Total Factor Productivity Performance Research Articles

Productivity and Technology for Asia’s Growth

For Asia to realize the Asian Century in 2050 and reach per capita income levels similar to Europe today, its fast-growing converging economies must sustain their growth momentum. The slower growing countries must accelerate their growth to achieve convergence status during this period. The underlying requirement for both groups is continued rapid improvement in total factor productivity (TFP). Although it may sound ambitious and though it is definitely not preordained, Asia can reach this dream if its economies strive for excellence in the areas of productivity and innovation, while learning from the best practice in the region and beyond. This article addresses the TFP level and performance of Asian economies, the salient underlying factors, and the strategies that Asian economies must pursue to make further improvement.

Trends of productivity growth in the construction industry across Europe, US and Japan

Productivity is a key driver for economic growth and prosperity in any country. The pursuit of productivity growth requires an understanding of the factors affecting productivity. The trend of productivity growth, along with the possible factors underlying such growth across Europe, the US and Japan, is thus examined. In particular, there is a focus on comparing the productivity performance of the construction sector to that of other industries. Using the recently released EU KLEMS1 database,2 a growth accounting framework was adopted to assess the contribution of the following factors to productivity growth (during 1971–2005): capital, labour quality and total factor productivity (TFP). It was found that there is a general slowdown in labour productivity growth in total industries including construction across major OECD countries, with the exception of the UK. The differences in labour productivity growth between construction and total industries can be largely explained by construction’s poor TFP performance. With the exception of the UK, TFP negatively contributed to labour productivity growth in the period 1990–2005, suggesting that the industry has become less efficient in combining the factors of production. That phenomenon seems to be consistent across all selected countries and warrants further investigation. Indeed a better understanding of the factors underlying productivity growth in OECD countries is a prerequisite for effective intervention of policy makers to support sustained productivity growth.

THE IMPACT OF R&D ON THE SINGAPORE ECONOMY: AN EMPIRICAL EVALUATION

This paper provides empirical estimates for the impact of R&D on economic growth in Singapore. The Cobb–Douglas based analysis found that R&D investment had a significant impact on total factor productivity performance in the last 20 years and established a long-term equilibrium relationship between R&D investments and TFP. However, compared to OECD countries, the impact of R&D on growth in Singapore is not as strong. To catch up with the developed nations in terms of R&D productivity not only requires increasing R&D intensity in Singapore but also more efficient exploitation of domestic R&D activity.

A DEA Approach to Explain Relative Productivity Performance of Indonesiaas Regional Government Bank

This paper assesses the total factor productivity performance of Indonesia’s regional government banks, using a balance panel data of 26 banks over fifteen year’s periods. The main focus of this study is to judge the performance of the sample banks in terms of total factor productivity growth achieved over the study period, and then to identify the principal sources via the decomposition into efficiency and technological changes. It is important to emphasize that these indicators capture performance relative to the best practices followed by the banks in the sample, where the best practice refers to the grand production frontier achieved by the banks in this study. The findings indicate these banks still have to maximizing the use of inputs to achieve the best practice productivity performance by increasing the output produce from their role as intermediary institutions.

Towards an efficient innovation policy in Latin America

Innovation has emerged as a central theme on the growth agenda of Latin America. This paper examines four issues. First, how can we know if Latin America really has an “innovation problem” that is behind its weak total factor productivity performance? Second, what do we mean by innovation and what are dimensions of it in which the region exhibits weaknesses? Third, what does recent experience and literature suggest for principles and broad policy measures to foment innovation? Fourth, are there any linkages between these weaknesses and equity? Since even in the Organisation for Economic Cooperation and Development (OECD) there is little consensus on the specific policies that governments should implement, and even less on their suitability to developing countries, this paper attempts to organize thinking around some basic principles and offer suggestive experience rather than specific policy advice.

The Impact of R&D on the Singapore Economy: An Empirical Evaluation

Much of the literature on the impact of R&D on economic performance is founded on the advanced countries, where the intensity of R&D expenditure has been relatively high and stable for many years. In this paper, we provide empirical estimates of the impact of R&D on the economic growth of a Newly Industrialised Economy, Singapore, where R&D expenditure intensity has been low initially, bur rising rapidly in recent years. The Cobb-Douglas based analysis provided empirical evidence that R&D investment in Singapore had a significant impact on its total factor productivity performance in the last 20 years and established a long-term equilibrium relationship between R&D investments and TFP. However, compared to the OECD nations, the impact of R&D investment on economic growth in Singapore is not as strong, as evidenced by lower estimated elasticity values. The long run elasticity of output with respect to R&D was computed to be 8.1% for Singapore compared to long run elasticities of over 10% estimated by other researchers for OECD countries. This suggests that Singapore still has some way to go in catching up with the advanced nations in terms of R&D productivity. This not only means increasing the level of R&D intensity in Singapore but also more efficient exploitation of domestic R&D activity.

The Case of the Missing Productivity Growth, or Does Information Technology Explain Why Productivity Accelerated in the United States but Not in the United Kingdom?

Solow's paradox has disappeared in the United States but remains alive and well in the United Kingdom. In particular, the United Kingdom experienced an information and communications technology (ICT) investment boom in the 1990s, in parallel with the United States, but measured total factor productivity (TFP) has decelerated rather than accelerated in recent years. We ask whether ICT can explain the divergent TFP performance in the two countries. Stories of ICT as a general purpose technology (GPT) suggest that measured TFP should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital, spillovers, or both) but perhaps with long lags. Contemporaneously, investments in ICT may in fact be associated with lower TFP because resources are diverted to reorganization and learning. In both the United States and the United Kingdom, we find a strong correlation between ICT use and industry TFP growth. The U.S. results are consistent with GPT stories: the acceleratio...

Productivity growth, capacity utilization, and technological progress in the natural gas industry

The main objective of this paper is to estimate the total factor productivity in the natural gas industry based on international comparison. Countries to be considered in the empirical analysis include the US, Canada, France, Italy, Japan and Korea. We also examine the determinants of total factor productivity performance focusing on the scale and capacity utilization effect. Methodologically, we will adopt the short-run equilibrium model based on the translog cost function incorporating the capacity utilization as an endogenous factor. From the results of our study, we found that the sources of productivity growth over time and productivity difference among countries in the natural gas industry differ from country to country. Especially, technological change turned out to be the main source of productivity growth in those countries with mature industry, while the effect from scale economies was the main contributor to productivity growth in Korea with a premature industry. Based on the empirical findings, we consider policy implications for the Korean natural gas industry.

Monitoring the Performance of Government Trading Enterprises

Total factor productivity (TFP) was used for some years as a single indicator for measuring performance of government trading enterprises in Australia. More recently there has been a shift in emphasis towards financial criteria, with little or no mention of TFP. But it is well known that financial measures can be inappropriate for enterprises with market power.We show that it is important to monitor both TFP and financial performance. TFP performance alone can be misleading and be achieved at the expense of financial performance—this is illustrated for Australian National Railways during the 1980s. TFP and financial performance can be directly linked, and this provides a better framework for performance assessment over time. We explore the relationship between productivity, price performance, and various financial measures.

Spillovers, Linkages and Technical Change

Using US input–output data for the period 1958–87, I find strong evidence that industry total factor productivity (TFP) growth is significantly related to the TFP performance of the supplying sectors, with an elasticity of almost 60%. R&D intensity is also found to be a significant determinant of industry TFP growth, with an estimated return of about 10–13% and the return to embodied R&D is estimated at 43%. Direct productivity spillovers, from the technological progress made by supplying sectors, appear to be more important than spillovers from the R&D performed by suppliers. They also play a key role in explaining changes in manufacturing TFP growth over time. Changes in the contribution made by direct productivity spillovers to TFP growth account for almost half of the slowdown in TFP growth in manufacturing from 1958–67 to 1967–77, and for 20% of the TFP growth recovery in this sector from 1967–77 to 1977–87. Changes in R&D intensity and embodied R&D are relatively unimportant in explaining movements in manufacturing TFP growth over these three periods.

Elasticities and factor weights for agricultural growth accounting: A look at the data for China

We review factor weight assumptions used in four studies of trends in total factor productivity (TFP) in Chinese agriculture, and factor elasticities estimated in 12 Chinese agricultural production function studies. We find that econometric estimates of the output elasticity of land typically exceed the upper bound weight for that factor used in the TFP studies. We illustrate the sensitivity of TFP trends to factor assumptions by showing that adopting average elasticities as factor weights leads to a less negative assessment of TFP performance in the collective period. We suggest directions for further progress in these studies.

Productivity-based financial net income analysis

This paper develops the analytical framework for a productivity based financial analysis, which has been successfully introduced by the authors as standard reporting in a major corporation. This analysis is designed to broaden and supplement conventional income statement analysis. It partitions expense and revenue items into their respective price and quantity components and establishes the precise relationship between total factor productivity performance and key aspects of financial performance. The underlying theory is reviewed. Subsequently, an actual case study example is analyzed. Some of the major additional insights into factors affecting the economic health of a productive enterprise and their implications for corrective actions are illustrated and discussed.