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

Joel Eita () and Marcio Jose Pedro

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Angola; total factor productivity; ARDL (search for similar items in EconPapers)
JEL-codes: C13 C50 C51 O4 O49 (search for similar items in EconPapers)
Date: 2020-01-31, Revised 2020-04-30
New Economics Papers: this item is included in nep-eff and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101304

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