Razzak, Weshah (2006): Explaining the gaps in labour productivity for some developed countries.
Download (289kB) | Preview
Modern economic theories explain differences in productivity and economic growth across countries by differences in political and economic institutions, and differences in culture, geographical location, policies, and laws. The success of any of these theories in explaining the gap in productivity between any two countries depends on the countries in the sample. We argue in this paper that differences in the above variables might explain gaps in economic performance between developed and developing countries, but are too small to explain the productivity gaps between developed countries. We test this hypothesis for two pairs of developed neighbouring countries: New Zealand and Australia and Canada and the United States, hence New Zealand – Australia and Canada – United States. In this paper, more than eighty percent of labour productivity gaps between New Zealand and Australia and Canada and the United States are explained by endogenous technology shocks (TFP) and capital intensities.
|Item Type:||MPRA Paper|
|Original Title:||Explaining the gaps in labour productivity for some developed countries|
|Keywords:||Labour Productivity; TFP; Real exchange rate|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
|Depositing User:||Weshah Razzak|
|Date Deposited:||03. Oct 2006|
|Last Modified:||14. Feb 2013 12:57|
Acemoglu, D. S. Johnson and J. Robinson, “Institutions as the Fundamental Cause of Long-Run Growth,” A paper prepared for the Handbook of Economic Growth, Philippe Aghion and Steve Durlauf (eds.,), 2004.
Aghion, P. and P. Howitt, “A Model of Growth Through Creative Destruction,” Econometrica 60, 2, 323-351, 1992.
Arin, K. P. and F. Koray, “Fiscal Policy and Economic Activity: US Evidence,” Working Paper presented at15th New Zealand Econometric Study Group, Auckland University of Technology, 2005.
Balassa, B., “The Purchasing Power Parity Doctrine: A Reappraisal, Journal of Political Economy 72, 584-596, 1964.
Barro, R. and X. Sala-i-Martin, Economic Growth, MIT Press, 1995.
Barro, R. and R. McCleary, “Religion and Economic Growth,” National Bureau of Economic Research Working Paper No. 9628, 2003.
Basu, S., J. G. Fernald, N. Oulton and S. Srinivasan, “The Case of the Missing Productivity Growth,” NBER conference April 2003.
Chinn, M. and L. Johnston, “Real Exchange Rate Levels, Productivity and Demand Shocks” Evidence from a Panel of 14 Countries,” NBER WP No. 5709, 1996.
Cordoba, J. C. and M. Ripoll, “Endogenous TFP and Cross-Country Income Differences,” Unpublished Manuscript, June 2005.
Davey, J. A., “Maximizing the Potential of Older Workers,” NZIRA Research Paper, Victoria University of Wellington, Wellington, New Zealand, 2003.
DeGregorio, J. and H. Wolf, “Terms of Trade, Productivity and Real Exchange Rate,” NBER WP No. 4807, 1994.
DeLong, B. and L. Summers, “Equipment Investment and Economic Growth,” Quarterly Journal of Economics, 106, 445-502, 1991.
Diamond, J. M., Guns, Germs and Steel: The Fate of Human Societies, W. W. Norton & Co., New York, 1997.
Dollar, D. and A. Kraay, “Trade, Growth, and Poverty,” Economic Journal 114 (493), F22-F49, 2002.
Edwards, S., “Openness, Productivity and Growth: What Do We Really Know?” Economic Journals 108 (447), 383-398, 1998.
Fitzgerald, D., “Terms of Trade Effects, Interdependence and Cross-Country Differences in Price Levels,” Harvard University Mimeo, 2003.
Frankel, J. and D. Romer, “Does Trade Cause Growth?” American economic Review 89 (3), 379-399, 1999.
Grief, A., “Cultural Beliefs and the Organization of the Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies,” Journal of Political Economy 102, 912-950, 1994.
Grossman G. M. and E. Helpman, Innovation an Growth in the Global Economy, MIT Press, 1991.
Hall, R. and C. Jones, “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” Quarterly Journal of Economics 114 (1), 83-116, 1999.
Harris, R., “Is There a Case for Exchange Rate Induced Productivity Change?” Discussion Paper No.0110, Centre for International Economic Studies, 2001.
Harrod, R., International Economics, London, James Nisbet and Cambridge University Press, 1933.
Helpman, E. and M. Trajtenberg, “Diffusion of General Purpose Technologies: In General Purpose Technologies and Economic Growth, (ed.) E. Helpman: MIT Press, 1998.
Helpman, E., General Purpose Technology, MIT Press, Cambridge, MA, 1999.
Hsieh, D., “The Determination of the Real Exchange Rate: The Productivity Approach,” Journal of International Economics 12 (2), 355-362, 1982.
Kenlow, P. J. and A. Rodriguez-Clare, “The Neoclassical Revival of Growth Economics: Has It Gone Too Far?” in Ben Bernanke and Julio Rotemberg *eds.), NBER Macroeconomics Annual, MIT Press, Cambridge, MA, 1997.
Krueger, A., “Trade Policy and Development: How We Learn.” American Economic Review 87 (1), 1-22, 1997.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. W Vishny, “Law and Finance,” Journal of Political Economy 106, 1113-1155, 1998.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. W Vishny, “Legal Determinants of External Finance,” Journal of Finance 52, 1131-1150, 1997.
Lee, A. J., “Technology Imports and R&D Efforts of Korean Manufacturing Firms,” Journal of Development Economics, Volume 50, 197-210, 1996.
Lee, J. and Man_Keung Tang, “Does Productivity Growth Lead to Appreciation of the Real Exchange Rate?,” IMF Working Paper WP/03/154, 2003.
Lobanio, G., “McCombie (John), Pugno (Maurizio) and Soro (Bruno), (eds.,) Productivity Growth and Economic Performance: Essays on Verdoorn’s Law, Economic Journal, Vol. 115, No 501, F138-F139, 2005.
Lucas, R. Jr., “On the Mechanics of Development Planning,” Journal of Monetary Economics 22, 3-42, 1988.
Mahoney, P. G., “The Common Law and Economic Growth: Hayek Might be Right,” University of Virginia School of Law Working Paper 00-8, January 2000.
Mankiw, N G, D Romer and D N Weil, “A Contribution to the Empirics of Economic Growth,” The Quarterly Journal of Economics, Vol.17:2, 407-437, 1992.
Marston, R., “Systematic Movements in Real Exchange Rate in the G-5: Evidence on the Integration of Internal and Exchange Markets,” Journal of Banking and Finance 14 (5), 1023-1044, 1990.
Matheson and L. Oxley, “Convergence in Productivity Across Industries: Some Results from New Zealand and Australia,” forthcoming International Review of Applied Economics,” 2006.
McCombie, J. Pugno, M. and Soro, B., Productivity Growth and Economic Performance: Essays on Verdoorn’s Law, Basingstocke and London: Palgrave, 2002.
Micossi, S. and G. M. Milesi-Ferretti, “The Real Exchange Rate and the Price of Nontradable Goods,“ IMF WP No.94/19, 1994.
Miyajima, K., “Real Exchange Rates in Growing Economies: How Strong Is the Role of the Nontradables Sectors?” IMF Working Paper WP/05/233, 2005.
Myrdal, G., Asian Drama: An Inquiry in the Poverty of nations, 3 Volumes, Twentieth Century Fund, New York, 1968.
Nelson, R. R. and B. N. Sampat, “Making Sense of Institutions as a Factor Shaping Economic Performance,” Journal of Economic Behaviour and Organization Vol. 44, 31-54, 2001.
Prescott, E. C, “Prosperity and Depression: 2002 Richard T Ely Lecture,” The American Economic Review May 2002.
Prescott, E.C., “Needed: A Theory of Total Factor Productivity,” Federal Reserve Bank of Minneapolis Research Department Staff Report No. 242, 1997.
Rangazas, P. C., “Human Capital and Growth: An Alternative Accounting, “The B.E. Journal in Macroeconomics, Topics in Macroeconomics, Volume 5 Issue 1, Article 20 www.bepress.com
Rodriguez, F., “Openness and Growth: What Have We Learned?” 2006.
Rodriguez, F. and D. Rodrik, Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence. NBER Macroeconomics Annual 2000. B. Bernanke and K. Rogoff, Cambridge, MA. National Bureau of Economic Research, 2000.
Rodrik, D., “Comments on “Trade, Growth and Poverty” By D. Dollar and A. Kraay, Harvard University.
Romer, P., “Increasing Returns and Long Run Growth,” Journal of Political Economy 94, 1002-1037, 1986.
Rogoff, K., “Traded Goods Consumption Smoothing and The Random Walk Behaviour of the Real Exchange rate, NBER WP No. 4119, 1992.
Sacks, J. D., “Notes on a New Sociology of Economic Development,” in Lawrence E. Harrison and Samuel P. Huntington (eds.,) Cultural Matters: How Values Shape Human Progress, Basic Books, New York, 2000.
Sala-i-Martin, and G. Doppelhofer, “Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach,” American Economic Review 94 (4), 813-35, 2004.
Samuelson, P., “Theoretical Notes on Trade Problems,” Review of Economics and Statistics 46, 145-154, 1964.
Tabellini, G., “Culture and Institutions: economic Development in the Regions of Europe” University of Bocconi-IGIER and CEPR, 2005.
Thomas, A. and A. King, “The Balassa – Samuelson Effect in the Asia – Pacific Region: Now You See It, Now You Don’t,” Otago University WP – Department of Economics, 2003.
Tullett, A., K. Carlaw, D. Marsh and A. Pirich, “A New Zealand Perspective on the New Economy,” Ministry of Economic Development, 2002.
Weber, M., The Protestant Ethic and the Spirit of Capitalism, Allen and Unwin, London, 1930.
Wieser, R., “R&D Productivity and Spillovers: Empirical Evidence at the Firm Level,” Forthcoming at the Journal of Economic Surveys, Institute of Public Finance and Infrastructure Policy at Vienna University of Technology, 2004.