MODELLING TOTAL FACTOR PRODUCTIVITY IN A DEVELOPING ECONOMY
DOI:
https://doi.org/10.2478/subboec-2021-0005Keywords:
Angola; total factor productivity; ARDL, cointegration, growth accounting.Abstract
Total factor productivity is an important driver of economic growth. It is therefore important to understand its determinants. This will help to enhance it and accelerate economic growth. The objective of this paper is therefore to investigate drivers of total factor productivity in Angola. The investigation covers the period 1995 – 2018. It is conducted for selected sectors of the economy. The results show that foreign direct investment has a positive effect on total factor productivity in all sectors. Increase in openness of the economy and depreciation the exchange rate have a positive effect on total factor productivity in the manufacturing sector. However, an increase in these two variables is associated with a decrease in total factor productivity of the primary and service sectors. The results indicate that a rise in inflation is associated with a decrease in total factor productivity in the manufacturing and service sectors. However, an increase in inflation is positively associated with an increase in total factor productivity in the primary sector. Increase in official development assistance impact negatively on total factor productivity in the primary and service sectors. This variable has a positive effect on total factor productivity of the manufacturing sector. The implication of these results is that Angola should pursue policies that attract foreign direct investment in order to ensure sustainable total factor productivity growth. The impact of other drivers such as openness of the economy, inflation, official development assistance and exchange rate depends on sectors. This implies that it is important for Angola to implement policies, which are specific to sectors. This will help to enhance the growth of total factor productivity.
JEL classification: O40; O47; O49; O55.
References
Abdullah M., Chowdhury M. (2020) Foreign direct investment and total factor productivity: Any nexus?,Margin-The Journal of Applied Economic Research, 14(2), 164 – 190
Abegaz M.T. (2013) Total factor productivity and technical efficiency in the Ethiopian manufacturing sector, Ethiopian Development Research Institute Working Papers 010, Addis-Ababa, Ethiopia
Adnan Z., Chowdhury M., Mallik C. (2019) Foreign direct investment and total factor productivity in South Asia, Theoretical and Applied Economics, XXVI(2), 105 -120
Adnan Z., Chowdhury M., Mallik, G. (2020) Determinants of total factor productivity in Pakistan: a time series analysis using ARDL approach, International Review of Applied Economics, 34(6), 807 – 820
Ahmed E. (2008) Foreign direct investment intensity effect on total factor productivity, Journal of Economic Development, 33(2), 155-166
Aitken B.J., Harrison A.E. (1999) Do domestic firms benefit from direct foreign investment? evidence from Venezuela, American Economic Review, 89, 605-618
Akinlo A. (2005) Impact of macroeconomic factors on total factor productivity: Sub-Saharan Africa countries, World Institute for Development Economic Research (WIDER) Research Paper No. 2005/39, Helsinki, Finland
Angola National Bank. (2015) Annual Report .Retrieved from http://www.boa
Azeroual M. (2016) The impact of foreign direct investment on the productivity growth in the Moroccan manufacturing industry, Journal of International and Global Economic Studies, 9(1), 29 – 45
Biatour M. (2011) The determinants of total factor productivity in Belgium: insights from sectoral data and common dynamic processes, Federal Planning Bureau, 7(1), 1-68
Castiglionesi F., Ornaghi C. (2011) On the determinants of total factor productivity growth: evidence from Spanish manufacturing firms, Macroeconomic Dynamics, 17(3), 501-530
Chaudhry A. (2009) Total factor productivity growth in Pakistan: an analysis of the agricultural and manufacturing sectors, Lahore Journal of Economics, 14(Special Edition), 1-16
Danquah M. (2006) Sources of economic growth in Ghana. Unpublished Master Dissertation, United Nations Institute for Economic Planning and Development, Dakar, Senegal
Eita, J.H., Pedro, M.J. (2020) Modelling total factor productivity in a developing economy: evidence from Angola, MPRA Paper 101304, University Library of Munich, Germany.
Engle R.F., Granger C.W. (1987) Cointegration and error correction: representation, estimation and testing, Econometrica, 55(2), 251 -276.
Espinoza R. A. (2012) Monetary policy transmission in the GCC countries, Journal of Economics, 44(5), 25-40
Fadiran D., Akanbi O.A. (2017) Institutions and other determinants of total factor productivity in Sub-Saharan Africa, Economic Research Southern Africa (ERSA) Working Paper 714, Economic Research Southern Africa (ERSA), Cape Town, South Africa
Haider S., Ganaie A.A., Kamaiah, B. (2019) Total factor productivity and openness in Indian economy: 1970 – 2011, Foreign Trade Review, 54(1), 46 -57
Garzarelli G., Limam Y.R. (2019) Physical capital, total factor productivity, and economic growth in Sub-Saharan Africa, South African Journal of Economic and Management Sciences, 22(1),1-10
Groth C. (2011) Lecture notes in Macroeconomics. Retrieved 2015, from htpp://www.econ.ku.dk
Idris J. (2007) Determinants of total factor productivity growth in Malaysia, Journal of Economic Cooperation, 28(3), 41-58
Johansen S., Juselius K. (1990) Maximum likelihood estimation and inference on cointegration with application to the demand for money, Oxford Bulletin of Economics and Statistics, 52(2), 169 -210
Jorgenson D. (1967) The explanation of productivity change, Review of Economic Studies, 55(3), 249-283
Khalid M. (2012) Macro determinants of total factor productivity growth of agriculture in Pakistan, Pakistan Journal of Applied Economics, 2(22),1-18.
Kim J., Park J. (2018) The role of total factor productivity growth in middle-income countries, Emerging Markets Finance and Trade, 54(6), 1264 – 1284
Lucas R.E. (1988). On the mechanics of economic development, Journal of Monetary Economics, 22(1), 3–42
Liao N., Liu X. (2009) Export-total factor productivity growth nexus in East Asian economies, Applied Economics, 41(13), 1663-1675
Lucas R.E. (1990) Why doesn’t capital flow from rich to poor countries, American Economic Review, 80(2), 92 - 96
Ludmila F. (2016) Measuring total factor productivity and variable factor utilization: sector approach, the Case of Latvia, Eastern European Economics Journal, 48(5), 63-101.
Malikane C., Chitambara, P. (2017) Foreign direct investment, productivity and the technology gap in African economies, Journal of African Trade, 4, 61 – 74
Misra B.S. (2020) Determinants of total factor productivity in Indian states, Indian Growth and Development Review, 13(1), 259 – 282
Myasnikow A. (2018) Analysis of determinants of total factor productivity of Russian regions, Economic of Region, 1(4), 1168-1180
Narayan P. (2005) Trade liberalization and economic growth in Fiji: an empirical assessment using the ARDL approach, Journal of the Asia Pacific Economy, 10(1), 96–115
Nelson R.R., Phelps, E.S. (1966) Investment in humans, technological diffusion and economic growth, American Economic Review, 56 (1/2), 69 – 75
Nunung N. (2016) Total factor productivity analysis of oil palm production in Indonesia, International Journal of Economics and Financial issues, 6(4), 1570-1577
Ogunleye E.O., Ayeni R. K. (2008) The link between export and total factor productivity: evidence from Nigeria, Social Sciences, 1, 9–18
Olomola P.P., Osinubi T.T. (2018). Determinants of total factor productivity in Mexico, Indonesia, Nigeria, and Turkey (1980-2014), Emerging Economy Studies, 4(2), 192 – 217
Pesaran M. Shin Y. (1999) An Autoregressive distributed lag modelling approach to cointegration analysis. In: Strom S. (Ed), Econometrics and economic theory in the 20th century: the Ragnar Frisch centennial Symposium, Cambridge University Press, Cambridge, United Kingdom
Pesaran H.M., Shin Y., Smith R.J. (2001) Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 2(3), 289–326
Phillip M. (2012) Macroeconomics and institutional determinants of total factor productivity: a cross-country empirical study, Economic Journal, 2(3), 89–126
Rodrik D. (2008) The real exchange rate and economic growth, Brookings Papers on Economic Activity, Fall 2008(2), 365-412
Romer P.M. (1986) Increasing returns to scale, Journal of Political Economy, 94(5), 1002 – 1037
Romer P.M. (1990) Endogenous technological change, Journal of Political Economy, 98(5 part 2), S71 –S102
Saleem H., Shahzad M., Khan M.B., Khilji B.A. (2019) Innovation, total factor productivity and economic growth in Pakistan: a policy perspective, Journal of Economic Structures, 8(7), 1 – 18
Shao L., He Y., Feng C., Zhang S. (2016) An empirical analysis of total-factor productivity in 30 sub-sub-sectors of China's nonferrous metal industry, Resources Policy, 50(C), 264-269
Solow R. (1956) A contribution to the theory of economic growth, Quarterly Journal of Economics, 1(4), 65-94.
Spilioti S., Vamvoukas G. (2015) The impact of government debt on economic growth: an empirical investigation of the Greek market, Journal of Economic Asymmetries, 12(1), 34-40
Swan W. (1956) The neoclassical growth model, Review of Economic Studies, 34(3), 249-283.
Wadad S. (2016) Economic growth and total factor productivity in Lebanon, International Journal of Economics and Finance, 9(2), 159-171
World Bank. (2015) Global Economic Prospect. Washington DC., World Bank Group.
World Bank. (2016) Country Database-Angola. Washington DC., World Bank Group.
World Bank. (2017) Angola-second Investment climate assessment, Washington DC., World Bank.
World Bank. (2018) Global economic prospect. Washington, DC: World Bank Group.
World Bank. (2016) GDP per capita (current US$). Retrieved 2016, from World Bank: http://www.data.worldbank.org
World Bank. (2015). Economic history of Angola. Retrieved 2015, from World Bank: http://www.worldbank.org.
World Bank. (2016). GDP per capita (current US$). Retrieved 2016, from: http://www.data.worldbank.org.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Studia Universitatis Babeș-Bolyai Oeconomica
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
