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Institutions and Total Factor Productivity Convergence

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  • McGuinness, Anne

    (Central Bank and Financial Services Authority of Ireland)

Abstract

The paper examines the effect that institutions have on Total Factor Productivity (TFP) growth. This is done by creating a TFP gap between the leader and each of the following countries. The global leaders used are the USA and an average of OECD members. The coefficient on the gap measures each country's ability to learn or absorb new technology from the more advanced leader. The results show that institutions do not seem to have as significant a role in TFP growth as other literature has suggested. The most influential variables are country-specific factors: this would indicate that a one size fits all model will not help developing nations to catchup. When institution variables were added to the model they manage to only explain 31 per cent of TFP difference. This implies that there is still a large portion of TFP growth that is random and not explicable using current economic models.

Suggested Citation

  • McGuinness, Anne, 2007. "Institutions and Total Factor Productivity Convergence," Research Technical Papers 9/RT/07, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:9/rt/07
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    References listed on IDEAS

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    Cited by:

    1. Annamaria Nifo & Gaetano Vecchione, 2014. "Do Institutions Play a Role in Skilled Migration? The Case of Italy," Regional Studies, Taylor & Francis Journals, vol. 48(10), pages 1628-1649, October.
    2. Lidia Mannarino & Valeria Pupo & Fernanda Ricotta, 2016. "Family Firms and Productivity: The Role of Institutional Quality," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(10), pages 343-343, September.
    3. Diana Barros, Aurora A.C. Teixeira, 2021. "The technology balance of payments and international competitiveness: a panel data analysis of southern European countries, 2000-2017," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 18(1), pages 105-136, June.
    4. A. Nifo & G. Vecchione, 2015. "Measuring Institutional Quality in Italy," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1-2, pages 157-182.
    5. Andrea Lasagni & Annamaria Nifo & Gaetano Vecchione, 2015. "Firm Productivity And Institutional Quality: Evidence From Italian Industry," Journal of Regional Science, Wiley Blackwell, vol. 55(5), pages 774-800, November.
    6. Agostino, Mariarosaria & Nifo, Annamaria & Trivieri, Francesco & Vecchione, Gaetano, 2016. "Total factor productivity heterogeneity: channelling the impact of institutions," MPRA Paper 72759, University Library of Munich, Germany.
    7. Fernanda Ricotta, 2019. "The Quality of Regional Government and Firm Performance," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(2), pages 27-40, February.

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