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Characteristics of the Portuguese Economic Growth: What has been Missing?

Listed author(s):
  • João Amador
  • Carlos Coimbra

This paper analyzes the Portuguese economic growth since the 1960's until present and compares its composition with that of Spain, Greece and Ireland. The average real GDP growth rate in each decade is decomposed as the contribution of input accumulation and total factor productivity. The contribution of labour and capital is separated using computed elasticities and the contribution of total factor productivity is disentangled into technological progress and efficiency. The methodology is based on Bayesian statistical methods and allows the computation of a world translog dynamic stochastic production frontier, which captures the technology that is available to all economies in each period of time. The results obtained are accurate in terms of the contribution of input accumulation and total factor productivity to GDP growth but there is lower precision when separating the contributions of technology growth and efficiency. The results obtained show that Portugal owes most of its economic growth to the accumulation of factors and not to total factor productivity. In particular the contribution of technology to economic growth is substantially lower than what is observed in the other economies considered. It is argued that this may be due to the existence of a low capital-labour ratio, which determines that Portugal is placed in a segment of the world production frontier that does not expand significantly as a result of technological progress. In addition, there is some evidence of modest developments in terms of efficiency which may be associated with the low quality of new inputs relatively to other economies. Another possible explanation for the disappointing performance of the Portuguese economy in the last decade lies in the existence of statistical inaccuracies in the measurement of GDP, especially in what concerns the contribution of some services.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200708.

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Date of creation: 2007
Handle: RePEc:ptu:wpaper:w200708
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