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Structural accounting: an empirical assessment of cross-country differences in productivity

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  • Dario Diodato

Abstract

This paper proposes a method to decompose cross-country differences in productivity (TFP) into a technological component - depending on the overall productivity of a country - and an allocation component, which depends on whether factors of productions are allocated to productive or unproductive industries. Using a sample of over 2 million fims from 30 countries, the analysis estimates that 1/4 of inequality between countries is due to the Composition effect, while 3/4 to the Place effect. Moreover, once accounting for heterogeneity at the subnational level, I find that the Composition effect may be as high as 50%.

Suggested Citation

  • Dario Diodato, 2020. "Structural accounting: an empirical assessment of cross-country differences in productivity," Papers in Evolutionary Economic Geography (PEEG) 2020, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2020.
    • Handle: RePEc:egu:wpaper:2020
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    File URL: http://econ.geo.uu.nl/peeg/peeg2020.pdf
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    References listed on IDEAS

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    1. McMillan, Margaret & Rodrik, Dani & Verduzco-Gallo, Íñigo, 2014. "Globalization, Structural Change, and Productivity Growth, with an Update on Africa," World Development, Elsevier, vol. 63(C), pages 11-32.
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    4. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2010. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," American Economic Review, American Economic Association, vol. 100(3), pages 1195-1213, June.
    5. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    6. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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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