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Factor Accumulation Story: Any Unfinished Business?

  • Michal Kejak
  • David Vavra

We construct a new measure of knowledge capital as an aggregate production factor in the sense of Lucas and employ it in a standard growth and variance accounting exercise. We base this new measure on the available data on educational attainment using the empirically confirmed relationship between the level of education and productivity growth. Decomposing the post war growth record we find that most of the growth in income per worker has been explicable in terms of factor accumulation. Overall, the scope for technology residual remained negligible, although there are important differences among various country groups. Unlike the results on growth accounting, explaining the variation in the average growth performance of the individual countries through the variation in the rates of growth of the production factors still leaves a substantial part of the variation unexplained. Yet, this part is significantly smaller than what other studies have ascribed to the variation of the technology residual. Lastly, we also demonstrate how the new measure of knowledge stock may be used to test theoretical predictions regarding the recent convergence experience in the EU periphery. The good fit of the theory can be interpreted as an indication that the theory provides a reasonable candidate explanation for total factor productivity growth.

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Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp220.

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Date of creation: May 2004
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Handle: RePEc:cer:papers:wp220
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  1. Zilibotti, Fabrizio, 1995. "A Rostovian model of endogenous growth and underdevelopment traps," European Economic Review, Elsevier, vol. 39(8), pages 1569-1602, October.
  2. Kejak, Michal, 2003. "Stages of growth in economic development," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 771-800, March.
  3. 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, vol. 34(2), pages 143-173, October.
  4. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
  5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  6. Frank Barry & John Bradley & Michal Kejak & David Vavra, 2003. "The Czech economic transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 539-567, 09.
  7. Kejak, Michal & Seiter, Stephan & Vavra, David, 2004. "Accession trajectories and convergence: endogenous growth perspective," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 13-46, March.
  8. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  9. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  10. Klenow, Peter J. & Rodriguez-Clare, Andres, 1997. "Economic growth: A review essay," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 597-617, December.
  11. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
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