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Education vs TFP: Empirical Evidence from The Sub-Saharan Countries

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  • Michael Donadelli

    ()
    (University Luiss "Guido Carli")

Abstract

This paper investigates the \education-total factor productivity trade-o " in explaining per worker income di erences between Sub-Saharan (unlucky) and G7 (lucky) economies. Following Hall and Jones (1999) and Caselli (2005), on a country basis, I am able to study separately the dynamic of the average years of schooling (i.e. education level), the per worker capital, the per worker income, and the total factor productivity (TFP). I con rm that physical capital and education levels partially explain income di erences between unlucky and lucky economies. In a time-series setup I create, on a country-by-country basis, ad hoc TFP shock times series. The main result of this paper is that the impact of TFP shocks on per worker income is larger in unlucky economies than in lucky ones. The result holds both for negative and positive shocks. I show that average TFP volatility in the "unlucky world" is 8 times higher than the "G7 world" average TFP volatility. I argue that the order of magnitude of the impact heavily depends on the level of the TFP volatility. It turns out also that the e ect of a TFP shock on a relative low per worker income growth rate is higher. I conclude by arguing that the presence of low levels of per worker capital and of human productivity pushes the unlucky economies into a poverty trap.

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Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers LuissLab with number 1299.

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Date of creation: 2012
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Handle: RePEc:lui:lleewp:1299

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Keywords: Education; TFP Shocks; Poverty Trap;

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  1. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
  2. 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.
  3. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
  4. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  5. Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5 Elsevier.
  6. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
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  12. Guido Cazzavillan & Michael Donadelli, 2010. "Understanding the Global Demand Collapse: Empirical Analysis and Optimal Policy Response," Working Papers 2010_18, Department of Economics, University of Venice "Ca' Foscari".
  13. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  14. Bewley, Truman, 1977. "The permanent income hypothesis: A theoretical formulation," Journal of Economic Theory, Elsevier, vol. 16(2), pages 252-292, December.
  15. Nihal Bayraktar & Hippolyte Fofack, 2011. "Capital Accumulation in Sub-Saharan Africa: Income-group and Sector Differences-super- †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(4), pages 531-561, August.
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