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Sources of TFP Growth: Occupational Choice and Financial Deepening

  • Hyeok Jeong
  • Robert M. Townsend

We develop a method of growth accounting based on the integrated use of transitional growth models and micro data. We decompose total factor productivity (TFP) growth into the occupational-shift effect, financial-deepening effect, capital-heterogeneity effect, and sectoral-Solow-residuals. Applying this method to Thailand, which experienced rapid growth with enormous structural changes between 1976 and 1996, we find that 73 percent of TFP growth is explained by occupational shifts and ?nancial deepening, without presuming exogenous technical progress. Expansion of credit is a major part. We also show the role of endogenous interaction between factor price dynamics and the wealth distribution for TFP.

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Paper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 05.28.

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Length: 32 pages
Date of creation: Mar 2005
Date of revision: May 2005
Publication status: Published in Review of Economics, March 1999, pages 1-23
Handle: RePEc:scp:wpaper:05-28
Contact details of provider: Phone: (213) 740-3521
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Web page: http://www.usc.edu/dept/LAS/economics/IEPR/

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  1. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  2. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
  3. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
  4. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  5. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, June.
  6. Townsend, Robert M, 1983. "Financial Structure and Economic Activity," American Economic Review, American Economic Association, vol. 73(5), pages 895-911, December.
  7. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
  8. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  9. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
  10. Fuss, Melvyn & McFadden, Daniel & Mundlak, Yair, 1978. "A Survey of Functional Forms in the Economic Analysis of Production," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 4 McMaster University Archive for the History of Economic Thought.
  11. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  12. Andres Erosa & Ana Hidalgo, 2005. "On Capital Market Imperfections as a Source of Low TFP and Economic Rents," Working Papers tecipa-200, University of Toronto, Department of Economics.
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