Modelling total factor productivity in a developing economy: evidence from Angola

Eita, Joel Hinaunye and Pedro, Marcio Jose (2020): Modelling total factor productivity in a developing economy: evidence from Angola.

Abstract

The study investigates the determinants of total factor productivity in selected sectors of the Angolan economy for the period of 1995 and 2017. The empirical results indicate that foreign direct investment is positively and significantly associated with an increase in total factor productivity in all sectors. Moreover, openness of the economy and the exchange rate have a positive impact on total factor productivity in the manufacturing sector. However, the impact of these two variables is negative on total factor productivity in the primary and service sectors. Furthermore, the study results reveals that an increase in inflation causes a decrease in total factor productivity in the manufacturing and service sectors, whilst positively associated with an increase in total factor productivity in the primary sector. Finally, official development assistance has a negative effect on total factor productivity in the primary and service sectors, whilst having a positive effect on total factor productivity in the manufacturing sector. The results imply that to ensure sustainable total factor productivity growth, Angola should pursue policies that attract foreign direct investment. The effect of other variables such as openness of the economy, inflation, official development assistance and exchange rate depends on sectors. This suggest that it is important to come up with policies, which are sector-specific in order to improve total factor productivity growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Angola; total factor productivity; ARDL
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O49 - Other

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