Total Factor Productivity Growth Research Articles

Digital transformation and supply chain concentration: evidence from China

ABSTRACT Excessive supply chain concentration (SCC) introduces various risks, and the factors contributing to SCC are complex and have been rarely explored. This study examines the economic impact of digital transformation on supply chains by analysing data from China’s A-share listed companies (2010–2021) using regression models. The findings demonstrate that digital transformation significantly reduces supply chain concentration and increases the firms’ influence within the supply chain. The mechanism analysis shows that digital transformation makes firms more attractive to suppliers and customers, eases financing constraints, boosts firm reputation, and reduces SCC. The impact is more pronounced in firms facing higher environmental uncertainty or those positioned upstream in the supply chain. Except for blockchain, all five dimensions of digital transformation help to reduce SCC, thereby improving total factor productivity and economic growth. Digital transformation also creates a spillover effect, raising expectations for digital transformation and productivity among suppliers and customers. These findings have significant implications for understanding digital transformation practices and advancing supply chain management. The conclusions remain robust after various tests, including changes to the measures of variables and controls for reverse causality using lagged treatment and instrumental variables.

Technological development and eco-efficiency: Drivers of total factor productivity in OECD countries

This study delves into the total factor productivity growth in OECD countries, focusing on the crucial role of technological advancement and environmental management. By utilizing the Malmquist-Luenberger index, the paper encompasses both positive and negative outputs, such as pollution, providing a comprehensive productivity analysis by breaking it down into efficiency and technical change. Data from 36 OECD countries from 2000 to 2021 were examined to uncover trends and patterns in productivity growth and its unintended environmental consequences. The results emphasize the dominant influence of technological progress, particularly after 2006, as the primary driver of productivity growth, surpassing improvements in technical efficiency. A significant increase in technical change (1.56 in 2021) compared to technical efficiency (1.05) underscores the importance of sustained investment in research and development (R&D), which correlates positively with patent generation and technological advancement. The study also illustrates that OECD countries have effectively integrated eco-efficient practices, aligning with global trends in environmentally conscious productivity analyses. By integrating environmental outputs such as PM2.5 pollution, the analysis demonstrates that countries mitigating these adverse effects achieve higher productivity growth. These findings challenge conventional productivity models, where productivity diminishes when environmental aspects are considered. The analysis emphasizes the necessity for tailored policy approaches to address disparities in R&D investments, technological adoption, and eco-efficiency among countries. Countries with more significant R&D investments consistently demonstrate superior technological advancement in patents (0.745). Policymakers are urged to prioritize long-term strategies that foster technological innovation and environmental sustainability to ensure sustained productivity growth and economic resilience.

The Importance of ICT Investment in EU Total Factor Productivity Growth: Industry Analysis for 2000-2020

The Importance of ICT Investment in EU Total Factor Productivity Growth: Industry Analysis for 2000-2020

The intermediate role of farmland transfer in the impact of digital financial inclusion on agricultural total factor productivity in China

IntroductionEnhancing agricultural productivity and promoting sustainable development in China are critical priorities, given their significant contribution to food security and rural development. However, achieving consistent agricultural productivity growth across regions and sectors has been challenging, leading to inefficiencies and environmental pressures. To address this, the potential of digital inclusive finance (DIF) as a catalyst for progress has been explored.MethodsThis study investigates the impact of DIF on agricultural total factor productivity (ATFP) through farmland transfer, with implications for rural revitalization and high-quality agricultural development. Using the HMB index method, we calculate and decompose China’s inter-provincial ATFP from 2011 to 2020. Employing the dynamic panel fixed effect model and SYS-GMM method, we empirically test the influence of DIF on agricultural productivity in relation to farmland transfer.Results and discussionOur findings reveal a slow upward trend in China’s ATFP, driven primarily by scale efficiency. Notably, a 1% increase in the general index of DIF correlates with a 0.136% increase in ATFP. We analyze the sub-classification indexes of digital inclusive finance, namely coverage breadth, depth of use, and digitalization degree. Their contributions to agricultural productivity growth are significant, with coverage breadth having the greatest impact, followed by depth of use and digitalization degree. Farmland transfer acts as a crucial intermediary, enhancing agricultural allocation efficiency and driving the relationship between digital finance and total factor productivity growth. Interestingly, the western region exhibits the highest growth rates, followed by the eastern region, while the central region shows no significant effects.ConclusionTo comprehensively enhance ATFP, aligning supply and demand for digital financial services, leveraging service depth, and guiding farmland transfer according to local conditions are essential. These findings offer valuable insights into effective strategies for maximizing the potential of DIF, promoting rural development, and achieving sustainable agricultural growth.

Digitalization and Agricultural Green Total Factor Productivity: Evidence from China

Based on panel data of 31 provinces (autonomous regions and municipalities) in China from 2011 to 2022, this paper empirically examines the impact of digitalization on the inputs and outputs of the agricultural production process, and thereby derives the effects and mechanisms by which digitalization empowers the growth of agricultural green total factor productivity. The study finds that agricultural and rural areas’ digitalization significantly improves agricultural green total factor productivity, and this promotion mainly comes from the improvement of technical efficiency. Further analysis shows that digitalization mainly reduces land input and labor input, increases expected output, and reduces undesired output during the agricultural production process to achieve an improvement in agricultural green total factor productivity, indicating that digitalization has altered the allocation of agricultural factors. Heterogeneity analysis finds that the effect of digitalization on the growth of agricultural green total factor productivity is more pronounced in the eastern regions, southern regions, and areas with higher levels of agricultural digitalization, indicating that the development of digitalization exacerbates the gap in agricultural green total factor productivity among regions.

Granular origins of the Chinese business cycle

ABSTRACT Recent events in China, like Foxconn’s factory downsizing and Evergrande’s bankruptcy, have significantly impacted regional economies, highlighting how idiosyncratic shocks from large firms can generate aggregate effects. Using the ‘granular hypothesis’, which posits a significant impact of large firms’ actions on the macroeconomy, this study investigates how idiosyncratic shocks from large Chinese firms affect regional productivity growth and markups. Our findings demonstrate that idiosyncratic shocks to the 100 largest firms per province significantly impact regional labour productivity and total factor productivity growth but not gross regional domestic product growth. Subsequently, we examine how idiosyncratic shocks impact product market distortions, revealing that idiosyncratic shocks to large firms increase markups in regional markets, suggesting amplified market power.

Bedeutung und Entwicklung der Produktivität

Abstract Labour productivity is an important determinant of competitiveness. for competitiveness. It is significantly influenced by the total factor productivity. In Austria, as in most other industrialized countries, growth in labour productivity and total factor productivity has considerably in recent decades. The starting points for reviving productivity growth are the promotion of investment and research and development as well as strengthening competition and the risk capital market.

The Elasticity of Aggregate Output with Respect to Capital and Labor

It is often assumed that the elasticity of GDP with respect to capital is one-third, but this assumes zero markups and an aggregate production function. I estimate the elasticity allowing markups to vary by industry and with a rich input-output structure. Assumptions about capital costs provide bounds on elasticity. In the United States from 1948–1995, the capital elasticity ranged from 0.19–0.32 and shifted to 0. 24–0.37 by 1996–2018. Excluding housing or decapitalizing intellectual property lowers bounds to as low as 0. 11–0.26. Based on these elasticities, common estimates of total factor productivity growth represent a lower bound. (JEL E13, E22, E23, E25, N12)

THE NEXUS OF INDUCING DEVELOPMENT: MEASURE PATH DISCOURSES IN INDONESIA’S DYNAMIC LANDSCAPE

The research objective underscores the importance of human capital, innovation, and research in fostering sustainable economic growth, with a focus on principal variables such as human capital development (measured by HDI), innovation and competitiveness (driven by FDI inflows), R&D expenditure, and employment dynamics. The research results reveals that FDI, R&D spending, and employment significantly impact TFP growth, with FDI inflows identified as a push driver of TFP growth by enhancing innovation and competitiveness. This research applies the research methodology ARDL model to delve into the factors that influence Total Factor Productivity (TFP), drawing on Romer’s theory of endogenous growth. The research results also highlight the role of R&D expenditure in boosting TFP, emphasizing the need for a supportive environment for research and innovation. The labor force is also found to contribute significantly to TFP. The research further explores the interaction between the labor force and R&D, suggesting the need for policies that support both workforce development and innovation for sustained prosperity. The study also incorporates the concept of employment elasticity with respect to growth as a measure of inclusive development. It concludes by advising stakeholders to prioritize the promotion of FDI inflows, entice R&D spending, and treatise labor force issues to enhance TFP growth and ensure long-term economic prosperity. This underscores the importance of stakeholders’ cooperation in leveraging investments for long-term economic prosperity.

Unveiling the impact of remittances on productive efficiencies: investigating productivity growth of prominent remittance-receiving developing nations

PurposeThe present study reviews the theoretical and empirical literature about the significance of international migrants' remittance to empirically analyse the effect of remittance on the productivity growth of developing countries using a panel dataset from 1991 to 2021.Design/methodology/approachThe study utilised the data envelopment analysis (DEA)-based Malmquist Productivity Index (MPI) to measure nationwide production efficiencies. It first performed a unit root test, cointegration test and pool mean group autoregressive distributed lag (PMG-ARDL) technique. To assess the robustness of the findings, the study also uses dynamic ordinary least squares (DOLS) and fully modified OLS (FMOLS) estimators.FindingsThe results demonstrated that remittances are a significant source of funding that promotes innovation [i.e. technological progress (TEC)] and hastens the country's total factor productivity (TFP) growth. However, the study needed to have established the effect of inward remittances on the nation's technical efficiency (EFF).Research limitations/implicationsAs remittances encourage innovation and TFP growth (TFPG), the concerned governments must create favourable and enabling economic environments to increase remittance inflows, which will have far-reaching growth repercussions.Originality/valueThe present study emphasises the connection between remittances and productivity growth, the disintegration of TFP, advanced econometric techniques and contribution to research policy. Despite prior literature exploring the effect of remittances on economic growth, a dearth of literature exists on how remittances affect a country's productivity. The output-based MPI methodology used in this study offered a nuanced understanding of how remittances affect many facets of productivity growth in developing nations.

RESEARCH ON DIGITAL ECONOMY AND GREEN TOTAL FACTOR PRODUCTIVITY GROWTH OF CHINA’S INDUSTRY AND SPATIAL EFFECTS

This paper evaluates the impact and role of digital economy on industrial green total factor productivity based on the perspective of China’s industrial green transformation and provides a realistic basis and decision-making reference for industrial green transformation. This paper constructs the industrial green total factor productivity and digital economy development index of 30 provinces from 2013 to 2019, and empirically tests the spatial-temporal evolution relationship between them and the impact of digital economy on industrial green development by using time-fixed effect and spatial Durbin model. The results show that the digital economy and industrial green total factor productivity digital economy are unevenly developed, basically showing a distribution trend of high in the east and low in the west, and the two have a significant positive spatial correlation in the years observed. The results of local spatial autocorrelation analysis show that there is a high clustering of digital economy and total factor productivity in the eastern coastal region and low clustering in the western region. The regional heterogeneity analysis shows that the development of digital economy is beneficial to optimize the distortion of capital and labor allocation and thus improve industrial green total factor productivity, but the indirect effect of digital economy on industrial green total factor productivity is not significant and the direct effect plays a dominant role.

Has R&D contributed to productivity growth in China? The role of basic, applied and experimental R&D

Since the early 2000s, R&D expenditure in China has increased rapidly, with the country having the third highest R&D expenditure, next only to the OECD and USA, and having surpassed Japan since 2009. Furthermore, policies in China in recent years have emphasized the need to conduct more basic and applied R&D in order to overcome technological bottlenecks and risks in access to advanced technologies when faced with international geopolitical tension. However, in the meantime, the trend in measured total factor productivity (TFP) in China has been downward since 2010. A lack of TFP growth despite the significant investment in R&D raises the question of the impact of R&D expenditure on productivity growth in China. Therefore, this study aims to investigate this issue and estimate the effects of three types of R&D stocks (basic, applied and experimental R&D stock) on TFP in China, using newly constructed provincial panel data in China from 1998 to 2018. Various empirical models and control variables are adopted to take into account non-stationarity and spatial spill-over of the provincial R&D stock values over time. The analysis results are robust to various specifications and reveal a significant positive effect of overall R&D and experimental R&D on TFP in China, but basic R&D exerts no significant results, and the effects of applied R&D are mixed across specifications. Further analyses using the 1991–2018 national data demonstrated largely consistent results. These results suggest that experimental R&D has been crucial for enhancing TFP growth in China during the decades investigated, but evidence of basic and applied R&D driving TFP growth in China is lacking.

Productivity drivers and pro-productivity policies: G20 economies, India and South Korea

In this article we look at productivity trends, drivers of productivity growth and pro-productivity policies across the G20 economies since 1970. We distinguish between three sub-groups of G20 economies: a “leading but slowing” group of the most developed economies, a “lagging but growing” group of economies that have shown rapid growth and a “muddling through” group of economies with no sustained improvement in productivity performance. We find distinctly different dynamics between the sub-groups regarding the contributions of capital deepening and total factor productivity (TFP) to labour productivity growth. The slowdown in labour productivity growth since the 2010s has been underpinned by lower TFP growth. India is the only G20 economy which has experienced a significant improvement in TFP growth over the past few decades. We develop a typology distinguishing five domains of pro-productivity policies (accumulation of the factors of production, markets and resource allocation, technological and structural change, internationalisation, and foundational policies) and explore how these have been applied across countries and over time. We also provide a more detailed analysis of productivity and related policies for two G20 countries: India and South Korea. We argue that a revival of productivity growth in the G20 requires a greater focus on policies which balance technological progress with knowledge diffusion; more investment in intangibles and public assets; and improvements in the quality of human capital.

High-quality marine economic development in China from the perspective of green total factor productivity growth: dynamic changes and improvement strategies

High-quality marine economic development (HMED) is regarded as a new development pattern of the marine economy in China. This paper aims to examine the dynamic changes and improvement strategies of HMED from the perspective of the green total factor productivity (GTFP) growth. First, the GTFP growth of the marine economy in China’s coastal regions for the period 2007–2020 is calculated using the bootstrapped Malmquist index. Second, the dynamic changes and spatial impacts of the GTFP growth are characterized using kernel density estimation (KDE). Moreover, a novel analytical framework to study the improvement strategies of the GTFP is developed. Within this framework, the fuzzy set qualitative comparative analysis (fsQCA) method is used to explore the paths to achieve HMED. The findings show that: (i) the GTFP growth for coastal regions shows significant fluctuations, suggesting that a stable pattern of marine economic development has yet to be established; (ii) the regional distribution of GTFP growth varies significantly, with provinces with fast GTFP growth gathering resources from neighboring provinces, resulting in a siphon effect; (iii) for coastal provinces that lack certain development conditions, the combined effect of other advantageous factors can be used to achieve HMED. Finally, this study presents policy recommendations for achieving HMED, which can provide insights into the design of China’s future marine economic policies.

Market Regulation, Cycles, and Growth Dynamics in a Monetary Union

AbstractWe build a two‐country currency union dynamic stochastic general equilibrium (DSGE) model with endogenous growth to assess the role of product market regulation (PMR) and labor market regulation (LMR) for growth and the adjustment to shocks. We show that with endogenous growth, there is no reason to expect real income convergence. Large shocks can lead to permanent changes of output and real exchange rates. Differences are exacerbated by different PMR and LMR. Less regulated economies have higher trend growth and recover faster from negative shocks. Results are consistent with higher inflation, lower employment, and disappointing total factor productivity (TFP) growth rates experienced in more regulated euro area members.

Green growth and net zero policy in the UK: Some conceptual and measurement issues

This paper examines how the likelihood of a transition to net zero could play out on the UK's total factor productivity growth over the longer term. It does this in the context of a potential trade-off between net zero goals and productivity growth. We begin by discussing the concept of green growth and a green industrial revolution, and then relate the green economy to the circular economy, as well as GDP measurement and how this relates to productivity growth under climate policies. We use a simulation method for the projected growth under net zero of the electricity sector in Great Britain to provide a context on the consequences of increasing input growth as output growth declines, and the result shows that the 2020s are challenging decades as productivity declines by −3.24 % p.a. in the electricity sector due to the combination of high input and low output growth. However, our findings reveal that the 2030s and 2040s look more promising, with productivity growth of 3 % p.a. and 1.6 % p.a. respectively as electrification increases and fossil fuel and labour inputs decline. Overall, the analysis offers a glimpse of just how challenging raising even maintaining the level of TFP will be in that sector in the earlier years out to 2050.

Financial Liberalization, Credit Market Dynamism, and Allocative Efficiency

AbstractWe investigate the effects of financial liberalization on the dynamism of the credit market. We measure interfirm credit reallocation in the U.S. states following a methodology akin to Davis and Haltiwanger (1992). We then exploit the staggered liberalization of the credit markets of the U.S. states to identify an exogenous shock to the credit reallocation process. The liberalization intensified credit reallocation in the states, even within narrowly defined groups of continuing firms, while leaving credit growth essentially unaltered. The results suggest that the increased credit market dynamism enhanced the allocation of funds to productive firms and total factor productivity growth.

Structural dynamics and sustainability in the agricultural sector: the case of the European Union

This paper seeks to draw a research agenda for unveiling the underlying bottlenecks and possibilities for improving the agricultural total factor productivity in the European Union (EU). To this aim, the paper first surveys the key challenges for the modern agricultural economy. Then, the case of the EU is discussed by looking at the convergence in the partial productivity indicators (including the GHG emission) and growth efficiency that relate to the gap in the total factor productivity growth. The results suggest that the EU member states exhibited growth inefficiency (i.e., a gap in the total factor productivity growth) of 5–9% on average during 2004–2021. The paper also discusses the possibilities to utilize the production theory for assessing the pathways towards improvements in the productivity and sustainability of the EU agriculture.

China’s 14th Five Year Plan: Unsolved Issues and Possible Way Out

Continued from the previous five year plan, the 14th Five Year Plan (2021–2025) emphasizes quality and innovation-led growth. To allow more flexibility to accomplish the qualitative targets, the central government did not explicitly set a growth target for the 14th Five Year Plan, which is unprecedented since China’s First Five Year Plan (1953–1957). Further, a new growth paradigm of “dual circulation” becomes the mainstay for future economic growth. One of the main planks of “dual circulation” is to boost economic growth via domestic consumption. It is argued that lifting domestic consumption will at best serve as counter-cyclical measures, but have limited impact on long-term growth that rests on the efficient use of factor inputs and the enhancement of total factor productivity (TFP). It is illustrated that China’s growth is constrained by declining population and labor force, shrinking labor and capital productivity as well as dwindling growth of TFP. Future policy initiatives must focus on quality human capital investment, mobility of factor inputs from low value uses to high value uses and productivity-enhancing innovation.

ICT and Agricultural Development in South Africa: An Auto-Regressive Distributed Lag Approach

The use of Information Communication Technology (ICT) forms a significant component of the Fourth Industrial Revolution (4IR). This study examined the impact of ICT on agricultural development in South Africa utilizing time series data from 1995 to 2022. Agricultural development was measured through agricultural output and agriculture total factor productivity as dependent variables. Traditional factors of production (land, labor, and capital) together with ICT variables (mobile cellphone subscriptions, Internet usage, and fixed telephone subscriptions) were used. Additional variables such as inflation, human development, access to energy and climate change were used. Data analysis was performed using the ARDL approach. The findings revealed that mobile phone subscriptions and Internet usage positively affect agricultural output and ATFP in the short and long run despite having a negative effect through the second lag in the short run. Fixed telephone subscriptions negatively affect ATFP in the long run while affecting output negatively in the short run through the first lag. Land, human development index, access to energy, and capital generally exhibited an increasing effect on both agricultural output and ATFP both in the short and long run through the various models estimated. Climate change and inflation were generally found to affect both agricultural output and ATFP negatively in the short and long run. The study concluded that ICT plays a significant role in promoting agricultural output and total factor productivity growth. Recommendations included that the South African government should promote the digitalization of the agriculture sector through the provision of ICT infrastructure that can be utilized by both smallholder farmers and large-scale agricultural producers.