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How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?

  • Konstantins Benkovskis

    (Bank of Latvia)

  • Ludmila Fadejeva

    (Bank of Latvia)

  • Robert Stehrer
  • Julia Woerz

The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyse the contributions from technological change at the industry level to an economy's aggregate growth performance. Our derivation of total TFP growth entails three major improvements over the traditional Solow residual approach. First, we allow for non-constant returns to scale as well as changes in the utilisation of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from industry level to macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms-of-trade shocks. Our calculations for the sample of 10 Eastern European EU Member States over the time period from 1995 to 2009 are based on the newly available World Input-Output Database (WIOD).

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Paper provided by Latvijas Banka in its series Working Papers with number 2012/05.

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Date of creation: 20 Dec 2012
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Handle: RePEc:ltv:wpaper:201205
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  1. Umed Temurshoev & Marcel P. Timmer, 2011. "Joint estimation of supply and use tables," Papers in Regional Science, Wiley Blackwell, vol. 90(4), pages 863-882, November.
  2. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are technology improvements contractionary?," Working Paper Series WP-04-20, Federal Reserve Bank of Chicago.
  3. Susanto Basu & John G. Fernald & Matthew D. Shapiro, 2001. "Productivity growth in the 1990s: technology, utilization, or adjustment," Working Paper Series WP-01-04, Federal Reserve Bank of Chicago.
  4. Konstantins Benkovskis & Ludmila Fadejeva & Robert Stehrer & Julia Woerz, 2012. "How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?," Working Papers 2012/05, Latvijas Banka.
  5. Charlotta Groth & Soledad Nuñez & Sylaja Srinivasan, 2006. "Productivity growth, adjustment costs and variable factor utilisation: the UK case," Bank of England working papers 295, Bank of England.
  6. Joze P. Damijan & Boris Majcen, 2001. "Recovery and Growth in the Manufacturing Sectors of CEE Transition Economies: Short and Long-Term Efficiency Improving Factors," wiiw Balkan Observatory Working Papers 12, The Vienna Institute for International Economic Studies, wiiw.
  7. Clopper Almon, 2000. "Product-to-Product Tables via Product-Technology with No Negative Flows," Economic Systems Research, Taylor & Francis Journals, vol. 12(1), pages 27-43.
  8. Ratna Sahay & Jeromin Zettelmeyer & Eduardo Borensztein & Andrew Berg, 1999. "The Evolution of Output in Transition Economies; Explaining the Differences," IMF Working Papers 99/73, International Monetary Fund.
  9. Temurshoev, Umed, 2010. "Joint Estimation of Supply and Use Tables," GGDC Research Memorandum GD-116, Groningen Growth and Development Centre, University of Groningen.
  10. Gábor Kátay & Zoltán Wolf, 2008. "Driving Factors of Growth in Hungary - a Decomposition Exercise," MNB Working Papers 2008/6, Magyar Nemzeti Bank (the central bank of Hungary).
  11. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  12. Ludmila Fadejeva & Aleksejs Melihovs, 2009. "Measuring Total Factor Productivity and Variable Factor Utilisation: Sector Approach, The Case of Latvia," Working Papers 2009/03, Latvijas Banka.
  13. Szilárd Benk & Zoltán M. Jakab & Gábor Vadas, 2005. "Potential Output Estimations for Hungary: A Survey of Different Approaches," MNB Occasional Papers 2005/43, Magyar Nemzeti Bank (the central bank of Hungary).
  14. David Moore & Athanasios Vamvakidis, 2007. "Economic Growth in Croatia; Potential and Constraints," IMF Working Papers 07/198, International Monetary Fund.
  15. Robert Stehrer & Gaaitzen J. de Vries & Los, Bart & Dietzenbacher, H.W.A. & Timmer, Marcel, 2014. "The World Input-Output Database: Content, Concepts and Applications," GGDC Research Memorandum GD-144, Groningen Growth and Development Centre, University of Groningen.
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