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The Determinants of TFP Growth in the Portuguese Service Sector

Author

Listed:
  • Ana Martins

    () (GEE - Gabinete de Estratégia e Estudos do Ministério da Economia)

  • Tiago Domingues

    () (GEE - Gabinete de Estratégia e Estudos do Ministério da Economia)

  • Catarina Branco

    () (Nova School of Business and Economics)

Abstract

As services today are of great complexity and usually a bundle of different individual inputs, it is sometimes hard to identify characteristics for the overall service sector. As such, empirical research on productivity is less common in this sector. Given the connection between Total Factor Productivity (TFP) and economic growth, and the importance of services for overall economic activity, it is crucial to study, at the firm level, which factors may drive TFP growth in this particular sector. Our empirical assessment is based on a firm-level panel dataset covering Portuguese service firms, between 2010 and 2016. We first estimate TFP through the Levinsohn-Petrin (LP) algorithm and compare results amongst different traditional estimating methods. Secondly, we conclude our econometric framework with a fixed-effects estimation, hence, trying to shed further light on the determinants of TFP growth in the Portuguese service sector. We found evidence for a positive correlation between financial health, innovation, wage premium, and TFP growth, whereas capital intensity, training, and age show a non-linear relationship with TFP growth.

Suggested Citation

  • Ana Martins & Tiago Domingues & Catarina Branco, 2018. "The Determinants of TFP Growth in the Portuguese Service Sector," GEE Papers 0114, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2018.
  • Handle: RePEc:mde:wpaper:0114
    as

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    File URL: http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_114.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Total Factor Productivity; LEVPET; Fixed e ects; Service Sector;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • 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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