Labor productivity growth: disentangling technology and capital accumulation

Michele Battisti, Massimo Del Gatto, Christopher Parmeter

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

How much of the convergence in labor productivity that we observe in manufacturing is due to convergence in technology versus convergence in capital-labor ratios? To shed light on this question, we introduce a nonparametric counterfactual decomposition of labor productivity growth into growth of the capital-labor ratio (K/L), technological productivity (TEP) and total factor productivity (TFP). Our nonparametric specification enables us to model technology allowing for heterogeneity across all relevant dimensions (i.e. countries, sectors and time). Using data spanning from the 1960s to the 2000s, covering 42 OECD and non OECD countries across 11 manufacturing sectors, we find TEP and TFP to account for roughly 46 and −6% of labor productivity growth respectively, on average. While technological growth at the world level is driven primarily by the US and a handful of other OECD countries, we find strong evidence of convergence in both technology and capital-labor ratios. Interestingly, very few of the usual growth determinants are found to enhance the process of technological catching-up.

Original languageEnglish (US)
Pages (from-to)111-143
Number of pages33
JournalJournal of Economic Growth
Volume23
Issue number1
DOIs
StatePublished - Mar 1 2018

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Keywords

  • Aggregate productivity
  • Convergence
  • Nonparametric estimation
  • Technology
  • TFP

ASJC Scopus subject areas

  • Economics and Econometrics

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