Abstract
Productivity is a key concept in economics and crucial for economic growth. By using different theoretical models, we show the role of several kinds of productivity, including the total factor productivity (TFP) and labor productivity.
The authors would like to thank Hinh T. Dinh and participants of a webinar organized by the CASED for constructive comments.
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Notes
- 1.
Solow was awarded the Nobel Memorial Prize in Economic Sciences in 1987 for his contributions to the theory of economic growth. The paper Solow (1957) is an important part of these contributions.
- 2.
Estimating contribution to growth of different factors is not an easy task. See Hulten (2009) for a great treatment of growth accounting.
- 3.
See Le Van and Dana (2003) for a detailed presentation of optimal growth models.
- 4.
Bloom et al. (2013) ran a management field experiment on large Indian textile firms and provided free consulting on management practices to randomly chosen treating plants. By comparing the performance of these plants to a set of control plants, they found that adopting these management practices raised the TFP by 17% in the first year.
- 5.
Here, we implicitly assume that u is continuously differentiable, strictly increasing, concave, u′(0) = ∞ and \(\sum _{t=0}^{\infty } \beta ^t u(D_t)<\infty \), where the sequence (D t) is defined by D 0 = H(S 0), D t+1 = H(D t).
- 6.
- 7.
Proof: If \(S<\frac {\alpha }{\xi \lambda }\), then we have \(H'(S)=\alpha S^{\alpha -1}>\alpha \big (\frac {\alpha }{\xi \lambda }\big )^{\alpha -1}=\alpha ^{\alpha }\xi ^{1-\alpha }\lambda ^{1-\alpha }\).
If \(S>\frac {\alpha }{\xi \lambda }\), then we have
$$\displaystyle \begin{aligned} H'(S)=a_h(\alpha+\xi) \lambda \frac{(\lambda S_t +1)^{\alpha +\xi-1}}{\lambda ^\alpha}>a_h(\alpha+\xi) \lambda \frac{(\lambda \frac{\alpha}{\xi \lambda} +1)^{\alpha +\xi-1}}{\lambda ^\alpha}=\alpha^{\alpha}\xi^{1-\alpha}\lambda^{1-\alpha}. \end{aligned} $$(8)Since βα α ξ 1−α λ 1−α > 1, by applying Proposition 4.6. in Kamihigashi and Roy (2007), we have that every optimal path increasingly converges to infinity.
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Van, C.L., Pham, NS. (2022). Why Does Productivity Matter?. In: Le Van, C., Pham Hoang, V., Tawada, M. (eds) International Trade, Economic Development, and the Vietnamese Economy. New Frontiers in Regional Science: Asian Perspectives, vol 61. Springer, Singapore. https://doi.org/10.1007/978-981-19-0515-5_12
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