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Productivity——Patterns and Determinants across the World


Time:4:00pm - 5:30pm, Apr 18, 2019

Venue:Room 359S, Overseas Exchange Center, Peking University

Speaker:Norman V. Loayza

(Development Research Group, World Bank)





This is the background paper for the productivity extension of the World Bank’s Long Term Growth Model (LTGM). Based on an extensive literature review, the paper identifies the main determinants of economic productivity as innovation, education, market efficiency, infrastructure, and institutions. Based on underlying proxies, the paper constructs indexes representing each of the main categories of productivity determinants and, combining them through principal component analysis, obtains an overall determinant index. This is done for every year in the three decades spanning 1985-2015 and for over 100 countries. In parallel, the paper presents a measure of total factor productivity (TFP), largely obtained from the Penn World Table, and assesses the pattern of productivity growth across regions and income groups over the same sample. The paper then examines the relationship between the measures of TFP and its determinants. The variance of productivity growth is decomposed into the share explained by each of its main determinants, and the relationship between productivity growth and the overall determinant index is identified. The results show that the highest contributor among the determinants to the variance in TFP growth is market efficiency for OECD countries and education for non-OECD countries in the most recent decade. The overall determinant index has a significantly positive relationship with productivity growth controlling for initial TFP, as well as country- and time-specific effects. Finally, this relationship is used to provide a set of simulations on the potential path of TFP growth if certain improvements on its determinants are achieved. The paper presents and discusses some of these simulations at the regional level. An accompanying Excel-based toolkit, linked to the LTGM, provides a larger set of simulations and scenario analysis at the country level for the next few decades.




Norman Loayza currently heads the World Bank's research hub for Asia, based in Kuala Lumpur, Malaysia. Most recently, he was director of the World Development Report 2014, Risk and Opportunity: Risk Management for Development. Norman is Peruvian and holds a Ph.D. in economics from Harvard University, awarded in 1994. Since then he has worked in the World Bank research group, except in 1999-2000 when he was a senior economist at the Central Bank of Chile.

Norman's research has addressed various areas of economic and social development, including macroeconomic management through monetary and fiscal policy, reforms for economic growth and productivity, an analysis of investment returns and risks across the world. His advisory experience at the World Bank has covered several regions and countries of the world, including Brazil, Colombia, Egypt, Georgia, India, Indonesia, Malaysia, Pakistan, Peru, Sri Lanka, and Tunisia. Norman has edited 10 books and published over 50 articles in professional journals and books.