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Labor productivity growth: disentangling technology and capital accumulation

Author

Listed:
  • Michele Battisti

    () (University of Palermo)

  • Massimo Del Gatto

    () (G.d’Annunzio University and CRENoS)

  • Christopher F. Parmeter

    () (University of Miami)

Abstract

Abstract How much of the convergence in labor productivity that we observe in manufacturing is due to convergence in technology versus convergence in capital-labor ratios? To shed light on this question, we introduce a nonparametric counterfactual decomposition of labor productivity growth into growth of the capital-labor ratio (K/L), technological productivity (TEP) and total factor productivity (TFP). Our nonparametric specification enables us to model technology allowing for heterogeneity across all relevant dimensions (i.e. countries, sectors and time). Using data spanning from the 1960s to the 2000s, covering 42 OECD and non OECD countries across 11 manufacturing sectors, we find TEP and TFP to account for roughly 46 and −6% of labor productivity growth respectively, on average. While technological growth at the world level is driven primarily by the US and a handful of other OECD countries, we find strong evidence of convergence in both technology and capital-labor ratios. Interestingly, very few of the usual growth determinants are found to enhance the process of technological catching-up.

Suggested Citation

  • Michele Battisti & Massimo Del Gatto & Christopher F. Parmeter, 2018. "Labor productivity growth: disentangling technology and capital accumulation," Journal of Economic Growth, Springer, vol. 23(1), pages 111-143, March.
  • Handle: RePEc:kap:jecgro:v:23:y:2018:i:1:d:10.1007_s10887-017-9143-1
    DOI: 10.1007/s10887-017-9143-1
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    1. repec:eee:enepol:v:122:y:2018:i:c:p:715-726 is not listed on IDEAS
    2. Michele Battisti & Filippo Belloc & Massimo Del Gatto, 2017. "Technology-specific Production Functions," Working Paper series 17-26, Rimini Centre for Economic Analysis.
    3. Michele Battisti & Filippo Belloc & Massimo Del Gatto, . "Labor Productivity and Firm-Level TFP with Technology-Specific Production Function," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    4. Emanuela Carbonara & Giuseppina Gianfreda & Enrico Santarelli & Giovanna Vallanti, 2019. "The Impact of Intellectual Property Rights on Labor Productivity: Do Constitutions Matter?," Working Papers LuissLab 19151, Dipartimento di Economia e Finanza, LUISS Guido Carli.

    More about this item

    Keywords

    TFP; Aggregate productivity; Technology; Nonparametric estimation; Convergence;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • 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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