The components of output growth: A stochastic frontier analysis

This dissertation looks at cross-country patterns of economic and productivity growth. In particular, I look at the components of output growth in 5 groups of countries: Africa, Latin America, East Asia, South Asia and West and over the thirty year period 1960–89. The main objective of this dissertation is to determine the relative importance of TFP versus capital accumulation in the growth process of these regions. ^ The major obstacle to the previous growth studies is the lack of data on physical capital stock, especially for developing countries. To allow the inclusion of a larger number of developing countries, this dissertation calculates a physical capital stock series for 104 countries and over the entire period. One assumption made by most empirical studies of growth is that capital and labor are homogenous across countries and time. I argue that this is an extreme assumption and I include variables that capture differences in input composition and may affect the productivity of capital and labor. I use the mean years of education as a proxy for the quality of labor and the average age of capital as a proxy for the quality of the physical capital stock. Consequently, this dissertation also calculates the average age of physical capital for each country and for every year. ^ I adopt a stochastic frontier analysis to decompose TFP growth into efficiency change and technological change. In the case with qualitative variables, TFP is further decomposed into quality change. The main findings are that the average age of physical capital has a negative effect on output growth while results on education are less conclusive. Output decomposition shows that in both models with and without qualitative variables, it is capital accumulation rather than TFP that explains most of output growth.