Natural Resources and Total Factor Productivity Growth in Developing Countries : Testing A New Methodology
Estimates of total factor productivity growth, a measure of increases in the efficiency of production, have traditionally been based on a two-factor model of labor and fixed capital. Because profits are measured residually in the System of National...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/565561547645473522/Natural-Resources-and-Total-Factor-Productivity-Growth-in-Developing-Countries-Testing-A-New-Methodology http://hdl.handle.net/10986/31172 |
| Summary: | Estimates of total factor productivity
growth, a measure of increases in the efficiency of
production, have traditionally been based on a two-factor
model of labor and fixed capital. Because profits are
measured residually in the System of National Accounts, they
implicitly include rents on natural resource exploitation,
with the result that the contribution of fixed capital to
growth in the inputs to gross domestic product is misstated,
particularly in resource dependent developing countries.
This leads to incorrect measures of total factor
productivity growth. Using data on natural resources from
the World Bank's Wealth of Nations database and methods
combining the Solow growth accounting model with recent work
at the Organisation for Economic Co-operation and
Development, this paper makes new estimates of total factor
productivity growth for 74 developing countries over
1996-2014. In the aggregate, including natural resources as
a factor of production increases estimated total factor
productivity growth across all country income classes and
regions of the world when compared with the traditional
two-factor approach. In addition, the estimated total factor
productivity growth including natural resources is less
volatile over time in the great majority of countries
compared with the traditional approach. The availability of
World Bank data on natural resource quantities and rents for
a wide range of countries suggests that natural resources
should be included in total factor productivity growth
estimation going forward. Further research could focus on
the distinctive roles played by different natural resource endowments. |
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