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Output Collapses and Productivity Destruction

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  • Christian Daude
  • Eduardo Fernández-Arias
  • Juan S. Blyde

Abstract

This paper analyzes the long-run relationship between output collapsesdefined defined as GDP falling substantially below trendand total factor productivity (TFP), using a panel of 71 developed and developing countries during the period 1960-2003 to identify episodes of output collapse and estimate counterfactual post-collapse TFP trends. Collapses are concentrated in developing countries, especially African and Latin American, and were particularly widespread in the 1980s in Latin America. Overall, output collapses are systematically associated with long-lasting declines in TFP. The paper explores the conditions under which collapses are least or most damaging, as well as the type of shocks that make collapses more likely or severe, and additionally quantifies the welfare cost associated with output collapses.

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Paper provided by Inter-American Development Bank in its series IDB Publications with number 6759.

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Date of creation: Jan 2009
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Handle: RePEc:idb:brikps:6759

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Keywords: Economics; WP-666;

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Cited by:
  1. Juan Blyde & Christian Daude & Eduardo Fernandez-Arias, 2009. "Output Collapses and Productivity Destruction," Research Department Publications, Inter-American Development Bank, Research Department 4610, Inter-American Development Bank, Research Department.
  2. Daude, Christian, 2012. "Sovereign default risk and volatility," Economics Letters, Elsevier, Elsevier, vol. 114(1), pages 47-50.
  3. Christian Daude & Arne Nagengast & José Ramón Perea, 2014. "Productive Capabilities: An Empirical Investigation of their Determinants," OECD Development Centre Working Papers, OECD Publishing 321, OECD Publishing.

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