Sources of TFP Growth: Occupational Choice and Financial Deepening

Hyeok Jeong
Robert M. Townsend
Publication Type: 
Papers
Publication Article File: 
Journal Name: 
Economic Theory
Journal Volume: 
32
Journal Number: 
1
Pages: 
179-221
Publication Year: 
2007

This paper explains and measures the sources of total factor productivity (TFP) by developing a method of growth accounting based on an integrated use of transitional growth models and micro data. We decompose TFP growth into the occupational-shift effect, financial-deepening effect, capital-heterogeneity effect, and sectoral-Solow-residuals. Applying this method to Thailand, which experienced rapid growth with enormous structural changes between 1976 and 1996, we find that 73% of TFP growth is explained by occupational shifts and financial deepening, without presuming exogenous technical progress. Expansion of credit is a major part. We also show the role of endogenous interaction between factor price dynamics and the wealth distribution for TFP.

JEL Codes: 
O47, O16 , J24 , D24
Region: 
East Asia and the Pacific
Country: 
Thailand
Topic: 
Economic Modeling
Topic: 
Occupational Choice
Topic: 
Enterprise
Topic: 
Credit
Topic: 
Growth
Topic: 
General Equilibrium