Discovering the Sources of TFP Growth: Occupational Choice and Financial Deepening
Hyeok Jeong () and
No 05.19, IEPR Working Papers from Institute of Economic Policy Research (IEPR)
Total factor productivity (TFP) growth is measured as a residual and its sources typically remain unknown inside the residual. This paper aims to identify the underlying sources of this residual growth, being explicit about both micro underpinnings and transitional growth. The key forces are occupational choice and limited access to credit. We develop a method of growth accounting that decomposes not only the overall growth but also TFP growth into four components: occupational shifts, financial deepening, capital heterogeneity, and sectoral Solow residuals. Thus we explicitly evaluate the quantitative importance of micro impediments to trade such as credit constraint on aggregate growth dynamics, in particular the TFP dynamics. Applying this method to Thailand, which experienced rapid growth with enormous structural changes for the two decades between 1976 and 1996, we find that 73 percent of TFP growth can be explained on average by occupational shifts and financial deepening, without presuming exogenous technical progress. Expansion of credit is a major part of this explained TFP growth. The remainder TFP growth is related to the sectoral Solow residuals, which are determined by the endogenous interaction between the price dynamics of wage, interest rate, and profits and the evolution of wealth distribution. The nature of this interaction between price dynamics and wealth distribution depends on access to credit, and the di¤erences in measured TFP growth across subgroups di¤erentiated by any specific characteristics may reflect the varying degrees of limited access to credit rather than subgroup-specific technical changes. The above key forces of TFP also provide a micro foundation of the relationship between growth and inequality. The inequality among the non-intermediated a¤ects the growth of the intermediated. The growth of the intermediated trickles down to the non-intermediated and reduces inequality among them.
Keywords: Total Factor Productivity; Occupation Choice; Financial Deepening (search for similar items in EconPapers)
JEL-codes: O47 O16 J24 D24 (search for similar items in EconPapers)
Pages: 75 pages
New Economics Papers: this item is included in nep-bec, nep-dev, nep-dge, nep-ent and nep-sea
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:scp:wpaper:05-19
Access Statistics for this paper
More papers in IEPR Working Papers from Institute of Economic Policy Research (IEPR) Contact information at EDIRC.
Bibliographic data for series maintained by ().