TFP growth and its determinants: nonparametrics and model averaging

Series: Working Papers. 1104.

Author: Michael Danquah, Enrique Moral-Benito, Bazoumana Ouattara.

Published in: Empirical Economics, 2014, Vol. 47.

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TFP growth and its determinants: nonparametrics and model averaging (610 KB)

Abstract

Total Factor Productivity (TFP) accounts for a sizeable proportion of the income and growth
differences across countries. Two challenges remain to researchers aiming to explain
these differences: on the one hand, TFP growth is hard to measure; on the other hand,
model uncertainty hampers consensus on its key determinants. This paper combines a
non-parametric measure of TFP growth with model averaging techniques to addess both
issues. The empirical findings suggest that the most robust TFP growth determinants are
unobserved heterogeneity, initial GDP, consumption share, and trade openness. We also
investigate the main determinants of the TFP components: efficiency change (i.e. catching
up) and technological progress (i.e. innovation).