Capital-Labor Ratios and Total Factor Productivity in the Balassa-Samuelson Model
The paper investigates the relationship between sectoral capital-labor ratios and total factor productivity (TFP) in the context of the Balassa-Samuelson model. It is shown that, under certain assumptions, the model implies that both traded- and nontraded-goods sectors' capital-labor ratios should be cointegrated with the traded-goods sector's TFP. Evidence from an intersectoral database for 14 OECD countries broadly supports this implication of the model. In addition to shedding light on the evolution of sectoral capital-labor ratios, the results also alleviate concerns regarding the reliability of capital stock data. Copyright 2002 by Blackwell Publishing Ltd.
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Volume (Year): 10 (2002)
Issue (Month): 1 (February)
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