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Factor Accumulation Story: Any Unfinished Business?

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  • Michal Kejak
  • David Vavra

Abstract

We construct a new measure of knowledge capital as an aggregate production factor in the sense of Lucas and employ it in a standard growth and variance accounting exercise. We base this new measure on the available data on educational attainment using the empirically confirmed relationship between the level of education and productivity growth. Decomposing the post war growth record we find that most of the growth in income per worker has been explicable in terms of factor accumulation. Overall, the scope for technology residual remained negligible, although there are important differences among various country groups. Unlike the results on growth accounting, explaining the variation in the average growth performance of the individual countries through the variation in the rates of growth of the production factors still leaves a substantial part of the variation unexplained. Yet, this part is significantly smaller than what other studies have ascribed to the variation of the technology residual. Lastly, we also demonstrate how the new measure of knowledge stock may be used to test theoretical predictions regarding the recent convergence experience in the EU periphery. The good fit of the theory can be interpreted as an indication that the theory provides a reasonable candidate explanation for total factor productivity growth.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp220.

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Date of creation: May 2004
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Handle: RePEc:cer:papers:wp220

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Related research

Keywords: Human capital; Endogenous growth; Total factor productivity; Growth accounting;

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References

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  1. Michal Kejak, 2001. "Stages of Growth in Economic Development," Development and Comp Systems 0012014, EconWPA.
  2. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  4. F Zilibotti, 1993. "A Rostovian Model of Endogenous Growth and Underdevelopment Traps," CEP Discussion Papers dp0166, Centre for Economic Performance, LSE.
  5. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  6. Klenow, Peter J. & Rodriguez-Clare, Andres, 1997. "Economic growth: A review essay," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 597-617, December.
  7. Frank Barry & John Bradley & Michal Kejak & David Vavra, 2003. "The Czech economic transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 539-567, 09.
  8. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
  9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  10. Kejak, Michal & Seiter, Stephan & Vavra, David, 2004. "Accession trajectories and convergence: endogenous growth perspective," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 13-46, March.
  11. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
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Cited by:
  1. Michal Kejak & Stephan Seiter & David Vavra, 2004. "Accession Trajectories and Convergence: Endogenous Growth Perspective," CERGE-EI Working Papers wp219, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Zuzana Křístková, 2012. "Impact of R&D Investment on Economic Growth of the Czech Republic - A Recursively Dynamic CGE Approach," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 412-433.
  3. Zuzana KRISTKOVA, 2013. "Analysis of Private R&D Effects in a CGE Model with Capital Varieties: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 262-287, July.

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