A Contribution to the Empirics of Total Factor Productivity
Dartmouth College Working Paper No. 02-09
42 Pages Posted: 13 Oct 2002
Date Written: August 12, 2002
Abstract
Our paper analyzes the causal links between human capital accumulation and growth in total factor productivity (TFP). In particular, it tests the Nelson-Phelps hypothesis that human capital is crucial in enabling the imitation of technologies developed at the frontier. To this end we calculate TFP for a sample of 86 heterogeneous countries over the period 1960-1990 and investigate whether there has been (conditional) convergence in TFP. Our regressions use a variety of GMM estimators in a dynamic panel framework with fixed effects. Human capital is found to have a positive and significant effect on the long run growth path of TFP. Countries are found to be converging to these growth paths at a rate of about 3% a year. This work goes some way in resolving the debate over whether factor accumulation or TFP increases are more important for economic growth; while TFP differences explain most of the static variation in GDP across countries, human capital accumulation is a crucial determinant of the dynamic path of TFP.
Keywords: Productivity, human capital, technology, convergence
JEL Classification: O30, O47
Suggested Citation: Suggested Citation
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