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Output Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach

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  • Yasmina Rim Limam, Stephen M. Miller and Giampaolo Garzarelli

Abstract

How do physical capital accumulation and Total Factor Productivity (TFP) individually add to economic growth? We approach this question from the perspective of the quality of both labor and physical capital, namely human capital and the age of physical capital. We build a unique dataset by explicitly calculating the age of physical capital for each country and each year of our time frame and estimate a stochastic frontier production function incorporating input quality in five groups of countries (Africa, East Asia, Latin America, South Asia, and West). Physical capital accumulation generally proves much more important than either the improved quality of factors or TFP growth in explaining output growth. The age of capital decreases growth in all groups except in Africa, while human capital increases growth in all groups except in East Asia.

Suggested Citation

  • Yasmina Rim Limam, Stephen M. Miller and Giampaolo Garzarelli, 2016. "Output Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach," Working Papers 613, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:613
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    More about this item

    Keywords

    Age of Physical Capital; Output Growth; Stochastic Frontier; Total Factor Productivity;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • 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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