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Explaining cross-country differences in productivity: is it efficiency or factor endowments?

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  • Gerba, Eddie
  • Pikoulakis, Emmanuel V.

Abstract

In this paper we develop a two-sector growth model of optimizing agents and apply this model to the data for the purpose of addressing the two interrelated questions that preoccupy the literature on development and growth accounting, namely: (1) What determines sustained growth and (2) What explains the vast cross-country differences in labor productivity. Concerning the first questions our findings support the view that to some extend the growth in effective human capital is a by-product of learning-by-doing. On the second question we find that differences in factors of production explain twice as much of the difference in labor productivity between developed and developing countries than differences in efficiency.

Suggested Citation

  • Gerba, Eddie & Pikoulakis, Emmanuel V., 2013. "Explaining cross-country differences in productivity: is it efficiency or factor endowments?," LSE Research Online Documents on Economics 56399, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:56399
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    More about this item

    Keywords

    two-sector growth model; effective human capital; education quality;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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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