1. bookVolume 66 (2021): Issue 1 (April 2021)
Journal Details
License
Format
Journal
eISSN
2065-9644
First Published
06 Mar 2016
Publication timeframe
3 times per year
Languages
English
access type Open Access

Modelling Total Factor Productivity in a Developing Economy

Published Online: 12 May 2021
Volume & Issue: Volume 66 (2021) - Issue 1 (April 2021)
Page range: 75 - 96
Journal Details
License
Format
Journal
eISSN
2065-9644
First Published
06 Mar 2016
Publication timeframe
3 times per year
Languages
English
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.

Keywords

JEL Classification

Abdullah M., Chowdhury M. (2020) Foreign direct investment and total factor productivity: Any nexus?, Margin-The Journal of Applied Economic Research, 14(2), 164 – 19010.1177/0973801020904473 Search in Google Scholar

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 Search in Google Scholar

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 Search in Google Scholar

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 – 82010.1080/02692171.2020.1792420 Search in Google Scholar

Ahmed E. (2008) Foreign direct investment intensity effect on total factor productivity, Journal of Economic Development, 33(2), 155-16610.35866/caujed.2008.33.2.007 Search in Google Scholar

Aitken B.J., Harrison A.E. (1999) Do domestic firms benefit from direct foreign investment? evidence from Venezuela, American Economic Review, 89, 605-61810.1257/aer.89.3.605 Search in Google Scholar

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 Search in Google Scholar

Angola National Bank. (2015) Annual Report. Retrieved from http://www.boa Search in Google Scholar

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 Search in Google Scholar

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 Search in Google Scholar

Castiglionesi F., Ornaghi C. (2011) On the determinants of total factor productivity growth: evidence from Spanish manufacturing firms, Macroeconomic Dynamics, 17(3), 501-53010.1017/S1365100511000332 Search in Google Scholar

Chaudhry A. (2009) Total factor productivity growth in Pakistan: an analysis of the agricultural and manufacturing sectors, Lahore Journal of Economics, 14(Special Edition), 1-1610.35536/lje.2009.v14.isp.a1 Search in Google Scholar

Danquah M. (2006) Sources of economic growth in Ghana. Unpublished Master Dissertation, United Nations Institute for Economic Planning and Development, Dakar, Senegal Search in Google Scholar

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. Search in Google Scholar

Engle R.F., Granger C.W. (1987) Cointegration and error correction: representation, estimation and testing, Econometrica, 55(2), 251-276.10.2307/1913236 Search in Google Scholar

Espinoza R. A. (2012) Monetary policy transmission in the GCC countries, Journal of Economics, 44(5), 25-4010.2139/ssrn.2127026 Search in Google Scholar

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 Search in Google Scholar

Haider S., Ganaie A.A., Kamaiah, B. (2019) Total factor productivity and openness in Indian economy: 1970 – 2011, Foreign Trade Review, 54(1), 46-5710.1177/0015732518810835 Search in Google Scholar

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),1-1010.4102/sajems.v22i1.2309 Search in Google Scholar

Groth C. (2011) Lecture notes in Macroeconomics. Retrieved 2015, from htpp://www.econ.ku.dk Search in Google Scholar

Idris J. (2007) Determinants of total factor productivity growth in Malaysia, Journal of Economic Cooperation, 28(3), 41-58 Search in Google Scholar

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), 169-21010.1111/j.1468-0084.1990.mp52002003.x Search in Google Scholar

Jorgenson D. (1967) The explanation of productivity change, Review of Economic Studies, 55(3), 249-28310.2307/2296675 Search in Google Scholar

Khalid M. (2012) Macro determinants of total factor productivity growth of agriculture in Pakistan, Pakistan Journal of Applied Economics, 2(22),1-18. Search in Google Scholar

Kim J., Park J. (2018) The role of total factor productivity growth in middle-income countries, Emerging Markets Finance and Trade, 54(6), 1264 – 128410.1080/1540496X.2017.1422244 Search in Google Scholar

Lucas R.E. (1988). On the mechanics of economic development, Journal of Monetary Economics, 22(1), 3–4210.1016/0304-3932(88)90168-7 Search in Google Scholar

Liao N., Liu X. (2009) Export-total factor productivity growth nexus in East Asian economies, Applied Economics, 41(13), 1663-167510.1080/00036840601032193 Search in Google Scholar

Lucas R.E. (1990) Why doesn’t capital flow from rich to poor countries, American Economic Review, 80(2), 92 - 96 Search in Google Scholar

Ludmila F. (2016) Measuring total factor productivity and variable factor utilization: sector approach, the Case of Latvia, Eastern European Economics Journal, 48(5), 63-101.10.2753/EEE0012-8775480504 Search in Google Scholar

Malikane C., Chitambara, P. (2017) Foreign direct investment, productivity and the technology gap in African economies, Journal of African Trade, 4, 61 – 7410.1016/j.joat.2017.11.001 Search in Google Scholar

Misra B.S. (2020) Determinants of total factor productivity in Indian states, Indian Growth and Development Review, 13(1), 259 – 28210.1108/IGDR-01-2019-0008 Search in Google Scholar

Myasnikow A. (2018) Analysis of determinants of total factor productivity of Russian regions, Economic of Region, 1(4), 1168-118010.17059/2018-4-9 Search in Google Scholar

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), 96–11510.1080/1354786042000309099 Search in Google Scholar

Nelson R.R., Phelps, E.S. (1966) Investment in humans, technological diffusion and economic growth, American Economic Review, 56 (1/2), 69 – 75 Search in Google Scholar

Nunung N. (2016) Total factor productivity analysis of oil palm production in Indonesia, International Journal of Economics and Financial issues, 6(4), 1570-1577 Search in Google Scholar

Ogunleye E.O., Ayeni R. K. (2008) The link between export and total factor productivity: evidence from Nigeria, Social Sciences, 1, 9–18 Search in Google Scholar

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 – 21710.1177/2394901518795072 Search in Google Scholar

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 Search in Google Scholar

Pesaran H.M., Shin Y., Smith R.J. (2001) Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 2(3), 289–32610.1002/jae.616 Search in Google Scholar

Phillip M. (2012) Macroeconomics and institutional determinants of total factor productivity: a cross-country empirical study, Economic Journal, 2(3), 89–126 Search in Google Scholar

Rodrik D. (2008) The real exchange rate and economic growth, Brookings Papers on Economic Activity, Fall 2008(2), 365-41210.1353/eca.0.0020 Search in Google Scholar

Romer P.M. (1986) Increasing returns to scale, Journal of Political Economy, 94(5), 1002 – 103710.1086/261420 Search in Google Scholar

Romer P.M. (1990) Endogenous technological change, Journal of Political Economy, 98(5 part 2), S71 –S10210.1086/261725 Search in Google Scholar

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 – 1810.1186/s40008-019-0134-6 Search in Google Scholar

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), 264-26910.1016/j.resourpol.2016.10.010 Search in Google Scholar

Solow R. (1956) A contribution to the theory of economic growth, Quarterly Journal of Economics, 1(4), 65-94.10.2307/1884513 Search in Google Scholar

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), 34-4010.1016/j.jeca.2014.10.001 Search in Google Scholar

Swan W. (1956) The neoclassical growth model, Review of Economic Studies, 34(3), 249-283. Search in Google Scholar

Wadad S. (2016) Economic growth and total factor productivity in Lebanon, International Journal of Economics and Finance, 9(2), 159-17110.5539/ijef.v9n2p159 Search in Google Scholar

World Bank. (2015) Global Economic Prospect. Washington DC., World Bank Group. Search in Google Scholar

World Bank. (2016) Country Database-Angola. Washington DC., World Bank Group. Search in Google Scholar

World Bank. (2017) Angola-second Investment climate assessment, Washington DC., World Bank. Search in Google Scholar

World Bank. (2018) Global economic prospect. Washington, DC: World Bank Group. Search in Google Scholar

World Bank. (2016) GDP per capita (current US$). Retrieved 2016, from World Bank: http://www.data.worldbank.org Search in Google Scholar

World Bank. (2015). Economic history of Angola. Retrieved 2015, from World Bank: http://www.worldbank.org. Search in Google Scholar

World Bank. (2016). GDP per capita (current US$). Retrieved 2016, from: http://www.data.worldbank.org. Search in Google Scholar

Recommended articles from Trend MD

Plan your remote conference with Sciendo