Dual Economies and International Total Factor Productivity Differences

Areendam Chanda and Carl-Johan Dalgaard

No 03-09, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper argues that a significant part of measured TFP differences across countries is attributable not to technological factors that affect the entire economy neutrally, but rather, to variations in the structural composition of economies. In particular, the allocation of scarce inputs between agriculture and non-agriculture seems to be important. We provide a theory which links the institutional framework to the long-run composition of the economy, and thereby to measured TFP and income per worker. A decomposition analysis suggests that between 30 and 50 percent of the international variation in TFP can be attributed to the composition of output. Estimation exercises suggest that recent findings of a conducive effect from institutions, and to some extent, geography, on long-run prosperity and TFP, may be thus explained.

Keywords: dual economy; structural change; total factor productivity; institutions; geography (search for similar items in EconPapers)
JEL-codes: O41 O47 O50 (search for similar items in EconPapers)
Pages: 37 pages + tables
Date: 2003-05
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Dual Economies and International Total Factor Productivity Differences (2005)
Working Paper: Dual Economies and International Total Factory Productivity Differences (2005)
Working Paper: Dual Economies and International Total Factor Productivity Differences (2003)
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