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How Important Is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?

Konstantins Benkovskis (), Ludmila Fadejeva and Julia Wörz ()
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Julia Wörz: Foreign Research Division, Oesterreichische Nationalbank,

Authors registered in the RePEc Author Service: Julia Maria Woerz ()

Focus on European Economic Integration, 2013, issue 1, 8-27

Abstract: The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyze the contributions from technological change at the industry level to an economy’s aggregate growth performance. Our derivation of economywide TFP growth entails three major improvements over the traditional Solow residual approach: First, we allow for non-constant returns to scale as well as changes in the utilization of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from the industry level to the macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms of trade shocks. Our calculations for the sample of ten Central, Eastern and Southeastern European EU member countries over the time period 1995–2009 are based on the newly available World Input- Output Database (WIOD).

Keywords: Total factor productivity; terms of trade; utilization; input-output table; Central; Eastern and Southeastern Europe (search for similar items in EconPapers)
JEL-codes: C23 D24 E23 O47 (search for similar items in EconPapers)
Date: 2013
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Working Paper: How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries? (2012) Downloads
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