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Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography

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  • AREENDAM CHANDA
  • CARL-JOHAN DALGAARD

Abstract

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. Copyright (c) The London School of Economics and Political Science 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2007.00673.x
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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 75 (2008)
Issue (Month): 300 (November)
Pages: 629-661

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Handle: RePEc:bla:econom:v:75:y:2008:i:300:p:629-661

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Cited by:
  1. Alonso-Carrera, Jaime & Raurich, Xavier, 2010. "Growth, sectoral composition, and the evolution of income levels," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2440-2460, December.
  2. Dietz Vollrath, 2008. "The Dual Economy in Long-run Development," Working Papers 2008-03, Department of Economics, University of Houston.
  3. Lei, Chaochao & Zhang, Rengui & Wu, Baocheng, 2013. "Labor reallocation in China: 1978–2011," Economic Modelling, Elsevier, vol. 35(C), pages 668-673.
  4. Francisco Alvarez-Cuadrado & Ngo Van Long, 2012. "Capital-Labor Substitution, Structural Change and Growth," Working Papers 01, Development and Policies Research Center (DEPOCEN), Vietnam.
  5. Briones, Roehlano M., 2013. "Agriculture, Rural Employment, and Inclusive Growth," Discussion Papers DP 2013-39, Philippine Institute for Development Studies.
  6. A. Lasagni & A. Nifo & G. Vecchione, 2012. "Firm productivity and institutional quality. Evidence from Italian industry," Economics Department Working Papers 2012-EP07, Department of Economics, Parma University (Italy).
  7. Areendam Chanda & Beatrice Farkas, 2009. "Technology-Skill Complementarity and International TFP Differences," DEGIT Conference Papers c014_028, DEGIT, Dynamics, Economic Growth, and International Trade.

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