beyond the neoclassical fallacy, economists have to stop relying on constrained-optimization methodology. Rather, they need to be trained in a “historical transformation” methodology that integrates history and theory. It is a methodology in which theory serves as both a distillation of what we have learned from the study of history and a guide to what we need to learn about reality as the “present as history” unfolds.

Using panel VAR to analyze international knowledge spillovers

AbstractTechnology diffusion often plays a critical role in models of trade and economic growth. Most existing empirical tests for international technology spillovers suggest some role for spillovers in explaining productivity growth. It has been relatively difficult, however, to identify separate roles for the direct and indirect channels of knowledge spillovers. The influence of these channels is often confounded owing to the focus on total‐factor productivity (TFP) and R&D spending within a cross‐section or panel data setting. This paper employs an alternative methodology to investigate the role of direct knowledge spillovers. Using citation‐weighted domestic patents, citation‐weighted foreign patents and value added for 14 U.S. manufacturing industries over the period 1977 to 2004 a panel VAR methodology is employed to investigate the dynamic role of direct and indirect knowledge spillovers. Evidence for the role of the direct knowledge spillovers channel is found—an increase in citation‐weighted patents abroad directly increases the measure of domestic citation‐weighted patents, after accounting for the influence of productivity/value added. The role of foreign innovative activity, however, is small relative to the role of U.S. innovative activity in explaining the dynamics of industry value added.

Measuring and Explaining Productivity Growth in South African Agriculture

Measuring and Explaining Productivity Growth in South African Agriculture

Does Interpersonal Trust Increase Productivity? An Empirical Analysis between an within Countries

A large number of studies show mixed results concerning the macro-economic significance of interpersonal trust. This study suggests that the dominant framework previously used, Barro-type growth regressions, is not adequate. Instead, this study uses the Solow productivity framework to study the effect of trust. Three effects are recognized. The effect of trust on (i) labor (where trust reduces principal-agent problems related to asymmetric information), (ii) capital (where trust facilitates access to the embedded resources in networks of agents,) and (iii) the quality of institutions (which is affected by trust through the absence of bureaucratic rules, corruption or excessive rent-seeking). To empirically test the sign and significance of the economic effect of trust, the study relates the share of high-trust individuals per country to the between-country level and within-country growth of total factor productivity from the Solow model. Cross-sectionally, the study shows that high-trust countries on average have higher levels of productivity. Longitudinally, the results show that an increase in trust is positively related to the growth of productivity in the last two decades (where t1=1990-1999, and t2=2000-2008). However, this relationship only significantly explains productivity growth for developed countries (OECD). This finding suggests that the economic effect of trust may be dependent on within-country development characteristics. Potentially, this explains why there exists such large variations in the literature dealing with the economic significance of interpersonal trust.

Determinants of Iran's Total Factor Productivity promotion

Our main purpose in this paper is, regard to the planned horizon for Iran's economy productivity according to Vision Document, the Fourth Development plan, and performance of the country in the Third Development plan, to show in the examined years, what factors could explain changes in Total Factor Productivity (TFP). Using ARDL technic, estimation of determinants of TFP shows institutional quality, accumulation of domestic and foreign R&D, human capital, economic openness, physical capital accumulation, investment in ICT, exchange rate, and inflation are factors that explain productivity growth trend in study period.

What Explains the Productivity Decline in Manufacturing in the Nineties in India?

This paper uses the data envelopment analysis (DEA) based Malmquist productivity index to estimate total factor productivity growth (TFPG), technical change, and efficiency change for a panel of firms during the period 1991 to 2001 in 26 Indian manufacturing industries. The paper then analyses the factors explaining productivity growth, technical change and efficiency change using a Tobit regression for each industry. The results reveal that TFPG declined for all the sectors during the period. The most significant factor affecting efficiency change, technical change and productivity growth is RD intensity, either recurring or capital: this variable is significant in sixteen industries. Vintage of capital is significant in eight of the industries. Exports intensity and imports of capital intensity are significant in four industries.

Disease and Development: A Reply to Bloom, Canning, and Fink

Previous articleNext article No AccessDisease and Development: A Reply to Bloom, Canning, and FinkDaron Acemoglu and Simon JohnsonDaron AcemogluMassachusetts Institute of Technology Search for more articles by this author and Simon JohnsonMassachusetts Institute of Technology Search for more articles by this author PDFPDF PLUSFull TextSupplemental Material Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 122, Number 6December 2014 Article DOIhttps://doi.org/10.1086/677190 Views: 799Total views on this site Citations: 25Citations are reported from Crossref © 2014 by The University of Chicago. All rights reserved.PDF download Crossref reports the following articles citing this article:Leah Bevis, Kichan Kim, David Guerena Soil zinc deficiency and child stunting: Evidence from Nepal, Journal of Health Economics 53 (Oct 2022): 102691.https://doi.org/10.1016/j.jhealeco.2022.102691Koichi Futagami, Miho Sunaga Risk aversion and longevity in an overlapping generations model, Journal of Macroeconomics 72 (Jun 2022): 103415.https://doi.org/10.1016/j.jmacro.2022.103415Rainer Kotschy Health improvements impact income inequality, The Journal of the Economics of Ageing 22 (Jun 2022): 100385.https://doi.org/10.1016/j.jeoa.2022.100385Masagus M. Ridhwan, Peter Nijkamp, Affandi Ismail, Luthfi M.Irsyad The effect of health on economic growth: a meta-regression analysis, Empirical Economics 122 (Apr 2022).https://doi.org/10.1007/s00181-022-02226-4Lei He, Zhengqi Wang The interaction effects of rising life expectancy and the public pension burden on aggregate savings and economic growth, Portuguese Economic Journal 115 (Mar 2022).https://doi.org/10.1007/s10258-022-00208-zMehmet Top, Songul Cinaroglu Cluster analysis of health systems in Europe according to life expectancy at birth, The International Journal of Health Planning and Management 36, no.66 (Jul 2021): 2162–2181.https://doi.org/10.1002/hpm.3283Maria Kuecken, Josselin Thuilliez, Marie-Anne Valfort Disease and Human Capital Accumulation: Evidence from the Roll Back Malaria Partnership in Africa, The Economic Journal 131, no.637637 (Dec 2020): 2171–2202.https://doi.org/10.1093/ej/ueaa134Alistair Dieppe, Atsushi Kawamoto, Yoki Okawa, Cedric Okou, Jonathan Temple What Explains Productivity Growth, (Jun 2021): 39–96.https://doi.org/10.1596/978-1-4648-1608-6_ch2Rainer Kotschy Health dynamics shape life-cycle incomes, Journal of Health Economics 75 (Jan 2021): 102398.https://doi.org/10.1016/j.jhealeco.2020.102398David E. Bloom, Simiao Chen, Michael Kuhn, Mark E. McGovern, Les Oxley, Klaus Prettner The economic burden of chronic diseases: Estimates and projections for China, Japan, and South Korea, The Journal of the Economics of Ageing 17 (Oct 2020): 100163.https://doi.org/10.1016/j.jeoa.2018.09.002Daron Acemoglu, Leopoldo Fergusson, Simon Johnson Population and Conflict, The Review of Economic Studies 87, no.44 (Aug 2019): 1565–1604.https://doi.org/10.1093/restud/rdz042Anna Tompsett The Lazarus drug: the impact of antiretroviral therapy on economic growth, Journal of Development Economics 143 (Mar 2020): 102409.https://doi.org/10.1016/j.jdeveco.2019.102409Sydney Chikalipah, Daniel Makina Economic growth and human development: Evidence from Zambia, Sustainable Development 27, no.66 (Apr 2019): 1023–1033.https://doi.org/10.1002/sd.1953Keiya Minamimura, Daishin Yasui From physical to human capital accumulation: Effects of mortality changes, Review of Economic Dynamics 34 (Oct 2019): 103–120.https://doi.org/10.1016/j.red.2019.03.005Dierk Herzer, Korbinian Nagel The impact of adult and non-adult mortality on development: Two centuries evidence from a panel of industrial countries, Journal of Policy Modeling 41, no.22 (Mar 2019): 352–371.https://doi.org/10.1016/j.jpolmod.2019.02.008Sydney Chikalipah, Godwin Okafor Dynamic Linkage Between Economic Growth and Human Development: Time Series Evidence from Nigeria, Journal of International Development 31, no.11 (Sep 2018): 22–38.https://doi.org/10.1002/jid.3390Agnieszka Gehringer, Klaus Prettner , Macroeconomic Dynamics 23, no.44 ( 2019): 1471.https://doi.org/10.1017/S1365100517000293Xiaobing Zhao, Mason Gerety, Nicolai V. Kuminoff Revisiting the temperature-economic growth relationship using global subnational data, Journal of Environmental Management 223 (Oct 2018): 537–544.https://doi.org/10.1016/j.jenvman.2018.06.022Daniel Gallardo-Albarrán Health and economic development since 1900, Economics & Human Biology 31 (Sep 2018): 228–237.https://doi.org/10.1016/j.ehb.2018.08.009Casper Worm Hansen, Holger Strulik Life expectancy and education: evidence from the cardiovascular revolution, Journal of Economic Growth 22, no.44 (Sep 2017): 421–450.https://doi.org/10.1007/s10887-017-9147-xJudith Kabajulizi, Marcus R Keogh-Brown, Richard D Smith The welfare implications of public healthcare financing: a macro–micro simulation analysis of Uganda, Health Policy and Planning 32, no.1010 (Oct 2017): 1437–1448.https://doi.org/10.1093/heapol/czx125Daron Acemoglu, Leopoldo Fergusson, Simon Johnson Population and Civil War, SSRN Electronic Journal (Jan 2017).https://doi.org/10.2139/ssrn.2947307Thomas J. Hyclak, Christopher L. Skeels, Larry W. Taylor The cardiovascular revolution and economic performance in the OECD countries, Journal of Macroeconomics 50 (Dec 2016): 114–125.https://doi.org/10.1016/j.jmacro.2016.09.005Marcello Basili, Filippo Belloc HOW TO MEASURE THE ECONOMIC IMPACT OF VECTOR-BORNE DISEASES AT COUNTRY LEVEL, Journal of Economic Surveys 29, no.55 (Jul 2014): 896–916.https://doi.org/10.1111/joes.12075Casper Worm Hansen, Lars Lønstrup The Rise in Life Expectancy and Economic Growth in the 20th Century, The Economic Journal 125, no.584584 (May 2015): 838–852.https://doi.org/10.1111/ecoj.12261

Kaldor-Verdoorn's law and increasing returns to scale

Purpose – The aim of this study is to investigate the validity of the Kaldor-Verdoorn's law in explaining the long-run determinants of the labor productivity growth for the manufacturing sector of some developed economies (Western European Countries, Australia, Canada, Japan and the USA). Design/methodology/approach – The authors consider the period 1973-2006 using data provided by the European Commission – Economics and Financial Affairs. The method is instrumental variable. The robustness of estimates is checked by means of the Chow and the CUSUM and CUSUMQ tests. The authors consider the traditional specification of the dynamic Verdoorn law and the one which also includes investment to output ratio (I/Y), as a proxy of the capital growth rate, and the average labor cost growth, as a proxy of supply factors. Findings – The findings suggest that the law is valid for the manufacturing as countries show increasing returns to scale. Capital growth and labor cost growth do not appear important in explaining productivity growth. The estimated Verdoorn coefficients are found to be substantially stable throughout the period. Originality/value – The authors consider the most recent years, which has been characterized by a constant decline in the average GDP growth rates; a productivity growth decline; the long-term reduction in the manufacturing share of total employment. The authors examine the importance of alternative hypotheses such as those related to the existence of supply constraints. The authors check the stability of the KVL throughout the period under the consideration and across countries. The authors evaluate whether, in the case of the developed countries, economies of scale are significant.

Big Data Investment, Skills, and Firm Value

This paper analyzes how labor market factors have shaped early returns on big data investment using a new data source—the LinkedIn skills database. The data source enables firm-level measurement of the employment of workers with technical skills such as Hadoop, MapReduce, and Apache Pig. From 2006 to 2011, Hadoop investments were associated with 3% faster productivity growth, but only for firms (a) with significant data assets and (b) in labor markets where similar investments by other firms helped to facilitate the development of a cadre of workers with complementary technical skills. The benefits of labor market concentration decline for investments in mature data technologies, such as Structured Query Language-based databases, for which the complementary skills can be acquired by workers through universities or other channels. These findings underscore the importance of geography, corporate investment, and skill acquisition channels for explaining productivity growth differences during the spread of new information technology innovations. This paper was accepted by Alok Gupta, special issue on business analytics.

Kaldor-Verdoorn's Law and Increasing Returns to Scale: A Comparison Across Developed Countries

The objective of this study is to investigate the validity of the Kaldor-Verdoorn’s Law in explaining the long run determinants of the labor productivity growth for the manufacturing sector of some developed economies (Western European Countries, Australia, Canada, Japan and United States). We consider the period 1973-2006 using data provided by the European Commission - Economics and Financial Affairs. Our findings suggest that the law is valid for the manufacturing as countries show increasing returns to scale. Capital growth and labor cost growth do not appear important in explaining productivity growth. The estimated Verdoorn coefficients are found to be substantially stable throughout the period.

Agricultural innovations for sustainable crop production intensification

Sustainable crop production intensification should be the first strategic objective of innovative agronomic research for the next 40 years. A range of options exist (often very location specific) for farming practices, approaches and technologies that ensure sustainability, while at the same time improving crop production. The main challenge is to encourage farmers in the use of appropriate technologies,  and  to  ensure that  knowledge  about  sound  production  practices  is  increasingly accepted and applied by farmers. There is a huge, but underutilized potential to link farmers’ local knowledge with science-based innovations, through favourable institutional arrangements.  The same  holds  for  the  design,  implementation and  monitoring  of  improved  natural  resource management that links community initiatives to external  expertise.  It is also suggested that a comprehensive effort be undertaken to measure different stages of the innovation system, including technological adoption and diffusion at the farm level, and to investigate the impact of agricultural policies on technological change and technical efficiency. This paper provides a brief review of agronomic management practices that support sustainable crop production system and evidence on developments  in the selection of crops and cultivars; describes farming systems for crop which take a predominantly ecosystem approach; discusses the scientific application of ecosystem principles for the management of pest and weed populations; reviews the improvements in fertilizer and nutrient management that explain productivity growth; describes the benefits and constraints of irrigation technologies; and suggests a way forward. Seven changes in the context for agricultural development are proposed that heighten the need to examine how innovation occurs in the agricultural sector.

The Role of Labor-Market Changes in the Slowdown of European Productivity Growth

Throughout the post-war era until 1995 labour productivity grew faster in Europe than in the United States. Since 1995, productivity growth in the EU-15 has slowed while that in the United States has accelerated. But Europe's productivity growth slowdown was largely offset by faster growth in employment per capita, leaving little difference in growth of output per capita between the EU and US going back to 1980. This paper is about the strong negative trade-off between productivity and employment growth within Europe. We document this trade-off in the raw data, in regressions that control for the two-way causation between productivity and employment growth, and we show that there is a robust negative correlation between productivity and employment growth across countries and time. Our primary explanatory variables to explain both the revival of EU employment growth and the slowdown in productivity growth include six policy and institutional variables. We find that several of these variables have significant negative effects on employment per capita, with policy changes that raised labour costs reducing employment both before and after 1995. These variables, together with employment per capita, are then used to explain productivity growth, using several alternative treatments with instrumental variables. We also find a significant time effect, and we link this to an increase in labour force participation by women, particularly in southern European countries. We find that the negative effect of changes in employment per capita on changes in productivity is robust to alternative instruments and to the inclusion or exclusion of particular countries like the US or Spain. We conclude by suggesting that evaluations of alternative policy reforms in Europe should take into account any offsetting effects on employment and productivity by examining the ultimate impact on changes in income per capita.

Productivity growth, trade and FDI nexus: evidence from the Canadian manufacturing sector

Using the confined exponential and logistic models of technology diffusion, this paper investigates the roles played by international trade and FDI in explaining productivity growth through both technology transfer and domestic innovation, with the technology transfer also occurring independently. Using panel data on Canadian manufacturing industries, we first find a robust role for the autonomous and international trade embodied technology transfer in explaining TFP growth. Second, international trade and FDI (as well as research and development) all contribute to productivity growth through the rate of innovation. Finally, we find that the exponential and logistic models of technology diffusion may have different implications for the growth dynamics in a technologically lagging country.

Liberalización comercial y crecimiento de la productividad: algunas lecciones del caso mexicano

Utilizando la más reciente metodología para explicar las diferencias en el crecimiento económico entre países (Barro, 1997), educación e infraestructura han sido consideradas como factores relevantes para explicar diferencias en el crecimiento de la productividad en las manufacturas urbanas mexicanas (De León, 1999). En este artículo se evalúa si ha habido un cambio en la relevancia de esta variable bajo liberalización comercial. En particular, se evaluó la hipótesis de que liberalización comercial promovería el crecimiento de la productividad en las manufacturas de las ciudades del norte mexicano como resultado de los efectos dinámicos del comercio, dado que estas ciudades están más cercanas al nuevo mercado central para las manufacturas mexicanas y quizás a la pérdida de relevancia en los factores de crecimiento previamente acumulados (Livas y Krugman, 1992; Hanson, 1994). En contraste a esta hipótesis, se observa que las manufacturas en ciudades cercanas a los Estados Unidos no mostraron un mejor desempeño productivo que el resto de las manufacturas en el resto de las ciudades y que factores de crecimiento previamente acumulados, como educación e infraestructura, son aún relevantes para explicar el crecimiento de la productividad entre las manufacturas urbanas mexicanas.

Demand and innovation in productivity growth

The labour productivity impact of demand and innovation is investigated in this paper combining insights from the Kaldorian and Schumpeterian traditions. After a review of studies in such traditions, a general model is proposed for explaining productivity growth in European manufacturing and service industries in the late 1990s, followed by two distinct specifications for the industries oriented toward product innovation, and for those where process innovation dominates. The empirical analysis is based on the match of the SIEPI‐CIS2 database developed at the University of Urbino and Eurostat Input–Output Tables at the industry level, for 22 manufacturing sectors and 10 services sectors. Six European countries are considered: Germany, France, Italy, the Netherlands, Portugal and the United Kingdom. The results show that productivity growth in European industries can be explained by a combination of technology factors and demand dynamics, confirming the complementarity of technology and demand effects. On the demand side, household consumption emerges as the most pervasive component of demand, able to stimulate greater efficiency in all manufacturing and service industries. Investment also has a role, focused however on the capital goods producing industries. On the technology side, the mechanisms of productivity growth are fundamentally different in the industries oriented towards product innovation and in those dominated by process innovation. This evidence supports the view that innovation in firms and industries can be associated to two contrasting strategies, searching either for technological competitiveness, through knowledge generation, product innovation and expansion of new markets, or aiming at greater cost competitiveness, through job reductions, labour saving investment, flexibility and restructuring.

Growth Accounting in Items of Turbulence and Death: Efficiency, Technology, Capital Accumulation and Human Capital 1929-1950

We employ a non-parametrical approach to growth accounting (Data Envelopment Analysis, DEA) to disentangle the proximate sources of labour productivity growth in 41 nations between 1929 and 1950 by decomposing productivity growth into four components: technological change; efficiency catch-up (movements towards the production frontier), capital accumulation and human capital accumulation. We show that efficiency catch-up generally explains productivity growth, whereas technological change and factor accumulation were limited and distorted by the effects of war. War clearly hampered efficiency. Moreover, an unbalanced ratio of human capital to physical capital (a gap to the technological leader) was crucial for efficiency catching-up.