TFP growth and its determinants: a model averaging approach

Danquah, Michael; Moral-Benito, Enrique; Ouattara, Bazoumana
August 2014
Empirical Economics;Aug2014, Vol. 47 Issue 1, p227
Academic Journal
Total Factor Productivity (TFP) accounts for a sizable proportion of the income differences across countries. Two challenges remain to researchers aiming to explain these differences: on the one hand, TFP growth is hard to measure empirically; on the other hand, model uncertainty hampers consensus on its key determinants. This paper combines a non-parametric measure of TFP growth with Bayesian model averaging techniques in order to address both issues. Our empirical findings suggest that the most robust TFP growth determinants are time-invariant unobserved heterogeneity and trade openness. We also investigate the main determinants of two TFP components: efficiency change (i.e., catching up) and technological progress.


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