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Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography
Author(s) -
CHANDA AREENDAM,
DALGAARD CARLJOHAN
Publication year - 2008
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2007.00673.x
Subject(s) - total factor productivity , economics , dual (grammatical number) , productivity , solow residual , economic geography , econometrics , international trade , growth accounting , macroeconomics , art , literature
This paper provides a framework that decomposes aggregate total factor productivity ( TFP ) into a component reflecting relative efficiency across sectors, and another component that reflects the absolute level of efficiency. A development accounting analysis suggests that as much as 85% of the international variation in aggregate TFP can be attributed to variation in relative efficiency across sectors. Estimation results show that recent findings highlighting the importance of strong protection of property rights, financial development and geographical advantage for the level of TFP , can be explained by their impact on relative efficiency.