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Identifying Sri Lanka’s Sources of Growth: The Application of Primal and Dual Total Factor Productivity Growth Accounting Approaches

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Abstract

This study aims to identify how much of economic growth is driven by improvement in Total Factor Productivity (TFP) in Sri Lanka, a small open economy, in comparison to other Asian economies. To examine this, aggregate TFP growth was calculated for Sri Lanka by using both primal and dual growth accounting frameworks. The study covers the period 1980-2016 and eight sub-periods, classified according to distinctive socio-economic-politico changes. For the whole period, TFP growth accounts for 45 percent of the total output growth. The annual average TFP growth rates under the primal and dual approaches are 2.3 percent and 3.6 percent, respectively. Though the growth accounting framework has limitations, the results were robust enough to draw comparative conclusions with those of other Asian countries. Sri Lanka’s TFP growth under both methods has been positive and higher than some Asian countries, except for China. Further, though Indonesia and Sri Lanka have similar per capita GDP levels, Sri Lanka’s TFP growth has been higher than that of Indonesia. Additionally, we show that the two growth drivers in Sri Lanka have been capital accumulation and productivity growth.

Suggested Citation

  • Ranpati Dewage Thilini Sumudu Kumari & Sam Hak Kan Tang, 2019. "Identifying Sri Lanka’s Sources of Growth: The Application of Primal and Dual Total Factor Productivity Growth Accounting Approaches," Economics Discussion / Working Papers 19-05, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:19-05
    Note: MD5 = 502b3c6006d2b1e4516c4d0692477fc8
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    More about this item

    Keywords

    Dual Approach; Growth Accounting; Primal Approach; Sources of Growth; Sri Lanka; Total Factor Productivity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • 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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