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How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?

Author

Listed:
  • Konstantins Benkovskis

    (Bank of Latvia)

  • Ludmila Fadejeva

    (Bank of Latvia)

  • Robert Stehrer
  • Julia Woerz

Abstract

The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyse the contributions from technological change at the industry level to an economy's aggregate growth performance. Our derivation of total TFP growth entails three major improvements over the traditional Solow residual approach. First, we allow for non-constant returns to scale as well as changes in the utilisation of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from industry level to macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms-of-trade shocks. Our calculations for the sample of 10 Eastern European EU Member States over the time period from 1995 to 2009 are based on the newly available World Input-Output Database (WIOD).

Suggested Citation

  • Konstantins Benkovskis & Ludmila Fadejeva & Robert Stehrer & Julia Woerz, 2012. "How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?," Working Papers 2012/05, Latvijas Banka.
    • Handle: RePEc:ltv:wpaper:201205
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    References listed on IDEAS

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    Cited by:

    1. POPKOVA, Elena, 2014. "New Prospects Of Economic Growth In Context Of Underdevelopment Whirlpools Phenomena," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 5-20.
    2. Konstantins Benkovskis & Ludmila Fadejeva & Julia Wörz, 2013. "How Important Is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-27.

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    More about this item

    Keywords

    total factor productivity; terms of trade; utilisation; input-output table; Central; Eastern and Southeastern Europe;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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