Total Factor Productivity Convergence Research Articles

Related and unrelated variety and convergence to technological frontier: empirical evidence for Polish regions

ABSTRACT This paper examines the effects of related and unrelated variety on total factor productivity (TFP) in Poland. Based on dynamic panel data regression results for Polish regions in 2003-2019, we find the positive effect of related variety and the strong negative effect of unrelated variety on TFP. This implies that regions with high related and low unrelated variety optimize TFP. Using the estimated TFP values, we tested for TFP convergence to the technological frontier using convergence tests that take into account significant differences in technological advancement across regions. We reject TFP convergence for all regions, but we find evidence of regional club convergence. The results of the convergence tests obtained for the simulation variants indicate that changes in related and unrelated variety structures may lead to the formation of convergence clubs with the regional technological leader. Furthermore, the changes primarily in related variety structures lead to the convergence of some regions to the regional technological frontier.

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.

The Role of Environmental Practices and Innovation in Total Factor Productivity Convergence – Evidence from Small and Medium-sized Manufacturing Enterprises in Vietnam

Cette recherche examine le lien entre la conformité environnementale, l’innovation et la convergence de la productivité totale des facteurs. Nous utilisons deux mesures de pratiques environnementales : la norme de certification environnementale et le traitment environnemental. Quant à l’innovation, il s’agit d’une variable qualitative ayant trois modalités croissantes : aucune innovation, innovation de produit ou de procédé et deux types d’innovation. En utilisant une base de données des petites et moyennes entreprises manufacturières vietnamiennes entre 2007 et 2015, les pratiques environnementales ne sont pas corrélées avec la productivité totale des facteurs. En revanche, il existe une forte corrélation entre l’innovation et le traitement environnemental. Les facteurs qui contribuent au taux de croissance de la productivité des entreprises, et par conséquent à la vitesse de convergence, sont l’innovation, la taille de l’entreprise et la forme juridique.

Sources of divergence in income in Indian states, 2001–2015

SummaryMotivationEmpirical studies on income convergence for India indicate that Indian states exhibit divergence in income. The literature, however, has neglected the convergence dynamics of the main sources of output. A pertinent question is whether divergence in income is due to divergence in factor inputs (capital and labour) and/or in total factor productivity (TFP) in India, a low middle‐income country with high dispersion of per capita income across its states.PurposeThis article examines the sources of income divergence in Indian states by analysing convergence in TFP, labour, and capital.Methods and approachWe test for stochastic convergence hypothesis by employing state‐level data for 19 Indian states during the period 2001–2015. Given the small sample dimension of the Indian state‐level income data, we benefit from the recent developments in non‐stationary panel data literature; and conduct novel panel stationarity and unit root tests with a fixed time dimension. We further carry out a robustness analysis to account for cross‐section dependency across the states.FindingsTFP as well as the factor inputs (labour and capital) exhibit divergence, implying persistence in income inequality across Indian states. Divergence in labour across the states reflects the fact that migration is primarily an intra‐district phenomenon. Poor investment climate in low‐income states acts as a barrier for convergence in capital. TFP and capital stock are found to be correlated, and thereby lower investment in poorer states may be responsible for divergence in TFP across the states.Policy implicationsMigration in India is primarily an intra‐district phenomenon. There is a need to study the reasons which are discouraging inter‐district and inter‐state migration for better utilization of the labour resource. Government intervention has not been adequate to improve the infrastructure position and encourage capital inflows to low‐income states. Low‐income states should improve their business climate and create support infrastructure to earn the confidence of investors. Increasing investment in low‐income states would help to increase their TFP and catch up with the high‐income states.

The 'vicious cycle' of energy poverty and productivity: insights from 45 developing countries.

This study is the first proper attempt to examine the influence of energy poverty on productivity. Specifically, the study investigates the effects on the level and convergence of total factor productivity of no access to clean fuels and technologies for cooking; no access to electricity in the total population; no access to electricity in the rural population; no access to electricity in the urban population; non-renewable electricity production; and non-renewable electricity consumption. The study examines a global sample of 45 developing countries from 2002 to 2017 and offers three empirical analysis findings. First, the mutual causalities between the five dimensions of energy poverty and total factor productivity are shown by a non-Granger causality test for panel data, except one-direction causality from no access to clean fuels and technologies for cooking to total factor productivity convergence, which hints a ‘vicious cycle’ of two variables. Second, the two-step system generalised method of moments estimates show significant negative impacts of no access to clean fuels and technologies for cooking and the three variables of no access to electricity on total factor productivity. In contrast, the production and consumption of non-renewable electricity appear to have significant positive effects. Third, the three-stage least squares estimates provide statistical evidence that the effects of energy poverty on total factor productivity are transmitted through human capital accumulation, Internet usage, and the shadow economy.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11356-021-14614-x.

Firm-level TFP convergence: an application to the German electricity and gas industry

ABSTRACT This paper investigates the degree of total factor productivity (TFP) convergence for the German electricity and gas industry. We use different approaches to compute the productivity level and several classic and new second-generation panel unit root tests to check the existence of a convergence process. For robustness purposes, we compare the convergence between small- and medium-sized enterprises and large companies. Our findings show the existence of the TFP convergence process, a result confirmed by all categories of tests we use. Therefore, we show that an innovation transfer is recorded between German electricity and gas firms and it is slightly higher for small- and medium-sized enterprises.

Can foreign direct investment foster the manufacturing industries’ spatial total factor productivity convergence in a transition economy? An empirical approach from Vietnam

AbstractThis study tries to examine the influence of foreign direct investment (FDI) on the total factor productivity (TFP) convergence of the manufacturing industries in Vietnamese provinces. We find that the convergence rates estimated using spatial lag and error models are larger than those implied by panel data models that do not consider spatial dependence. The spatial dependence of TFP growth in the provinces is due to geographical TFP and FDI spillovers. Our findings indicate that studies on the convergence rate of regions should check for spatial dependence.

Firm-Level Total Factor Productivity Convergence in German Electricity and Gas Industry

This paper investigates the degree of total factor productivity convergence for the German electricity and gas firms. We use different approaches to compute the productivity level and several old and new panel unit root tests from the second generation to check the existence of a convergence process. For robustness purpose we compare the convergence between small and medium-sized enterprises and large companies. Our findings show the existence of the convergence process in terms of total factor productivity, result confirmed by all categories of tests we use. Therefore, an innovation transfer is recorded between German electricity and gas firms, transfer that is slightly higher for small and medium-sized enterprises.

Research on TFP change and convergence of China’s regional real estate industry

The added value method is used to screen the input and output indicators of the real estate industry. The DEA-Malquist method was used to measure the total factor productivity (TFP) of the real estate industry in China’s 30 provinces from 2006 to 2017. Further, the convergence test of the real estate industry TFP in eastern, central and western China was conducted. It was found that the average growth rate of real estate industry TFP in China’s 30 provinces during the period was 3.3%. Technical efficiency was the main driving force for TFP growth, and the contribution of technological progress was relatively small. In the improvement of technical efficiency, pure technical efficiency is obviously improved, and the improvement of scale efficiency is limited. The absolute β convergence test was carried out. From the national perspective, the TFP gap in the real estate industry in each province has a significant narrowing trend; In terms of regions, the TFP gap in the real estate industry in the eastern provinces has a narrowing trend, but it is not significant; The growth of TFP in the real estate industry in the central region has a significant catch-up characteristic, and the TFP gap between provinces has gradually narrowed; The TFP gap in the real estate industry in the western provinces has significantly expanded.

Bank total factor productivity convergence: Evidence from india

This study examines the total factor productivity convergence for a sample of Indian commercial (public, private and foreign) banks for the period 1992–2018. Our empirical findings strongly support the convergence (beta and sigma) hypothesis among Indian banks without ownership bias. The speed of productivity convergence is higher in the public sector banks followed by foreign and private banks during the sample period.

A reassessment of total factor productivity convergence: Evidence from cross-country analysis

This study revisits total factor productivity (TFP) convergence by employing the latest Lagrange multiplier and residual augmented least squares Lagrange multiplier unit root tests and Phillips and Sul panel club convergence technique. The study uses annual data for 44 developing and 29 developed countries covering the time-period 1970–2014. Our findings from these unit root tests support evidence of TFP convergence. Region-based results (Africa, Asia, and Latin America and the Caribbean) also confirm TFP convergence. Further, results derived from the Phillips and Sul test support evidence of TFP convergence, although the speed of convergence varies by region. The highest speed is noted in the Asia region, whereas, the lowest of speed productivity convergence is observed in the Africa region.

The difference and convergence of total factor productivity of inter-provincial water resources in China based on three- stage DEA-Malmquist index model

A three-stage DEA-Malmquist index method was used to measure and analyze the total factor productivity and its decomposition index of provincial water resources in China from 2008 to 2015. The results showed that the total factor productivity and its decomposition index of inter-provincial water resources in China have changed significantly after ruling out external environmental factors and random error factors: the total factor productivity increased by 7.9% annually; technical efficiency index increased by 4.7% per year and the average annual growth rate of the technical progress index reached 3.1%. Technical efficiency is a main growth driver for the total factor productivity of provincial water resources in China. Sub-regionally, annual growth rate of the total factor productivity of water resources in Western China was 10%, which is higher than that of the whole country and that of Eastern and Central China. Technical progress index in Eastern China increased by 4.8% per year for index decomposition of total factor productivity, and it is higher than that of the whole country and the Central and Western China. Besides, technical efficiency of Western China with an increased by 8.2% per year is higher than that of the whole country and the Eastern and Central China. The adjusted total factor productivity was tested for σ convergence and β convergence. The test results showed that there was no σ convergence nor conditional β convergence in the total factor productivity, but there was significant absolute β convergence, indicating that the gap in total factor productivity gap of water resources between all provinces in China is narrowing and eventually converging to the same steady state equilibrium level. The growth of the total factor productivity of water resources in China has not yet reached maturity. Hence, its suitable conditional convergence path has not been found yet.

Total Factor Productivity Convergence in Developing Countries: Role of Technology Diffusion

AbstractIn recent years, though total factor productivity (TFP) convergence phenomenon has gained tremendous importance yet further deliberations for identification of catalytic factors that can help developing countries to achieve their steady developmental paths, are under way. Against this backdrop, present study investigates the principal determinants of TFP convergence by employing data of 91 developing countries over the period 1960–2015 and with USA being the frontier country. In concordance with the existing literature, main focus remains on technology diffusion for the catch‐up process and is measured by means of trade openness (TO) and foreign direct investment (FDI) with introduction of their interaction terms. However, TFP is computed by incorporating the Growth Accounting Model while empirical results are drawn from the 2‐step GMM estimation technique. It is surfaced that though high degree of openness benefits TFP growth and convergence but FDI has a dominating role. Therefore, governments can play a competent role via unflagging efforts in ensuring that the right kind of policies are enacted, promoting trading activities and FDI flows.

Total Factor Productivity of the Japanese Rice Industry

We calculate partial factor productivity and total factor productivity (TFP) indices for rice production using panel data across 42 Japanese prefectures from 1996 to 2006, and perform panel unit root tests of TFP convergence across prefectures. We find that during this period, the partial factor productivity growth rates for capital, land and materials stagnated at the aggregate national level, as did the TFP growth rate, despite a large increase in labor productivity. We also identify evidence of a convergence in TFP across Japanese prefectures.

Business reforms and total factor productivity in Vietnamese manufacturing

Vietnam implemented reforms in the 2000s to ease start-up of new businesses with dramatic effect on firm entry and market competition. This study examines firm level data for the period 2000–2010 to analyze total factor productivity (TFP) in connection with the reforms, adopting a semi-parametric technique developed by Wooldridge (2009) and Petrin and Levinsohn (2012) to measure TFP. Intensified competition is hypothesized to have driven convergence of TFP within industrial sectors as technologies best suited to Vietnamese market conditions became more widely implemented. The evidence strongly supports this hypothesis with convergence found for 16 of the 17 sectors analyzed. Further, comparison of TFP growth rates between the first and second half of the decade shows mixed results by sector and region. More often than not, TFP growth is seen to have slowed over time. This suggests that competition acted not only to push low TFP firms to exit the market or raise productivity, it also discouraged use of technologies that may have been overly advanced and not cost efficient for Vietnam.

Income Disparities, Population and Migration Flows Over the 21st Century

This paper provides worldwide projections of population, educational attainment, international migration and income for the 21st century. We develop and parametrize a dynamic, stylized model of the world economy that accounts for the key interdependencies between demographic and economic variables. Our baseline scenario is in line with the ‘high-fertility’ population prospects of the United Nations, assumes constant education and migration policies, long-run absolute convergence in total factor productivity (TFP) between emerging and high-income countries, and the absence of economic takeoff in Africa. It predicts a rise in the income share of Asia (from 38 to 59 percent of the world income) and in the demographic share of Africa (from 10 to 25 percent of the world population). However, over the 21st century, the worldwide proportion of adult migrants will only increase by one percentage point (from 3.5 to 4.5 percent). Half of this change is explained by the increased attractiveness of China and India; and the remaining part is explained by the increased migration pressure from Africa to Western Europe. Keeping its immigration policy unchanged, the 15 members of the European Union will see their average immigration rate increase from 7.5 to 17.2 percent. On the contrary, immigration rates will remain stable in the other high-income countries. Then, we assess the sensitivity of our projections to changes in migration policies, TFP disparities, fertility and education. The evolution of productivity in emerging economies and in Africa will have a drastic impact on the worldwide population size, income disparities and the migration pressure to the European Union. The world economy will also be drastically affected if TFP convergence is accompanied by a fall in migration costs to China and India. However, a large increase in the average European immigration rate is obtained under all the scenarios. More than ever, the management of immigration will become a major societal challenge for Europe.

Income Disparities, Population and Migration Flows Over the Twenty First Century

This paper provides worldwide projections of population, educational attainment, international migration and income for the twenty first century. We develop and parametrize a dynamic, stylized model of the world economy that accounts for interdependencies between socio-demographic and economic variables. Our baseline scenario is in line with the ‘high-fertility’ population prospects of the United Nations, assumes constant education and migration policies, long-run absolute convergence in total factor productivity (TFP) between emerging and high-income countries, and the absence of economic take-off in Africa. It predicts a rise in the income share of Asia (from 37 to 58% of the world income) and in the demographic share of Africa (from 10 to 29% of the world adult population). Over the twenty first century, the worldwide proportion of adult migrants will increase by less than 1% point (from 3.5 to 4.3%). Keeping its immigration policy unchanged, the 15 members of the European Union will see their average immigration rate increase from 7.4 to 18.2%. In Italy, the immigration pressure will increase fourfold. On the contrary, immigration rates will be fairly stable in the non-European, high-income countries. Then, we assess the sensitivity of our projections to changes in migration policies, TFP disparities, fertility and education. Large increases in the average European (and Italian) immigration rates are obtained under all the scenarios. More than ever, the management of immigration will represent a major societal challenge for European countries.

The impact of the Great Recession on TFP convergence among EU countries

ABSTRACTThis article provides evidence on the effect of the Great Recession on productivity convergence among European Union (EU) economies. We use firm data, aggregated at the country-year level, to analyse the evolution of beta-convergence on total factor productivity (TFP) for 2003–2014. We obtain a positive impact of the recession on TFP (unconditional and conditional) beta-convergence across EU economies. These results support the existence of a catching-up process within the EU during the recent financial crisis. Other macroeconomic and institutional characteristics are important in fostering TFP growth, namely R&D intensity and quality of governance.

Total factor productivity convergence in German states since reunification: Evidence and explanations

A quarter-century after reunification, labor productivity in the states of eastern Germany continues to lag systematically behind the West. Persistent gaps in total factor productivity (TFP) are the proximate cause; conventional and capital-free measurements confirm a sharp slowdown in TFP growth after 1995. Strikingly, eastern capital intensity, especially in industry, exceeds values in the West, casting doubt on the embodied technology hypothesis. TFP growth is negatively associated with rates of investment expenditures. The stubborn East-West TFP gap is best explained by low concentration of managers, low startup intensity and the distribution of firm size in the East rather than R&D activities.

Total factor productivity convergence across the Kazakh regions

This article examines total factor productivity (TFP) convergence across the regions of Kazakhstan over the period of 1997–2013. Using a growth accounting methodology we found that the average level of TFP fell by almost 40% over the period under consideration. Several panel unit root tests confirm that the whole set of Kazakh regions and the group of non-oil regions converged in terms of TFP, while the group of oil-rich regions diverged. This result explains sigma-divergence of the GRP per capita across the regions of Kazakhstan by divergence in capital intensity.