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Labor Productivity Growth: Disentangling Technology and Capital Accumulation

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  • Michele Battisti

    (University of Palermo, CeLEG LUISS Guido Carli and RCEA)

  • Massimo Del Gatto

    (G.d'Annunzio University and CRENoS)

  • Christopher F. Parmeter

    (Department of Economics, University of Miami)

Abstract

We adopt a counterfactual approach to decompose labor productivity growth into growth of Technological Productivity (TEP), growth of the capital-labor ratio and growth of Total Factor Productivity (TFP). We bring the decomposition to the data using international countrysectoral information spanning from the 1960s to the 2000s and a nonparametric generalized kernel method, which enables us to estimate the production function allowing for heterogeneity across all relevant dimensions: countries, sectors and time. As well as documenting substantial heterogeneity across countries and sectors, we nd average TEP to account for about 44% of labor productivity growth and TEP gaps with respect to the US to remain almost unchanged, on average, despite an average 1% yearly decrease in the labor productivity gap. The US displays the highest TEP growth rate. We then perform standard convergence regressions nding strong evidence of technological convergence and showing that the e ect of a few variables only, among those found significant to explain labor productivity convergence, occurs through the technology channel.

Suggested Citation

  • Michele Battisti & Massimo Del Gatto & Christopher F. Parmeter, 2014. "Labor Productivity Growth: Disentangling Technology and Capital Accumulation," Working Papers 2014-02, University of Miami, Department of Economics.
  • Handle: RePEc:mia:wpaper:2014-02
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    Cited by:

    1. Michele Battisti & Filippo Belloc & Massimo Del Gatto, 2017. "Technology-specific Production Functions," Working Paper series 17-26, Rimini Centre for Economic Analysis.

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    Keywords

    TFP; Aggregate Productivity; Technology; Nonparametric Estimation; Convergence Publication Status: Under Review;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • 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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