Total Factor Productivity Growth Research Articles

IMPACT OF DIGITALISATION ON PRODUCTIVITY GROWTH IN EU MEMBER STATES

Recent economic studies on the relationship between digitalisation and economic growth show some ambiguity in the results due to the use of different methods, measures, country samples and time periods. The purpose of this article is to theoretically substantiate, build and econometrically test the model of the impact of digitalisation and other important factors on the growth of total factor productivity in the countries of the European Union for the period of recent years for which data are available. Methodology. The regression analysis of panel data with fixed effects was conducted. The regression estimation of the model is done for 27 EU countries and the entire European Union for the available periods 2017-2022. The robustness of the model to the choice of alternative regression methods, heterogeneity, autocorrelation and random effects is also tested. The model is based on the principles of the endogenous growth theory. The author substantiates and models the relationship of productivity growth with digitalisation, exports, imports, use of intellectual property rights, research and development, foreign investment, human capital and institutions; calculates the indicator of total factor productivity (TFP) based on the Cobb-Douglas function; the European Commission's Digital Economy and Society Index (DESI) is chosen as a measure of digitalisation. Regression results. It is proved that digitalisation is an important factor in productivity growth in the countries of the EU sample, which has a positive and significant impact on total factor productivity (a 1% increase in the digitalisation index leads to an increase in TFP by about 0.1%). Trade openness (exports and imports) was confirmed to remain a key factor affecting productivity. Income from the use of intellectual property rights has a positive, statistically significant impact on TFP growth, although the magnitude of this impact is rather small compared to the impact of digitalisation and trade. It has been found that the quality of institutions can be important for productivity growth, which is an argument for relevant reforms at the level of the government and local communities. The impact of research and development, foreign direct investment, and human capital on TFP growth is difficult to interpret due to the lack of statistical significance of these parameters, which requires further research.

A random walk for agricultural total factor productivity

AbstractGrowth in agricultural total factor productivity (TFP), which explains most of the long‐term growth in U.S. agricultural output, may be slowing. The Economic Research Service (ERS) of the USDA is confident that current levels of below‐average growth will eventually regain the long‐term trend line. Others disagree, arguing instead that due to declining public expenditures on agricultural research, TFP growth experienced a downward and seemingly permanent structural shift about 30 years ago. In this paper, I argue that neither perspective is accurate since agricultural TFP is best modeled as a random walk with drift and thus not governed by a deterministic trend line. When I use a first difference model to accommodate the unit root, I do not find a structural break in the rate of drift. However, I acknowledge that this finding may not be general because I show that my test for a structural break has low power. To add theoretical relevance, I develop a simple model of stochastic innovation and farm technology adoption, and then use simulation results from my model to explain why a random walk for agricultural TFP is a theoretically sound proposition.

Challenges or drivers? Threshold effects of environmental regulation on China’s agricultural green productivity

This study investigates the effect of environmental regulation (ER) on the growth of Chinese agricultural Green Total Factor Productivity (GTFP). Threshold model results suggest an inverted-U shaped interconnection between command-control ER and growth of agricultural GTFP, a decreasing positive marginal effect of voluntary ER, and an absence of influence of incentive-based ER. Regional heterogeneity test indicates that command-control ER affects agricultural GTFP growth in a far more favorable way in less developed provinces than in more developed provinces, and only the former can benefit from the synergistic effect between command-control and voluntary ER. Mediating effect test results reveal that agricultural green innovation and grain crop proportion are channels through which ER affect agricultural GTFP growth, highlighting the pressing need to stimulate green innovation and realize green transformation of grain production.

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.

Agriculture–Tourism Integration’s Impact on Agricultural Green Productivity in China

Currently, the integrated development of agriculture and tourism is one of the most critical strategic measures in China. The rapid growth of agricultural tourism integration presents the typical characteristics of expanding regional differences. Exploring the impact of agricultural tourism integration on the growth of green total factor productivity in agriculture has important theoretical and practical significance. This study constructs a comprehensive index system for agricultural tourism integration, measuring the development level of agricultural tourism integration in 30 sample provinces from 2008 to 2018. Using the generalized system method of moments approach and Tobit model, the impact of agricultural tourism integration on agriculture was empirically tested, and the regulatory role of rural human capital was discussed. It was found that agricultural tourism integration contributes significantly to the improvement in green total factor productivity in agriculture, with rural mobility human capital, education human capital, and health human capital all playing a significant positive moderating role in this process. Finally, it is recommended that priority be given to agricultural tourism integration in the policy framework, promoting industrial chain upgrading, raising investment in rural infrastructure, and upgrading rural human capital levels to contribute the rural economic development.

Industry contributions to productivity growth in U.S. manufacturing: an application of alternative output concepts

To understand the performance of the U.S. manufacturing sector, in this article, we explore the performance of individual industries. We first use the U.S. Bureau of Labor Statistics published data to look at the influence of industries on sector-level performance and total factor productivity (TFP) growth. The underlying dynamics of production in any given industry determine its influence on the sector as a whole. Both an industry’s share of output and its individual TFP growth vary over time, and these changes jointly determine the industry’s contribution to performance in the manufacturing sector. Next, we trace the contribution of industries to manufacturing sector TFP by using three alternative output concepts—value-added output, sectoral output, and gross output. We examine the differences in industry contributions that result from the use of the alternative output measures, over 2000–21 and three different business cycles (2000–07, 2007–19, and 2019–21). We show that one must carefully deliberate before selecting a value-added-output, sectoral-output, or gross-output framework for TFP and contribution analysis.

Does equity market openness increase productivity? the dual effects of Shanghai-Hong Kong stock Connect program in China

This study investigates the dual effects of equity market openness on aggregate total factor productivity (TFP) growth and finds that gains in aggregate TFP can be driven by within-firm and reallocation effects across firms. Using a quasi-natural experiment based on China’s Shanghai-Hong Kong Stock Connect program, we find that equity market openness has a positive effect on firms’ TFP. Stock price efficiency is the mechanism underlying this improvement. Equity market openness reduces firms’ stock mispricing and improves corporate governance and investment efficiency through the feedback effect, thereby increasing TFP. Finally, we argue that equity market openness induces significant growth in capital stock and employment among high-TFP firms, driving them to achieve rapid growth and greater market share. The reallocation effect of equity market openness translates into aggregate productivity gains. This empirical study considers stock pricing as a mechanism to shed light on the dual effect of equity market openness on TFP growth.

Digital financial inclusion and green growth: analysis of Chinese agriculture

ABSTRACT Capitalizing on the explosive surge in data volume and the rapid advancements in financial technology, the rise of digital financial inclusion stands poised to amplify financial support across critical agricultural sectors and propel the revitalization of rural areas. This study utilizes panel data spanning 2012 to 2018 from 26 cities in the Yangtze River Delta region of China. Employing a nonparametric approach, it quantifies the growth of agricultural green total factor productivity, both with and without accounting for environmental constraints. Additionally, this research employs the system generalized moment method (system-GMM) alongside the instrumental variable (IV) model to execute a dynamic panel regression. This study explores the influence of digital financial inclusion on agricultural green performance, all the while examining the intricate interplay between conventional financial inclusion and its digital counterpart. The findings show an overall enhancement in agricultural green performance within the Yangtze River Delta region, notwithstanding the divergence across cities, with technological progress chiefly underpinning this growth. Moreover, the development of inclusive digital finance significantly amplifies agricultural productivity gains, and this positive effect stands to be further elevated as traditional financial avenues also evolve.

Financial Globalisation and Total Factor Productivity Growth in Pakistan

The study aimed at examining the impact of financial globalisation and natural resource rents on Total Factor Productivity growth in Pakistan. The total factor productivity growth is computed by the growth accounting model assuming the Cobb-Douglas production Function, while the KOF index of globalisation is used to quantify financial globalisation. The series encompassed the time period from 1985 to 2019, and in order to get empirical results, an Autoregressive Lag Distributed Model is used. The empirical outcomes proved that financial globalisation positively impacts productivity. Hence, the propositions put forth by endogenous growth and new trade theories that globalisation has a central role in achieving productive growth are confirmed by the empirical findings of this study. On the other hand, the results indicated that rent-seeking behaviour concerning natural resources has a negative influence on total factor productivity growth in the long run demonstrating a natural resource curse exists for Pakistan’s economy. Based on its findings, the study recommended that promoting outward-oriented policies with a primary focus on financial integration is crucial for augmenting the overall productivity of domestic factors of production. Likewise, it is imperative to discourage rent-seeking behaviour from natural resources to increase the factor’s productivity.

Analysis of Spatial Unbalance and Convergence of Agricultural Total Factor Productivity Growth in China—Based on Provincial Spatial Panel Data from 1978 to 2020

Using the provincial panel data from 1978 to 2020 as the research object, this study employs the fixed effect SFA-Malmquist model to measure the agricultural total factor productivity of each province and city, and the spatial correlation of China’s agricultural total factor productivity is determined by Moran’s I. On this basis, three weights (adjacency, economy, geography) are included as spatial factors in three spatial β-convergence models (SAR, SEM and SDM), and the spatial convergence characteristics of China’s agricultural total factor productivity are analyzed in different time periods and different regions. The study found that: First, China’s agricultural total factor productivity shows a growing trend, but as time goes on, its growth rate gradually slows down, and the growth rate in the eastern region is higher than that in the central and western regions. Second, China’s agricultural total factor productivity has significant spatial correlation and spatial convergence characteristics. The differences in agricultural total factor productivity in various regions are shrinking over time, and the spatial spillover effect significantly shortens the convergence process. Due to spatial convergence, while carrying out agricultural production, all regions should thoroughly consider the advantages of agricultural resources in neighboring regions and strengthen cooperation and exchanges between regions.

Does innovative city pilot policy promote urban green growth in China? An analysis of green total factor productivity, 2005–2020

The innovative city pilot policy (ICPP) is an essential manifestation of China’s construction of an innovative and green-driven development country. We incorporated urban green total factor productivity (GTFP) growth into the evaluation of ICPP. Based on the panel data of 223 cities in China from 2005 to 2020, we used the difference-in-differences model to empirically assess the influence and mechanism of the ICPP on urban GTFP growth. The main results show that (i) The ICPP has maintained an effectively fluctuating promotion on urban GTFP growth, mainly manifested in the urban green technological progress improvement. (ii) The ICPP has urban heterogeneity in promoting GTFP growth in pilot cities, mainly affecting key cities such as provincial capitals. (iii) The interaction between the agglomeration of producer services and the ICPP inhibits GTFP growth in pilot cities.

The growing impact of ICT productivity via the cost of capital: Evidence from the U.S. and Japan

We identify and measure two impacts of industry-level total factor productivity (TFP) growth on aggregate price change in the U.S. and Japan. The first is a standard effect from the definition of aggregate GDP. TFP change lowers aggregate prices ceteris paribus. The second is that a change in TFP in the production of investment goods lowers the cost of capital via lower investment prices. We call this the cost-of-capital effect and formulate an expanded growth accounting framework to capture both effects. We apply it to a harmonized dataset for the two countries and find that the standard effect has fallen since the peak around 2000 due to lower TFP growth and a diminished share of GDP. However, the cost-of-capital effect has risen in importance and offsets part of this decline in the standard effect.

Blessing or curse: How does sustainable development policy affect total factor productivity of energy-intensive enterprises?

The achievement of sustainable development in energy-intensive sectors is crucial for promoting long-term economic growth and stability. Utilizing the National Sustainable Development Plan for Resource-based Cities (2013–2020) (SDP) in China as a quasi-experiment, we examine the effect of sustainable development policy on the productivity performance of energy-intensive firms. Our analysis of data from Chinese listed companies between 2006 and 2020 reveals that the SDP significantly enhances the productivity performance of treated firms. Our investigation into the pathways towards sustainability reveals that these firms rely on both resource reallocation and technological innovation to cope with the impact of the SDP. Specifically, firms with stronger environmental regulations and more human capital tend to accumulate total factor productivity growth through technological innovation, while firms with greater resource dependence and political connections tend to benefit more from resource reallocation efforts. By exploring the mechanisms through which these policies impact productivity and sustainability, we provide valuable information for policymakers and managers to embrace heterogenous technology pathways towards sustainable development.

The total factor productivity growth of health systems in African least developed countries

Background: Given the several health policy reforms in various countries in the Sustainable Development Goals (SDGs) era, the need for efficient and productive health systems has become of great concern. This is even more urgent in African Least Developed Countries (African LDCs) that need to improve the health of their populations. Thus, the objective of this study is to assess the total factor productivity growth of health systems of 29 African Least Developed Countries for the 2008-2018 period. Methods: The study uses data from the World Bank and the World Health Organization. Using the Data Envelopment Analysis (DEA) Malmquist index, the inputs that were used in the study included domestic general government health expenditure, domestic private health expenditure, external health expenditure and out of pocket health expenditure while the outputs were life expectancy at birth, maternal mortality rate, under five mortality rate, and infant mortality rate. Results: Sixteen African LDCs registered progress in the total factor productivity growth of their health systems while thirteen registered a decline the total factor productivity growth of their health systems. Overall, there was 0.3% average increase in total factor productivity growth of health systems in African LDCs. This was attributed to a 1.2% increase in technical efficiency change and a 0.9% average decrease in the technical change of health systems in African LDCs. Conclusions: African LDCs with less productive health systems are advised to bench mark the policies of African LDCs with productive health systems.

Factor Accumulation, Total Factor Productivity, Random Shocks and Output Growth in Cameroon

The main focus of this paper is to examine the proper channels through which the Cameroon economy can achieve a high output (GDP) growth rate and sustain it over time in order to accelerate her pace of economic recovery. Specifically, the paper attempts to understand the role of the various determinants of GDP and to investigate the role of random shocks (RNDSH) in GDP growth in the Cameroon economy from 1970 to 2015. A maximum likelihood technique (MLT) is used to estimate a trans log stochastic frontier production function in a one stage estimation procedure. The results reveal that GDP growth in the Cameroon economy is promoted by labour and capital, which jointly contribute 68% (47% for labour and roughly 22% for capital) against -22% for total factor productivity (TFP). The results also show that RNDSH impedes the GDP growth of the country at an annual average rate of 9.1% throughout the study period. These results imply that the Cameroon economy needs to focus on labour intensive techniques of production so as to propel GDP growth. This study recommends that more efforts should be invested in human capital development, reduction of inefficiency in production processes, and design of proper mechanisms to minimise the effects of Random shocks in the economy.

Market power, output, and productivity

I document a positive correlation between increases in markups and growth of output, value added, and labor productivity at the 3-digit sector level using national accounts data from Mexico. Additionally, I show that those results can be partly accounted for by the positive correlation between increases in markups and total factor productivity growth. Taken together, the findings provide new evidence that a rise of market power can be associated with positive welfare effects and not only with negative outcomes of reduced competition.

Preferential Trade Agreements and Productivity: Evidence from Peru

This paper analyzes the impact of reducing output tariffs (i.e., domestic tariffs on import of final goods) and input tariffs (i.e., domestic tariffs on imports of intermediate goods) on total factor productivity growth of Peruvian manufacturing firms. Peru’s annual survey of manufacturing data from 2003–2017 is used to explore the reduction of tariffs during three preferential trade agreements: United States, China, and the European Union. Lower output tari˙s could decrease productivity by reducing firm’s market share or could increase productivity by inducing tougher import competition, while cheaper imported inputs can raise productivity via learning, variety, and quality effects. The results show that a decrease in output tariffs decreases Peruvian firms’ productivity growth for non-exporters (i.e., domestic firms producing goods that are also imported) while increasing productivity growth for exporters (i.e., domestic firms producing export goods). In contrast, a reduction in input tariffs increases firm productivity for all firms.

Analysis of productivity performance of real estate and construction firms in Indonesia

Sustained total factor productivity (TFP) growth of firms is essential to achieve sustained supply growth, which is necessary to solve the housing shortage and affordability problems. Existing productivity literature focuses on large firms whilst smaller firms make a significant contribution to the total supply. This paper investigates the productivity of 363 Indonesian real estate construction firms of medium and large sizes. We estimate Färe-Primont TFP measures under the meta-frontier framework, accounting for differences in the overall technologies under which each group of firms operates. Results deliver several important findings. First, large firms have higher productivity levels than medium firms, but average productivity levels are very low. Second, the productivity growth of large and medium firms is negative, which contributes to the growth of the housing shortage in Indonesia from 2012 to 2016. Third, in case of easier transfer or spill-over of production technologies between two firm groups, firms could enhance further their efficiency and productivity. Fourth, those factors related to branch numbers, legal structure and experience of doing business have positive correlations with the productivity performance of firms in both large and medium groups. Additionally, medium firms could gain higher productivity by diversifying their income. Importantly, our study shows evidence to support that government subsidies have a positive influence on the productivity level of medium firms.

The Impact of the Demographic Transition on the Total Factor Productivity in Türkiye

The demographic transition would affect almost every aspect of life and our surroundings and could lead to significant changes and consequences in the social and economic sub-systems. In addition, it is a vital factor in economics. Therefore, a deep understanding of demographic transitions, characteristics, and dimensions would be helpful due to better managing the consequences and preparing for the future. The aim of this paper is to explore the impact of Türkiye's demographic transition on total factor productivity (TFP) from 1970 to 2021 using a Probit model. The results indicate that factors such as dependency ratio, elderly population ratio, youth population ratio, deaths per 1000 people, life expectancy, population density, gross capital formation per capita, and manufacturing production can increase the likelihood of TFP growth. However, factors such as capital stock, urban population, and births per 1000 people are shown to potentially reduce this likelihood.

Green productivity divergence and factor endowments: Evidence from the Yellow River Basin, China

Using panel data for the Yellow River Basin (YRB) of China from 2006 to 2017, we investigate cross-city conventional total factor productivity (TFP) and green TFP convergence, and the moderating effects of relative factor endowments on TFP growth. Allowing for cross-city and cross-time variation in the production function, we estimate TFP across cities using a nonlinear varying coefficient model, and decompose it into various input-embedded and input-free productivity components based on the new growth accounting, covering all growth-driving channels. This paper then employs a conditional convergence framework to examine whether convergence occurs, through which channels, and the effects of relative factor endowments on them. Empirical results show that lagging cities fail to achieve TFP catch-up, and that the divergence of capital-embedded and labor-embedded productivity instead triggers a widening of the cross-city TFP gap. Part of the cause of this increase in these gaps is that cities with relatively high capital deepening and capital-to-energy ratio are experiencing rapid TFP growth by driving the quality of capital and labor. Nor have these effects been altered in examining environmentally constrained or green TFP convergence.