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How Important are Capital and Total Factor Productivity for Economic Growth?

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  • Scott L. Baier
  • Gerald P. Dwyer
  • Robert Tamura

Abstract

We examine the relative importance of the growth of physical and human capital and the growth of total factor productivity (TFP) using newly organized data on 145 countries that spans more than 100 years for 23 of these countries. For all countries, only 14% of average output growth per worker is associated with TFP growth. We use priors from theories to construct estimates of the relative importance of the variances of aggregate input growth and TFP growth across countries. Much of the importance of the variance of TFP growth across countries is associated with negative TFP growth. (JEL O47, O50, O57, O30, N10) Copyright 2006, Oxford University Press.

Suggested Citation

  • Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2006. "How Important are Capital and Total Factor Productivity for Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 23-49, January.
  • Handle: RePEc:oup:ecinqu:v:44:y:2006:i:1:p:23-49
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    More about this item

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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