Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Theory of Total Factor Productivity and the Convergence Hypothesis: Workers’ Innovations as an Essential Element

Contents:

Author Info

  • Harashima, Taiji

Abstract

A theory of total factor productivity (TFP) is needed to explain why substantial differences in international income have been observed. This paper presents a theory of TFP that incorporates workers’ innovations. Because workers are human and capable of creative intellectual activities, they can create innovations even if these innovations are minor. The creative activities of ordinary workers have been almost entirely neglected in economics even though the importance of workers’ learning activities has been emphasized by the theories of learning-by-doing and human capital. I examine this creative element and show that innovations created by ordinary workers are indispensable for efficient production. A production function incorporating workers’ innovations is shown to have a Cobb-Douglas functional form with a labor share of about 70%. The production function offers a microfoundation of the Cobb-Douglas production function and more importantly indicates that heterogeneous parameter values with regard to workers’ innovations are essential factors of the currently observed substantial income difference across economies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/15508/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15508.

as in new window
Length:
Date of creation: 31 May 2009
Date of revision:
Handle: RePEc:pra:mprapa:15508

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Innovation: Total factor productivity; Experience curve effect; Convergence hypothesis; Cobb-Douglas production function;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  2. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 92-96, May.
  3. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  4. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 95/13, Department of Economics, Keele University.
  5. Dudley, Leonard, 1972. "Learning and Productivity Change in Metal Products," American Economic Review, American Economic Association, American Economic Association, vol. 62(4), pages 662-69, September.
  6. Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," NBER Working Papers 7591, National Bureau of Economic Research, Inc.
  7. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  8. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 381-405, December.
  9. Martin B. Zimmerman, 1982. "Learning Effects and the Commercialization of New Energy Technologies: The Case of Nuclear Power," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 13(2), pages 297-310, Autumn.
  10. Levine, Ross & Zervos, Sara, 1996. "Stock market development and long-run growth," Policy Research Working Paper Series 1582, The World Bank.
  11. Lynch, Lisa M, 1991. "The Role of Off-the-Job vs. On-the-Job Training for the Mobility of Women Workers," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 151-56, May.
  12. Michelacci, C. & Zaffaroni, P., 2000. "(Fractional) Beta Convergence," Papers, Banca Italia - Servizio di Studi 383, Banca Italia - Servizio di Studi.
  13. Bernard, A.B. & Durlauf, S.N., 1993. "Convergence in International Output," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 93-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Growiec, Jakub, 2006. "A New Class of Production Functions and an Argument Against Purely Labor-Augmenting Technical Change," MPRA Paper 7069, University Library of Munich, Germany.
  15. Yin-wong Cheung & Antonio Garcia-Pascual, 2004. "Testing for Output Convergence: A Re-examination," Working Papers, Hong Kong Institute for Monetary Research 052004, Hong Kong Institute for Monetary Research.
  16. Linda Argote & Bill McEvily & Ray Reagans, 2003. "Managing Knowledge in Organizations: An Integrative Framework and Review of Emerging Themes," Management Science, INFORMS, INFORMS, vol. 49(4), pages 571-582, April.
  17. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  18. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(2), pages 688-726, June.
  19. P. L. Joskow & G. A. Rozanski, 1977. "The Effects of Learning by Doing on Nuclear Plant Operating Reliability," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 209, Massachusetts Institute of Technology (MIT), Department of Economics.
  20. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 89-90-02, Carnegie Mellon University, Tepper School of Business.
  21. Miketa, Asami & Schrattenholzer, Leo, 2004. "Experiments with a methodology to model the role of R&D expenditures in energy technology learning processes; first results," Energy Policy, Elsevier, Elsevier, vol. 32(15), pages 1679-1692, October.
  22. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 717-37, August.
  23. Paul Wachtel, 2003. "How much do we really know about growth and finance?," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q1, pages 33-47.
  24. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  25. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  26. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2008. "Financial development and economic growth: The Egyptian experience," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(5), pages 887-898.
  27. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile, Central Bank of Chile 56, Central Bank of Chile.
  28. Beck, Thorsten & Levine, Ross, 2002. "Industry growth and capital allocation:*1: does having a market- or bank-based system matter?," Journal of Financial Economics, Elsevier, Elsevier, vol. 64(2), pages 147-180, May.
  29. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  30. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  31. Papineau, Maya, 2006. "An economic perspective on experience curves and dynamic economies in renewable energy technologies," Energy Policy, Elsevier, Elsevier, vol. 34(4), pages 422-432, March.
  32. Olav Sorenson, 2003. "Interdependence and Adaptability: Organizational Learning and the Long--Term Effect of Integration," Management Science, INFORMS, INFORMS, vol. 49(4), pages 446-463, April.
  33. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 407-43, May.
  34. Andrew B. Bernard & Steven N. Durlauf, 1994. "Interpreting Tests of the Convergence Hypothesis," NBER Technical Working Papers 0159, National Bureau of Economic Research, Inc.
  35. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, Elsevier, vol. 42(1), pages 51-74, October.
  36. Gary P. Pisano & Richard M.J. Bohmer & Amy C. Edmondson, 2001. "Organizational Differences in Rates of Learning: Evidence from the Adoption of Minimally Invasive Cardiac Surgery," Management Science, INFORMS, INFORMS, vol. 47(6), pages 752-768, June.
  37. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  38. T. N. Srinivasan, 1995. "Long-Run Growth Theories and Empirics: Anything New?," NBER Chapters, in: Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4, pages 37-70 National Bureau of Economic Research, Inc.
  39. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 56-62, May.
  40. Marvin B. Lieberman, 1984. "The Learning Curve and Pricing in the Chemical Processing Industries," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 213-228, Summer.
  41. Norman Keith Womer, 1984. "Estimating Learning Curves from Aggregate Monthly Data," Management Science, INFORMS, INFORMS, vol. 30(8), pages 982-992, August.
  42. Patrick Criqui & Jean-Marie Martin & Leo Schrattenholzer & Tom Kram & Luc Soete & Adriaan Van Zon, 2000. "Energy technology dynamics," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 14(1/2/3/4), pages 65-103.
  43. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 9.
  44. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, Elsevier, vol. 49(1), pages 199-227, April.
  45. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(2), pages 517-549, May.
  46. Edward P. Lazear, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," NBER Working Papers 9679, National Bureau of Economic Research, Inc.
  47. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, Elsevier, vol. 29(4), pages 255-261, March.
  48. Jonathan Temple, 2000. "Summary of an Informal Workshop on the Causes of Economic Growth," OECD Economics Department Working Papers 260, OECD Publishing.
  49. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 281.
  50. 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, Elsevier, vol. 34(2), pages 143-173, October.
  51. Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, INFORMS, vol. 36(2), pages 140-154, February.
  52. Womer, N Keith & Patterson, J Wayne, 1983. "Estimation and Testing of Learning Curves," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 1(4), pages 265-72, October.
  53. Paul S. Adler & Kim B. Clark, 1991. "Behind the Learning Curve: A Sketch of the Learning Process," Management Science, INFORMS, INFORMS, vol. 37(3), pages 267-281, March.
  54. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, Elsevier, vol. 34(17), pages 3218-3232, November.
  55. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 513-542, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Harashima, Taiji, 2012. "A Theory of Intelligence and Total Factor Productivity: Value Added Reflects the Fruits of Fluid Intelligence," MPRA Paper 43151, University Library of Munich, Germany.
  2. Harashima, Taiji, 2012. "Sustainable Heterogeneity as the Unique Socially Optimal Allocation for Almost All Social Welfare Functions," MPRA Paper 40938, University Library of Munich, Germany.
  3. Harashima, Taiji, 2010. "Sustainable Heterogeneity: Inequality, Growth, and Social Welfare in a Heterogeneous Population," MPRA Paper 22521, University Library of Munich, Germany.
  4. Harashima, Taiji, 2011. "A Mechanism of Inflation Differentials and Current Account Imbalances in the Euro Area," MPRA Paper 28121, University Library of Munich, Germany.
  5. Harashima, Taiji, 2011. "A Model of Total Factor Productivity Built on Hayek’s View of Knowledge: What Really Went Wrong with Socialist Planned Economies?," MPRA Paper 29107, University Library of Munich, Germany.
  6. Harashima, Taiji, 2014. "Division of Work and Fragmented Information: An Explanation for the Diminishing Marginal Product of Labor," MPRA Paper 56301, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:15508. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.