Estimation of technical change and TFP growth based on observable technology shifters

  • Almas Heshmati
  • Masoomeh RashidghalamEmail author


This paper models and estimates total factor productivity (TFP) growth parametrically. The model is a generalization of the traditional production function model where technology is represented by a time trend. It decomposes TFP growth into an unobservable time trend induced technical change, scale economies and an observable technology shifter index’s components. The empirical results are based on unbalanced panel data at the global level for 190 countries observed over the period 1996–2013. It uses a number of exogenous growth factors in modeling four technology shifter indices to explore development infrastructure, finance, technology and human development determinants of TFP growth. Our results show that unobservable technical change remains the most important component of TFP growth. Our findings also show that technical changes and TFP growth are unexpectedly negative across all country income groups and years.


Technical change Total factor productivity growth Technology indicators Technology shifters 

JEL classification

C33 C43 D24 O33 O47 O50 



Some of the material included in this paper was developed from the IZA Discussion Paper Series, IZA DP 2016-10448, and the Global Labor Organization GLO Discussion Paper 2017–8, The authors are grateful to an Editor of the journal and three anonymous referees for their constructive comments and suggestions on earlier versions of this manuscript.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.


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Authors and Affiliations

  1. 1.Department of EconomicsSogang UniversitySeoulKorea
  2. 2.Jönköping International Business SchoolJönköping UniversityJönköpingSweden
  3. 3.Department of Agricultural EconomicsUniversity of TabrizTabrizIran

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