Neoclassical Growth Accounting Research Articles

Conflict dynamics and costs in the Greek Civil War 1946–1949

Using a new set of data from Greek Army sources, US military archives, and Communist Party documents, the paper provides a quantitative analysis of the armed confrontation that took place in Greece during 1946–1949. A dynamic Lotka–Volterra model is estimated, pointing to the existence of a conflict trap that explains the prolongation of the civil war and its dire consequences for the country. A regional analysis finds that the mobilization of guerrilla forces was crucially affected by morphology and the local persecutions of political rivals. Using neoclassical growth-accounting, the economic cost of the conflict is estimated to surpass an annual GDP, in line with similar findings in contemporary civil wars. The same framework is employed to assess the outcome in counterfactual situations discussed in this paper.

Where do Investments in Telecoms Come from? Developing and Testing a Framework of Sustained Economic Impact of Investments in Information and Communication Technologies

The framework of neoclassical growth accounting is widely used to estimate the impact of investments in information and communication technologies (ICT) on the macroeconomic bottom line. Results of multiple investigations presented evidence that investments in ICT have a positive impact on such measure of macroeconomic outcome as gross domestic product. Thus, it is not surprising that less developed countries of the world often turn to investments to ICT as one of the sources of a sustained economic development. But sustainability of economic growth is predicated on the sustainability of the sources of growth, such as investment capital and labor. The question of how annual investments in ICT are sustained is an important one, and yet it was not given much research consideration. This is, in part, due to the absence of a theoretically sound framework outlining mechanisms of investments → outcomes → reinvestments process. In this study, we synthesize a consistent with the framework of neoclassical growth accounting model allowing for investigating the process by which various microeconomic outcomes of investments in ICT are associated with re-investments in ICT. We test the proposed model using techniques of structural equation modeling with the data on investments in telecoms (a common subset of investments in ICT) in the context of transition economies. The results of the investigation support the notion of cyclical relationship between investments in ICT and economic outcomes [Qureshi, S. (2013). What is the role of mobile phones in bringing about growth? Information Technology for Development, 19(1), 1–4] and offer valuable insights to decision- and policy-makers tasked with the responsibility of improving the impact of investments in ICT.

Efficiency Change over Time in a Multisectoral Economic System

Neoclassical growth accounting is a methodology used to measure the contribution of different production factors to economic growth and to indirectly compute the rate of technological progress. This model assumes constant returns to scale and perfectly competitive factor markets, which implies that factor prices are equal to marginal products – something that is only satisfied if factor markets are cleared, and external effects and distortions are absent. However, these conditions are usually not satisfied in real economies. Moreover, growth accounting assumes efficiency on factor and commodity markets, and consequently does not distinguish between efficiency change and technical change. In this paper, we estimate total factor productivity growth without recourse to data on factor input shares or prices. In the proposed model, the economy is represented by the Leontief input-output model, which is extended by the constraints of primary inputs. A Luenberger productivity indicator is proposed to estimate productivity change over time; this is then decomposed in a way that enables us to examine the contributions of individual production factors and individual outputs to productivity change. The results allow the inference of which inputs or outputs of an economy are the drivers of the overall productivity change– this is then decomposed into efficiency change and technical change components. Using input-output tables of the US economy for the period 1977 to 2006, we show that technical progress is the main source of productivity change. Technical progress, in turn, is mostly driven by capital whereas low-skilled labor contributes negatively.

The spillover effects of investments in telecoms: insights from transition economies

For several years, researchers and practitioners have been concerned about the impact of investments in information and communication technologies (ICTs) on productivity. The research framework of neoclassical growth accounting is widely used in this area of research on information technology and productivity. While several studies have explored the relationship between investments in ICT and metrics such as GDP, the links between investments in ICT and total factor productivity (TFP) have received less attention, particularly for transition economies (TEs). While the data that we use in this study are directly related to TEs, our exploration can provide insights that are useful for understanding similarities and differences between developed and developing/emerging economies. In this study, we propose and illustrate a methodology for investigating the relationship between investments in ICT and TFP that is consistent with the framework of neoclassical growth accounting. Narcyz Roztocki and H. Roland Weistroffer are the accepting Guest Editors for this article.

Understanding the Human Capital Dimension of ICT and Economic Growth in Transition Economies

Human capital is one of the key factors affecting the expansion of ICT and the realization of macroeconomic outcomes in transition economies (TE). Research on ICT investments and their impact on the economic bottom-line have pointed to the shortage of technologically skilled ICT workers who can adopt, implement, innovate and maintain new information technologies in TEs. While ICT regulatory policies have shifted to encourage increased ICT investments, the ability to formulate and implement complementary practices to investments in ICT human capital development strategies remains a continuing problem. In this investigation we inquire into the relationship between investments in Telecoms (a subset of investments in ICT), and a full-time Telecom staff, and propose a two-phase approach allowing for formulating policy and strategies for complementary investments in the development of the ICT workforce. The proposed two-phase approach for formulating empirically-justifiable and theoretically sound HR strategies is then tested in the context of eight TEs. The framework of neoclassical growth accounting and the theory of complementarity provide the theoretical foundation for this inquiry, while multivariate regression and data envelopment analysis are utilized to conduct the data analysis.

Improving the relative efficiency of revenue generation from ICT in transition economies: a product life cycle approach

In order to attract domestic and international investors, transition economies (TE), i.e. economies in the transition from planned to market-driven, must demonstrate their ability to convert investments into revenues in an efficient and effective manner. In this study, conducted in the context of 18 TEs, we investigate strategies for increasing the relative efficiency of the production of revenues from information and telecommunications technologies (ICT). We use a four-step methodology incorporating data envelopment analysis and neural networks to determine the areas along the product life cycle curve where increased investments in ICTs will likely have the most macroeconomic impact in a resource-efficient manner. We use the framework of neoclassical growth accounting to support our inquiry. James Pick is the accepting Associate Editor for this article.

The contribution of Information and Communication Technology investments to Greek economic growth: An analytical growth accounting framework

Information and Communication Technology (ICT) investments are the driving force behind the resurgence of growth in the developed countries during recent years. They are also the main reason for the increased growth rates of Total Factor Productivity (TFP). In this paper, we examine whether these relationship also hold for Greece. We use a neoclassical growth accounting model to identify the sources of growth and more specifically the role of ICT investments. We find that the contribution of ICT investments has increased during the period 1988–2003, but that this contribution is still lower than in the United States. During 1996–2003, ICT capital services contributed 0.75 to the total growth rate. We also examine the role of ICT investments at the industry level; we find that ICT investments have most benefited the Finance, Insurance, Real Estate and Business Services industries, and the Wholesale and Retail Trade industries. Finally, our results show that growth rates of TFP have also risen, a necessary condition to maintain the high growth rates of productivity in the future.

Strategies for Telecoms to Improve Efficiency in the Production of Revenues: An Empirical Investigation in the Context of Transition Economies

Despite sharing a common label, Transition Economies (TE) do not constitute a homogenous group; rather, these countries differ in many ways, including the level of economic development. These differences preclude TEs from adapting a uniform strategy towards increasing the level of relative efficiency of production of revenues from investments in Telecoms. In this study, conducted in the context of 18 TEs, we address two research questions. The first involves the identification of strategies appropriate to each TE for increasing the level of the relative efficiency of the production of revenue from Telecoms. The second question involves the identification of the appropriate implementation routes of the identified strategy. In order to answer the research questions of this study, we draw theoretical support from the framework of Neoclassical Growth Accounting and employ a three-step methodology utilizing Decision Trees, Neural Networks, and Data Envelopment Analysis.

Explaining a Productive Decade

Explaining a Productive Decade Stephen D. Oliner, Daniel E. Sichel, and Kevin J. Stiroh Productivity growth in the United States rose sharply in the mid-1990s, after a quarter century of sluggish gains. That pickup was widely documented, and a relatively broad consensus emerged that the speedup in the second half of the 1990s was importantly driven by information technology (IT).1 After 2000, however, the economic picture changed dramatically, with a sharp pullback in IT investment, the collapse in the technology sector, the terrorist attacks of September 11, 2001, and the 2001 recession. Given the general belief that IT was a key factor in the growth resurgence in the mid-1990s, many analysts expected that labor productivity growth would slow as IT investment retreated after 2000. Instead labor productivity accelerated further over the next several years. More recently, however, the pace of labor productivity growth has slowed considerably. [End Page 81] In light of these developments, researchers and other commentators have been intensely interested in the course of productivity growth since 2000. Distinguishing among the possible explanations for the continued strength in productivity growth is challenging, because much of that strength appeared in measured multifactor productivity (MFP), the unexplained residual in the standard growth accounting setup. Nevertheless, potential explanations can be divided into two broad categories: those centered on IT and those unrelated or only loosely related to IT. The simplest IT-centered story—that rapid technological progress in the production of IT and the induced accumulation of IT capital raised productivity growth—does not work for the period after 2000, because the contributions to growth from both the production and the use of IT declined. A second IT-related story that has received a great deal of attention is that IT investment proxies for complementary investments in intangible capital, and a growing body of research has highlighted the important role played by such intangibles.2 A third IT-related story identifies IT as a general-purpose technology that spurs further innovation over time in a wide range of industries, ultimately boosting growth in MFP.3 Because this process takes time, the gains in MFP observed since 2000 could reflect the follow-on innovations from the heavy investment in IT in the second half of the 1990s. Another broad set of explanations highlights forces not specific to IT. Gains in labor productivity since 2000 could have been driven by fundamental technological progress outside of IT production, as implied by the strong growth in MFP in other sectors.4 Alternatively, the robust advance in labor productivity could reflect broader macroeconomic factors such as normal cyclical dynamics, a decline in adjustment costs after 2000 as investment spending dropped back, greater-than-usual business caution in hiring and investment, or increased competitive pressures on firms to [End Page 82] restructure, cut costs, raise profits, and boost productivity. The profit-driven cost-cutting hypothesis, in particular, has received considerable attention in the business press.5 In this paper we try to sort out these issues using both aggregate and industry-level data.6 We investigate four specific questions. First, given the latest data and some important extensions to the standard growth accounting framework, is an IT-centered story still the right explanation for the resurgence in productivity growth over 1995-2000, and does IT play a significant role when considering the entire decade since 1995? Second, what accounts for the continued strength in productivity growth after 2000? Third, how has investment in intangible capital influenced productivity developments? Finally, what are the prospects for labor productivity growth in coming years? Our analysis relies in part on neoclassical growth accounting, a methodology that researchers and policymakers have used for many years to gain insights into the sources of economic growth. Notably, the Council of Economic Advisers, the Congressional Budget Office, and the Federal Reserve Board routinely use growth accounting as part of their analytical apparatus to assess growth trends.7 Of course, growth accounting is subject to limitations, and in recent years many analysts have leveled critiques at this methodology. For example, the standard neoclassical framework does not explicitly account for adjustment costs, variable factor utilization, deviations from perfect competition and constant returns to scale...

Neoclassical Growth Accounting and Frontier Analysis: A Synthesis

The standard measure of productivity growth is the Solow residual. Its evaluation requires data on factor input shares or prices. Since these prices are presumed to match factor productivities, the standard procedure amounts to accepting at face value what is supposed to be measured. In this paper we estimate total factor productivity growth without recourse to data on factor input prices. Factor productivities are defined as Lagrange multipliers to the program that maximizes the level of domestic final demand. The consequent measure of total factor productivity is shown to encompass not only the Solow residual, but also the efficiency change of frontier analysis and the hitherto slippery terms-of-trade effect. Using input-output tables from 1962 to 1991 we show that the source of Canadian productivity growth has shifted from technical change to terms-of-trade effects.

Biased Technical Change, Growth Accounting, and the Conundrum of the East Asian Miracle

The standard neoclassical growth accounting approach suggests that much, if not all, of the fast growth rates of the East Asian Tigers, was input driven. R. R. Nelson and H. Pack (Econ. J.109, 457:416–436, July 1999) have pointed out that these estimates may be subject to substantial errors caused by the presence of biased technical change and an elasticity of substitution that is less than 1. This paper proposes a method for implementing empirically their arguments. We find that, while indeed the total factor productivity (TFP) growth rates of these countries increase with the adoption of the modified growth accounting methodology, so also do the TFP growth rates of a group of developed countries. Thus, the standard conclusions about the role of technical progress in the region do not change substantially in relative terms. J. Comp. Econ., September 2001, 29(3), pp. 542–565. Georgia Institute of Technology, Atlanta, Georgia 30332-0610; Downing College and University of Cambridge, Cambridge, United Kingdom. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: O47, O53.

Intertemporal and interspatial productivity differentials in U.S. manufacturing

This study analyzes the role productivity plays in explaining the variation in regional manufacturing growth rates. Using the neoclassical growth accounting procedure, we measure productivity from an intertemporal and interspatial perspective. Previous regional studies of U.S. manufacturing look only at the contribution of intertemporal productivity growth in explaning regional growth. These studies ignore the level of productivity and its effect on regional growth. For each year of our study, we rank regions by their interspatial productivity index. We find little difference between the productivity growth rates among the regions of the north and south. Differences among the regions emerge only when we consider interspatial productivity differentials. The North's level of factor productivity is 25 to 30% higher than the South's. The absolute productivity disadvantage of the South, however, is offset by its low input prices. Thus, it is the cost advantage of the South and not its productivity advantage that explains the region's relatively high growth rate.