TFP Growth Research Articles

Club Convergence in Productivity among European Regions: Recent Evidence and Policy Implications

We use data on 155 NUTS regions, with the objective of i) generating TFP series over 1996-2018, and ii) testing for club-convergence. We also employ a logistic regression to identify the significant club-membership conditioning factors. We contribute to the literature on two main grounds. Firstly, we are the first to extract TFP series while applying a methodology that allows for heterogeneous production functions and accounts for cross-section dependence and nonstationarity. Secondly, we are the first to apply a TFP-club convergence analysis in the context of European regions over a large period of time that witnessed several shocks affecting the European integration. Our analysis reveals that: (i) most of the regions of the top TFP convergence clubs are located in the "old" EU-member states, with few regions situated in countries that joined the EU after 2004; (ii) several regions in the South are trailing with the risk of falling in a "productivity trap"; (iii) regions situated in new EU-member countries registered remarkable TFP growth rates; (iv) larger regional research and development resources, and higher employment in high-technology sectors are associated with a greater probability of being member of top-ranked TFP convergence clubs. Our findings suggest that the needs of the lagging regions should be prioritized in the agenda of the EU. In this respect, we suggest several recommendations.

The Policy of Cross Border E-Commerce Comprehensive Pilot Zone and the Growth of Urban Total Factor Productivity — Empirical Testing Based on Double Difference Method

Since the establishment of the first pilot zone in 2015, China’s cross border e-commerce has rapidly developed, becoming a new engine driving international trade. This paper delves into the impact of China’s cross border e-commerce comprehensive pilot zones on urban total factor productivity. The paper first provides an overview of the development trajectory and current status of cross border e-commerce comprehensive pilot zones and analyzes the potential mechanisms through which these pilot zones might affect urban TFP. Utilizing data from 70 major cities between 2011 and 2019, the study employs a Difference-in-Differences approach to evaluate the impact of the pilot zone policies on urban TFP growth. The results indicate that the establishment of pilot zones significantly enhances urban TFP growth rates, with more pronounced effects in the eastern regions. The regional heterogeneity test reveals that the pilot zones positively influence TFP growth in the eastern and central regions, while the impact on the western and northeastern regions is not significant. Robustness checks further confirm the significance of the policy effects. Based on the findings, the paper proposes policy recommendations, including strengthening policy support, enhancing infrastructure development, reinforcing technological innovation capabilities, and promoting regional coordinated development to fully leverage the role of cross border e-commerce comprehensive pilot zones in boosting urban TFP and driving high-quality economic development. Overall, this paper provides empirical evidence for understanding how cross border e-commerce comprehensive pilot zones enhance urban TFP through technological innovation and policy support, offering important insights for optimizing relevant policies and promoting regional economic development.

Can government subsidies facilitate TFP growth? From the perspective of dynamic capability

Can government subsidies facilitate TFP growth? From the perspective of dynamic capability

Financial resources utilization efficiency in sports infrastructure development, determinant of total factor productivity growth and regional production technology heterogeneity in China

Despite China's heavy investment in sports infrastructure development in the last decades, the financial resources utilization efficiency (FRUE), regional technological gap (TGR), and total factor productivity change (TFPC) in sports infrastructure development are undiscovered and worth investigating. To this end, this study employed DEA-SBM, Meta-frontier analysis, and Malmquist productivity index on the data set of 31 Chinese provinces and 3 regions for the years 2014–2021 to gauge the FRUE, TGR, and TFPC in sports infrastructure development. The results indicate that the average FRUE is 0.4859, with a growth potential of 51.41% in financial resource utilization efficiency for sports infrastructure development. Further Eastern region is more efficient as compared to the Central and western regions. Beijing, Shanghai, Tibet, Hainan, and Guangdong are top performers in FRUE. Further, the value of TGR in the East is 0.9787 which is higher than in Central (0.4977), and Western (0.5821) regions. It indicates that the eastern region contains superior production technology in the development of the sports infrastructure in China. Moreover, the average TFPC value is 1.035 witnessed a 3.5% growth, primarily determined by technological change (TC). As TC = 1.0273 is higher than efficiency change EC = 0.997. The eastern region has a higher average TFPC of 1.048, indicating higher total factor productivity growth in sports infrastructure development. Beijing, Liaoning, Tianjin, Shanghai, and Zhejiang are the top performers in the TFP growth over the study period. Finally, the Kruskal-Wallis test proved the statistically significant difference in three regions of China for FRUE, TGR, and TFPC in sports infrastructure development.

Changing times: incentive regulation, corporate reorganizations, and productivity growth in the Great Britain’s gas networks

ABSTRACT The gas industry in Great Britain has witnessed periodic regulatory reviews and large corporate reorganization over the last few decades. We assess how these changes have impacted total factor productivity growth using a data envelopment analysis (DEA) approach by setting out different models, each for gas transmission and distribution network. We also construct a combined single series for distribution and transmission using financial data to show whether productivity growth can be attributed to corporate reorganizations. Our results show a negative productivity growth of −1.6% p.a. for gas transmission over the sample period, but reversed to a positive TFP growth once quality is included. For gas distribution, we find productivity regress at −6.2% p.a. over the sample period, with a negative productivity trend observed across all the models, despite the inclusion of quality variables. However, the findings reveal a slightly higher productivity growth of 1% p.a. using corporate data, with pre-restructuring period having a positive productivity growth compared with the post-restructuring era with a negative productivity growth.

Improving the SNA: Alternative measures of output, input, income, and productivity

AbstractThe current System of National Accounts (SNA) Gross Domestic Product (GDP) concept does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that measures the income generated by the production sector of an economy and implements this measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970–2020. Real gross and real net income generated by the Chinese production sector are decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial, and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.

Total Factor Productivity Growth and Changing Cost Structure of Sugarcane in Gujarat, India

Aims: 
 
 To estimate the growth of input, output indices and total factor productivity of sugarcane in Gujarat
 To estimate the changing cost structure of sugarcane
 
 Place and Duration of Study: Department of Agricultural Economics, Junagadh Agricultural University (between June 2018 and July 2020).
 Methodology: This paper has estimated the growth in total factor productivity of sugarcane crop using Tornqvist Theil index and growth trends in cost structure of sugarcane crop in Gujarat.
 Results: The results showed that the growth rate of TFP indices of sugarcane planted crop and ratoon crop were negative about -0.86 and -0.31 per cent per annum, respectively. Negative TFP growth resulted due to a relatively faster rate of total input growth than total output growth. in the total cost of cultivation of sugarcane, the cost share of human labour, irrigation and miscellaneous in Gujarat has shown an increasing trend. while, rental value of land showing declining trend. 
 Conclusion: Study suggested that technological gains have not been experienced in this crop needs concentrated efforts to bridge extension gap and further research to evolve concrete strains, resistant to pest and diseases which reduce the real cost of production.

Long shadows of the walking dead on economic activity

This paper presents the panorama of zombie firms in the Turkish economy, which are highly inefficient, highly indebted firms that have low or sometimes negative productivity, and provides an analysis of the impact of these firms on economic activity for the period 2012–2015. Our results suggest that the number of zombie firms in Türkiye has increased. The share of these firms in sales and employment has also increased, but at a lower rate. These firms are mainly found in low-technology manufacturing and transportation and distribution services. The paper also shows that healthy firms increase total factor productivity, employment growth, and the investment-to-capital ratio in the economy in a robust manner. The sales of zombie firms have no distorting effect on the economic activity of healthy firms. However, capital sunk into zombie firms has a differential impact on the performance of healthy firms. When the share of zombie capital in a sector increases, the TFP growth of manufacturing firms decreases, while the employment growth of medium-sized service firms increases.

Middle‐income country trap and total factor productivity growth

AbstractThis study assessed the factors allowing middle‐income countries to achieve higher income levels and thus escape the middle‐income trap (MIT). By deriving a stochastic production function using the Cornwell–Schmidt–Sickles (CSS) estimator and country panel data, we successfully distinguished between growth due to total factor productivity (TFP) and that attributable to various production inputs after controlling for random shocks and cross‐sectional dependence. We found that TFP growth was the main factor distinguishing middle‐income countries that have and have not escaped from the MIT; the former countries had significantly higher TFP growth.

The unequal implications of Industry 4.0 adoption: evidence on productivity growth and convergence across Europe

ABSTRACT Do new manufacturing technologies of the Industry 4.0 (I4.0) boost TFP growth? By adopting a distance-to-frontier framework, this paper explores whether the adoption of (advanced) digital technologies affect the sectoral TFP growth rates across manufacturing industries of 14 European countries, during the period 2009–2019. We rely on a novel measure of adoption of I4.0 technologies (namely, advanced industrial robots, additive manufacturing and industrial internet of things), exploiting highly detailed (8-digit level) information on imports of capital goods embodying such technologies. Our results suggest that adopting new digital manufacturing technologies of the I4.0 brings quantitatively important and statistically significant contributions to sectoral TFP growth rates, although these are mostly concentrated in countries close to the technology frontier. In turn, these technologies seem to have hampered the process of convergence between European technological leaders and laggards over the last decade.

Understanding R&D transitions: From bottom to top?

Over the last five decades a growing number of governments in developed and developing countries have implemented targeted policies to increase the R&D to GDP ratio. However, there is little evidence regarding the feasibility of achieving large and permanent changes in R&D investment. We study the incidence and effects of episodes of substantial acceleration in R&D expenditure, using a sample of 62 countries with data from 1960 to 2007. Among other exercises, we use propensity score matching, synthetic cohorts, and panel VAR, in order to elucidate the determinants and effects of important increases in R&D intensity. We find that transitions to higher levels of R&D-intensity are a relatively infrequent phenomenon which occurs at relatively high levels of R&D intensity. Looking at long-run changes in R&D, we corroborate that few countries have been able to raise their R&D intensity from the bottom quintile to the top quintile of the global distribution. Our findings indicate that income, physical investment, education, and the size of the manufacturing sector increase the likelihood of transition, whereas country size and FDI decrease it. We find that transitions are positively correlated with subsequent greater income levels, and weakly to TFP growth. Finally, in our Granger tests with panel VAR estimates, we find that R&D acceleration Granger causes GDP growth, the level of patents, high-tech exports, and private and public R&D. In the case of private R&D, there is evidence of bidirectional causality with R&D acceleration.

Haste makes waste? Quantity-based subsidies under heterogeneous innovations

With quantity-based innovation targets and subsidy programs launched since the mid-2000s, China has seen a patent surge, accounting for 46% of the world’s total patent applications in 2020; however, the overall patent quality has been declining after 2008. This paper develops a Schumpeterian growth model featuring innovating firms’ quantity–quality trade-off between radical and incremental innovations, and decomposes subsidies’ aggregate impact into quantity and quality channels. We calibrate the model to Chinese firm-level data in the early 2010s. Our quantitative analysis shows that the quality channel effects are negative and dominant, and quantity-based subsidies in that period reduce the TFP growth rate and welfare by 0.19 percentage points and 3.31%, respectively. We evaluate welfare gains under a constrained planner’s problem, and propose skill subsidies which are quality-biased and effectively recover the optimal allocation.

Growth decomposition of the Indian states using panel data techniques

ABSTRACT The study investigates the causes of rising economic inequality among Indian states between 2000 and 2017. To identify the components of output growth that are driving rising regional inequality in the Solow Model framework, we first create state-level data on capital stock and labour force, which are not published in India’s national accounts. While we find beta divergence in per capita state domestic product (SDP) between states, there is no evidence of beta divergence in capital stock accumulation. Therefore, differences in TFP growth, rather than capital stock accumulation, may be one of the factors contributing to India’s rising regional inequality. Furthermore, a productivity index for Indian states was created using the physical and social infrastructure, health, education, digital connectivity, and energy access to help explain the differences in states’ TFP. When common factor models were used to account for the high cross-sectional dependence between state growth rates, the influence of capital accumulation and productivity index on state growth was significantly reduced. Hence, the Indian economy’s common growth factor emerges as a major driver of the SDPs, with higher per capita SDP states benefiting more from overall growth than the lower per capita SDP states, resulting in growing regional disparities.

Natural resources and productivity growth in developing countries

Productivity growth has contributed significantly to boost living standards in many regions of the world. Concerns about certain emerging nations’ dependence on unprocessed natural resource exports have led some analysts to be sceptical about the possibilities for structural reform in resource-rich countries. We hope to contribute to the research on the nexus between natural resources and growth by examining the impact of the dependence on resources on TFP growth in 91 developing countries from 1980 to 2019. Findings demonstrate unequivocally that TFP growth is lower in resource-rich emerging nations. The results are robust to several tests, including additional control variables and the partition of resource reliance between point-source and diffuse-source resources. Furthermore, the establishment and maintenance of democratic and economic institutions enable resource-rich countries to avoid the curse.

The Asymmetric Effect of Credit Supply on Firm‐Level Productivity Growth

AbstractWe study the impact of bank credit on firm productivity. We exploit a matched firm‐bank database, covering all the credit relationships of Italian corporations, to measure idiosyncratic supply‐side shocks to credit availability and estimate a production model augmented with financial frictions. We find the effect of credit supply to be asymmetric: contractions harm TFP growth, halting productivity‐enhancing activities; positive credit supply shocks have limited effects. This points toward a role of financial stability in preserving productivity growth.

Catching up by ‘Deglobalizing’: Capital account policy and economic growth

While substantial empirical research has evaluated the question of whether capital account openness promotes economic growth, this paper finds empirical evidence for cases where the opposite is true—that a policy of capital controls can promote economic growth, when combined with a policy of reserve accumulation. Using panel data from 45 countries from 1985 to 2019, we find that capital controls combined with reserve accumulation—strategic capital account policy—contribute to growth in real GDP and TFP. This effect is stronger for emerging markets and prior to the global financial crisis. We show that the policy is strongly associated with enlarging the scale of the manufacturing sector and productivity, and is consistent with theories of learning-by-doing through exporting.

Research on the Effect of Knowledge Stock on Technological Advance and Economic Growth in Republic of Korea

The Republic of Korea’s R&D investment has been rapidly increasing over the long term. This R&D investment is accumulated as knowledge stock, which means the amount of knowledge held by individual countries. However, is the rapid increase in R&D investment contributing to the advancement of domestic science and technology and economic growth? In general, technological advance will lead to a country’s sustainable economic growth. If so, how much has it contributed? This is a very important question for a neoclassical economist. This study reviewed previous studies on “knowledge stock”, “TFP estimation”, and “R&D investment, TFP and economic growth relationship”, and sequentially analyzed the relationship among knowledge stock, TFP, and economic growth through a three-step process. The analysis procedure first performs data processing and time series trend analysis, then time series characteristics analysis, and finally Orderful Least Squares (OLS). The analysis results showed that all three models had a positive (+) relationship and most of them were derived to be statistically significant. On this basis, three policy implications are presented. First, the knowledge stock is estimated to have had a positive (+) effect on economic growth, and the continuous increase in domestic R&D investment is believed to have acted as a growth engine. In particular, financial of the government by financial resources and the mid-to-high tech industry groups by industrial characteristics are statistically positively significant. Next, domestic knowledge stocks have had a positive effect on TFP but the efficiency is judged to be decreasing. It is implied that high-tech industries need to form knowledge stocks above the threshold through continuous R&D investment. Finally, TFP was analyzed to have had a high impact on economic growth, and this confirmed that innovation-led growth was important. It is still relevant that innovation-led sustainable growth is more important than factor led in the Republic of Korea.

Green Technological Progress Implications on Long-Run Sustainable Economic Growth

The main objective of this study is to model and examine the green technological progress’s positive and negative externalities spillover effects on the sustainable economic growth of 15 economies from Asia, the Pacific, and Latin America. The study calculated labour and capital contributions to green total factor productivity growth via the inclusion of CO2 emissions as undesirable output or private unpriced input and energy consumption that proxies for unmeasured pollutant emissions. The results, in most cases, confirm that a high level of air pollutant emissions generated by these countries’ economic development affected the growth rates of TFP growth as an indicator of green technological progress. The significant contribution of this study is to integrate innovation and climate change in the form of green productivity (green technological progress). The role of these externalities on long-term sustainable economic growth has been ignored by several past studies undertaken in these areas.

Productivity and regulation in the construction sector: evidence for OECD countries

ABSTRACT Labour productivity growth in the construction sector has been very weak in recent decades in most OECD countries. This paper addresses this issue based on a panel of 23 countries over the period 1995–2015. First, we use the Ackerberg, Caves, and Frazer (2015) method to propose a multifactor explanation for this lack of productivity growth: (i) average TFP growth is close to zero and even negative for most countries; (ii) average contributions to growth of capital and intermediate inputs are positive but weak, respectively of 0.05% and 0.90% per year, and much smaller than in the manufacturing sector over the same period (respectively of 0.40% and 3.10% per year). Then, we investigate whether reforms of regulations specific to the construction sector might boost productivity there. Using regulation indicators from the ‘Doing Business Report’, we find a negative impact of these regulations on TFP, but not on the intensities of capital and intermediate inputs. Our results suggest that reducing the construction sector regulations might bolster productivity: a switch to the lightest regulations would lead to a long-term TFP increase of 6% on average.

Does exporting cause productivity growth? Evidence from Chilean firms

Does exporting increase firm productivity, or are increased export sales caused by the firm’s ability to increase its productivity? This paper provides new empirical evidence on the causal relation between trade and productivity, adopting a structural vector autoregressive analysis combined with identification algorithms from the machine learning literature. We focus on a well-studied country (Chile) and on already-exporting firms (intensive margin). We identify the contemporaneous and lagged causal structure between firm productivity and export growth using two different machine learning algorithms based on independent components analysis (ICA), which exploit the non-Gaussian distribution of the data to recover the independent structural shocks that drive the observed variables. Our findings show that, for Chilean firms, productivity growth causes export growth in the same year, but that the reverse does not apply. Export growth also has no causal effect on TFP growth in subsequent years. To increase sales in the foreign market, firms should first also increase productivity. The increased presence in the foreign market does not contribute to such productivity growth.