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The Determinants of Total Factor Productivity in the Portuguese Quaternary Sector

Author

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  • Paulo Matos
  • Pedro Neves

Abstract

Quaternary activities have been on the rise, as a consequence of the increasing technological developments and work automation, as they are expected to have an impact on both the future of the job market and the overall economy. As such, and considering that Total Factor Productivity (TFP) constitutes a main driver of output growth, we propose to study its determinants for the quaternary sector. First, we establish several criteria to build our own definition of quaternary activities, as they are not acknowledged in national accounts or other statistics. For such purpose, our empirical assessment is based on a firm level panel dataset, comprising Portuguese firms, between 2006 and 2017. Secondly, we employ the Levinsohn and Petrin (2003)’s methodology to estimate TFP at the firm level. Finally, through a second stage estimation, we build a fixed effects model based on several determinants said to impact firms' TFP, and establish a comparison with the remainder sectors of economic activity. Both descriptive statistics of the database and the final regression outputs provide evidence that quaternary activities differ from the remainder in several characteristics. Our results show that innovation, wage premium and international openness rise the level of TFP, while indebtedness presents an opposite correlation. The age and size of the firm show a non linear relationship with TFP.

Suggested Citation

  • Paulo Matos & Pedro Neves, 2020. "The Determinants of Total Factor Productivity in the Portuguese Quaternary Sector," GEE Papers 0149, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Apr 2020.
  • Handle: RePEc:mde:wpaper:0149
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    More about this item

    Keywords

    Total Factor Productivity; LEVPET; Fixed Effects; Quaternary Sector;
    All these keywords.

    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
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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