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Tripartite decomposition of labor productivity growth, FDI and human development: evidence from transition economies

Khaled Elmawazini (), Elias G. Saleeby, Ahmed Ibn el Farouk and Bashayer AL-Naser
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Khaled Elmawazini: Gulf University for Science & Technology
Elias G. Saleeby: American University of Iraq
Ahmed Ibn el Farouk: Gulf University for Science & Technology
Bashayer AL-Naser: Gulf University for Science & Technology

Economic Change and Restructuring, 2018, vol. 51, issue 2, 153-171

Abstract: Abstract This study investigates the relative contribution of technological change, technological catch-up and capital deepening as drivers of labor productivity growth in 14 transition economies during the period 2000–2012. In addition, the study extends the usual decomposition of labor productivity growth by encompassing the impact of foreign direct investment (FDI) on labor productivity growth in transition economies. To illustrate the relative contribution of FDI as a driver of labor productivity growth, we present a simple theoretical model that augments Kohli [Labour productivity vs. total factor productivity. IFC Bulletin 20 (April), Irving Fisher Committee on Central Bank Statistics, International Statistical Institute, 2005] and Grosskopf et al. (Aggregation, efficiency, and measurement, Springer, New York, pp 97–116, 2007) decomposition of the labor productivity. The insights derived in this model provide an underpinning to the empirical analysis in this study. Using Blundell–Bond dynamic panel General Method of Moments estimators, the main finding of dynamic panel data regressions shows that technological catch-up, technological change, and human development level, trade and demographic of population ageing are the main factors that affect labor productivity growth in transition countries. Furthermore, the findings of dynamic panel data regressions show insignificant positive impact of FDI on productivity growth in transition economies. One explanation is that the 14 transition economies that are included in this study do not reach a minimum human development threshold level.

Keywords: Labor productivity; Technological change; Technological catch-up; Capital deepening; Human development; FDI; Transition economies (search for similar items in EconPapers)
JEL-codes: O30 O47 D24 F23 (search for similar items in EconPapers)
Date: 2018
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