Effective Rates of Sectoral Productivity Change

In effective rates of sectoral productivity change, some of the inputs are treated as produced. Here, this is extended to cover all the inputs. All the sectoral rates of productivity growth based on a static input–output (IO) framework are shown to be equal to the corresponding rates of decrease in the production price. For the direct rate, all the input prices are treated as exogenous constants. For the effective rates, prices of the inputs, which are treated as produced, are determined by production technology. The fully effective rate is derived from the price equations of the closed dynamic IO model. It is equal to the rate of decrease in the production price when the prices of all inputs, human capital and human time included, depend on production technology. The overall rate, obtained as a weighted sum of the fully effective sectoral rates, is equal to the rate of growth in the growth potential of the economy.     

Dynamics of Trade Integration and Technological Convergence

The issue of the impact of trade on economic performance and labour markets has been intensively discussed in recent literature on trade liberalization and globalization, where the debate was mainly about identifying the relative impact of trade and technology. The bulk of the existing literature in this area employs, almost without exception, a static Heckscher-Ohlin framework that seems not to be a suitable tool for analysing the ongoing dynamics. This paper presents a dynamic multi-sectoral framework with heterogenous labour to explore the issue of trade liberalization and sectoral catching-up in productivity levels. The model is basically an input-output framework with Schumpeterian features; the latter are modelled as the impact of transitory rents that result from uneven productivity growth and technological catching-up upon the price and quantity systems of the trading economies. Relative productivity and wage rate dynamics across sectors determine the comparative costs and the dynamics of trade specialization. In the Appendix, the equilibrium solutions of the model are derived.     

Temporary contracts and labour productivity in Spain: a sectoral analysis

This paper analyses the impact on sectoral labour productivity growth caused by the increase in the use of temporary employment contracts in Spain over the period 1987–2000. With this aim, we estimate a production function model in which effective labour is represented by the shares of permanent, temporary and self-employed workers. Results suggest that productivity growth has been slowed down by the use of temporary contracts for regular jobs and that this has not been affected by compositional changes in activity over the period. However, this effect has only been detected in the manufacturing and energy sector, in contrast to low-technology low-human capital sectors like construction and hospitality.     

The effect of population growth,the pattern of demand and of technology on the process of urbanization

A nonlinear, three-sector, two-region wage and price endogenous dynamic general equilibrium model is used to study the effects of population growth, the pattern of demand, and technological change on urbanization in the context of a low-income developing country starting at a low level of urbanization. The model represents a closed economy and is therefore more suited to a large country. It is validated on Indian data and traces its development path well from 1950 to the present. The sectors modeled are agriculture, industry, and services with the latter two being located exclusively in urban areas. The three sectors are linked with an input-output matrix which subsumes transportation costs incurred between urban and rural areas. The model is designed to investigate long-term changes, e.g., over a 30-year period, and factor mobility is therefore assumed to be “almost perfect.” The model demonstrates that rapid agricultural productivity growth, high rates of investment, and Engel demand effects combine to produce a continuing increase of urbanization as development occurs in an economy. The rate of urbanization is not necessarily dependent on high overall population growth: indeed, under certain conditions, a lowering of overall population growth might speed up the rate of urbanization. The pattern of demand and changes in the pattern can affect the rate of urbanization significantly: in particular, Engel-type demand changes serve to make the process of urbanization logistic. Technological bias effects are not very strong but effective appropriate technology policies might speed up urbanization.     

Sectoral sources of metropolitan growth

The paper proposes a method for identifying sectoral sources of metropolitan employment growth The key feature of the VAR is the set of (over)identifying restrictions which do not require a causal ordering to be developed among industries to create orthogonal sectoral shocks. The simulations for four cities indicate that local sectoral shocks are more important than national counterparts, and that among local shocks, the overall evidence indicates that manufacturing, service and public sector employment shocks account for a substantial portion of employment growth variation, a conclusion that seems roughly consistent with export-oriented models of metropolitan growth.     

General Equilibrium Analysis of International TFP Growth Rates

The paper presents a study of the total factor productivity (TFP) performance among developed countries between 1985 and 1990. The analysis includes the three large economies: the US, Japan and Europe. A general equilibrium model of these economies is used to estimate TFP growth at the sectoral and at the aggregate levels. The model is based on the fundamentals of the economies and employs only data on input-output flows, factor inputs across sectors, consumption and trade patterns and endowments. Prices are endogenous in the model. They are obtained as shadow prices from the model's linear program and then used to measure TFP growth and decompose it in a technical change effect, a demand effect and a terms-of-trade effect. The technical change effect is highly correlated with the conventional Solow residual measure. This result lends support to the standard measure of technological change.     

The Effect of Import Competition on Firm Productivity and Innovation: Does the Distance to Technology Frontier Matter?

How does foreign competition affect growth and innovation in China? Using our unique measures of proximity of Chinese firms and industries to the world technology frontier, we find that despite vast sectoral heterogeneity, Chinese manufacturing industries have undergone rapid technological upgrading over the period of 2000–06. The distance to the world production frontier of firms and industries plays an important role in shaping the nexus between the competition pressure from foreign imports and domestic firms' growth and innovation behaviour. Our results support the theoretical predictions of Aghion et al. (2005, The Quarterly Journal of Economics, pp. 701–728) that import competition stimulates the domestic firms' productivity growth and R&D expenditure if firms and their industries are close to the world frontier, but discourages such incentives for laggard firms and industries. The two forces highlighted by the model operate for imports under the ordinary‐trade regime, for collective and private firms, and for imports originated from high‐income countries. Our findings are robust after controlling the influence of foreign investment, the reverse causality of regressors and the short‐term business cycle fluctuations.     

Productivity, convergence and policy: a study of OECD countries and industries

This paper analyses trends in labour productivity and its underlying determinants in a panel of OECD countries from 1979 to 2002. Data Envelopment Analysis (DEA) is used to estimate a Malmquist measure of multifactor productivity (MFP) change. We decompose the growth in labour productivity into (i) net technological change (ii) input biased technical change (IBTC) (iii) efficiency change and (iv) capital accumulation. We analyse the effect of each of these factors in the transition towards the equilibrium growth paths of both labour productivity and per capita GDP for the OECD countries, controlling for the effects of different policies and institutions. The results indicate that on average gaps in productivity or income levels are narrowing down although there is no evidence to suggest that the entire OECD area comprises a single convergence “club”. Using kernel estimation methods we find that that labour productivity and per capita GDP are settling toward a twin peak (bimodal) distribution. Panel unit root tests over an extended (1960–2001) period provide general support for the convergence hypothesis. Analysis of the contributions of productivity growth within industries and sectoral composition changes show that aggregate productivity change is predominantly driven by ‘net’ within sector effects with very little contribution emerging from sectoral shifts (the ‘in-between’ static or dynamic effects resulting from higher or above average productivity industries gaining employment shares or low productivity industries losing shares).     

A model of intersectoral flow of technology using technology and innovation flow matrices

This paper builds a simple general equilibrium model that sheds new light on the mechanism of intersectoral flows of technology. It explicitly models the production of technology using diverse technology components as inputs. The model shows that demand shocks do not cause innovation while technology shocks as deviations from a balanced growth path induce asymmetric productivity changes across sectors. We also conduct a simple quantitative analysis using recent Japanese R&D data, which shows that most productivity effects remain within the bounds of the sector. We find some important exceptions to this rule, however, in particular for shocks occurring in information technology and precision instruments.     

Estimating Radial Measures of Productivity Growth: Frontier vs Non-Frontier Approaches

In this paper, we propose an alternative econometric framework for estimating and decomposing productivity change that does not require a distribution for inefficiency or the uncorrelatedness between inefficiency and the regressors. We develop our methodology for the input-oriented radial measure of productivity change and establish that this equals the negative of the time change in the log cost function. Our econometric framework is based on a fixed-effects, multiple-output cost frontier, where we decompose productivity change into discrete shifts in the frontier and changes in firm efficiency levels relative to the frontier. We also show that the standard non-frontier specification is nested within our frontier model and thus can produce different estimates of productivity change. Using a panel of twelve US railroads from 1951 to 1975, our estimated cost frontier suggests average annual productivity growth of roughly 0.3 percent, with efficiency change rising then falling over the period. Specification tests reject the non-frontier model, which yields smaller gains in productivity.     

Sources of labour productivity: a panel investigation of the role of military expenditure

The objective of this paper is to examine the effect of military expenditure on productivity performance in 70 countries, over the period 1989–2011. We employ the labour productivity as a measure of productivity, while the military burden is initially utilized as an indicator of the level of military expenditure within the framework of a transcendental production function. Applying the system GMM method, it is observed that defence expenditure exerts a negative and statistically significant effect on labour productivity. The negative impact of military expenditure still holds, when an alternative measure of military spending is introduced into the model. The main policy implication of these results is that the overall productivity would be expected to improve, if military expenditures are replaced by civilian expenditures.     

Decomposing productivity patterns in a conditional convergence framework

In this study we examine regional data on per worker GDP, disaggregated at sectoral level, by focusing our interest on the role of differences in the sectoral composition of activities, and in productivity gaps that are uniform across sectors, in explaining the catching-up process, which is realized through physical and human capital as well as technological knowledge accumulation. Our objective is to investigate how much of the interregional inequality in aggregate productivity per worker is imputable to each component. A methodology for identifying and analyzing sources of inequality from a decomposed perspective is developed in the growth framework by combining a shift-share based technique and a SUR model specification for the conditional-convergence analysis. The proposed approach is employed to analyze aggregate interregional inequality of per worker productivity levels in Italy over the period 1970–2000. With respect to the existing empirical results, our approach provides a more comprehensive and detailed examination of the contribution of each identified component in explaining the regional productivity gaps in Italy. It is argued that region-specific productivity differentials, uniform across sectors, explain a quite large share of differences in productivity per worker. However, sectoral composition plays a non negligible role, although decreasing since the end of 1980s, and very different productivity patterns emerge within geographical areas.

Korean And Taiwanese Productivity Performance: Comparisons at Matched Manufacturing Levels

We compare the productivity performances of 15 matched manufacturing sectors in Korea and Taiwan, using the Malmquist productivity indexes, based on category-wise meta frontiers, 1978–1996. Comparisons at the sector levels are made using sequential multiplicative products of the indexes. The overall productivity and technology growth rates of Taiwan were higher than those of Korea. However, at disaggregated levels, the productivity and technology growth rates of the high-tech industries of Korea were much larger than those of Taiwan, while Taiwans high overall growth rate rested mainly on its traditional and basic industries. The leading innovators of both countries are also discussed.JEL Classification: C43, D24, L16, O11, O47, O53     

Directed technological change,skill complementarities and sectoral productivity growth: evidence from industrialized countries during the new economy

Recent growth accounting exercises attribute strong productivity growth to increased investments in information and communication technologies (ICT) over the last decades, but abstain from potential complementarity effects with other inputs. Based on three different sets of industrialized countries, this study shows that sectoral productivity growth originated from ICT-skill complementarities and skill-biased technological change (SBTC) during the New Economy. In particular, Scandinavian goods-producing sectors and Anglo–Saxon market services reveal strong SBTC effects that originated from ICT-skill complementarities, while such effects were totally missing in Continental market services during the same periods. Further drivers of productivity growth were intermediate and non-ICT capital deepening.     

Measuring Intersectoral Spillovers: French Evidence

In this paper, we measure the effect of internal R&D and various spillover concepts on productivity growth, using a database for France that covers the period 1978–92. Three spillover concepts are distinguished: rent spillovers related to investment goods; rent spillovers related to intermediate goods; pure knowledge spillovers. When production is measured by gross output, all three spillover concepts yield positive and statistically significant coefficients. Each concept has a measurable effect on technological progress at the sectoral level.     

Capturing the Implications of Services Trade Liberalization

This paper evaluates the impact of service sector trade liberalization on the world economy by a ten-region, eleven-sector CGE model with import embodied technology transfer from developed countries to developing countries. Simulation results show that service sector trade liberalization not only directly affects world service production and trade, but also has significant implications for other sectors in the economy. The major channel of the impact is through inter-industry input-output relations and TFP growth induced from services imported by developing countries from developed countries, which may be embodied with new information and advanced technology.     

Endogenous technology and sectoral productivity: Chile 1962–1982

The choice of sectoral productivity in Chile is studied within the choice of technique approach. The choice of production techniques is an economic problem in that the techniques implemented at any time reflect the prevailing economic environment, as well as its history. Incorporating this choice in the analysis adds another channel through which market conditions can influence productivity while neglecting this simple fact leads to a distorted view of the production process. This view of production is applied here to present an econometric framework for estimating sectoral production functions. The derived function has the form of a Cobb-Douglas function, but its coefficients are allowed to vary in response to the economic environment and to factor utilization. The results show the important effect that macro, external, and institutional shocks have on the level and cyclical behavior of productivity.The editor of this paper was Jaime de Melo.     

Employment Growth in Italian Local Labour Systems: Issues of Model Specification and Sectoral Aggregation

Abstract

In this paper we construct a model to estimate local employment growth in Italian local labour markets for the period 1991–2001. The model is constructed in a similar manner to the original models of Glaeser et al. (1992), Henderson et al. (1995) and Combes (2000). Our objective is to identify the extent to which the results estimated by these types of models are themselves sensitive to the model specification. In order to do this we extend the basic models by successively incorporating new explanatory variables into the model framework. In addition, and for the first time, we also estimate these same models at two different levels of sectoral aggregation, for the same spatial structure. Our results indicate that these models are highly sensitive to sectoral aggregation and classification and our results therefore strongly support the use of highly disaggregated data.     

Further model-based estimates of US total manufacturing production capital and technology, 1949–2005

Production capital and technology (i.e., total factor productivity) in US manufacturing are fundamental for understanding output and productivity growth of the US economy but are unobserved at this level of aggregation and must be estimated before being used in empirical analysis. Previously, we developed a method for estimating production capital and technology based on an estimated dynamic structural economic model and applied the method using annual SIC data for 1947–1997 to estimate production capital and technology in US total manufacturing. In this paper, we update this work by reestimating the model and production capital and technology using annual SIC data for 1949–2001 and partly overlapping NAICS data for 1987–2005.     

Explaining economic growth in the Soviet Union, 1950–86

Production function estimates are provided for Soviet industrial production and gross national product for the period 1950–86. A variety of alternative specifications is tested, including Cobb-Douglas, constant elasticity of substitution and variable elasticity of substitution production functions, and an error correction mechanism is used to investigate the long-run properties of the estimated equation. The structural stability of the estimates is also examined. Constant-returns-to-scale Cobb-Douglas production functions suggest that the rate of total factor productivity growth in the Soviet economy has declined steadily over time, becoming negative sometime in the period between 1970 and 1980. However the extensive statistical tests can doubt on the validity of any production function estimated on Soviet data.