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Productivity and GDP: international evidence of persistence and trends over 130 years of data

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Abstract

The degree of persistence of the real gross domestic product per capita, total factor productivity and labour productivity has been examined in a group of 23 developed and developing nations, as well as the overall Euro Area, by evaluating the order of integration of the macroeconomic series over the annual period from 1890 to 2019. As against the conventional use of using integer degrees of differentiation (i.e. 0 for stationary processes and 1 in case of unit roots), fractional values have been utilized. The empirical findings provide evidence for mean reversion in both total factor productivity and the real gross domestic product per capita in Chile, Germany, the Netherlands and New Zealand. The results further suggest that mean reversion only occurs in labour productivity of Australia. The non-linearity analysis shows that non-linearity is also present in the majority of the series. The policy implications of the results are enumerated in the body of the paper.

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Data availability

The datasets will be provided upon reasonable requests.

Notes

  1. 1 Many authors have investigated since the late 70 s the appropriate treatment of trends in economic series. Thus, the removal of an estimated (linear) trend from series that are in fact integration may led to spurious cyclical patterns in the detrended series. Classical examples are Chan et al. (1977), Nelson and Kang (1981, 1984) and Durlauf and Phillips (1988).

  2. 2 Note that stationarity is a more general concept than integration of order 0. Thus, covariance stationarity holds as long as the order of integration d is strictly smaller than 0.5.

  3. 3 Based on the suggestion of an anonymous referee, we also estimated the fractional integration order d using the exact local Whittle estimator of Shimotsu (2010) based on the panel-data-based approach of Chen (2006, 2008a, b). When we looked at the full-sample of the 23 countries, and also a sample of only developed countries (i.e. by dropping Chile and Mexico), we found that the null hypothesis of a unit root cannot be rejected for the three series under consideration, irrespective of whether we use fixed- or random-effects specifications. While these results tend to be in line with the overall findings of the time series-based approach, we are unable to capture the underlying heterogeneity that exists in the estimate of d (as revealed in the time series context), to the extent that some countries also depict mean reversion in TFP, LP and GDP per capita. Complete details of these results are available upon request from the authors.

  4. Preliminary long-memory analyses performed on the residuals recovered from the regression of TFP or LFP on GDP per capita revealed that, cointegration (captured by mean-reverting residuals) can be detected for in at least 17 of the 24 countries or regions considered associated with LP or TFP or both. Complete details of these results are available upon request from the authors.

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Acknowledgements

Comments from the Editor and two anonymous reviewers are gratefully acknowledged.

Author information

Authors and Affiliations

  1. University of Navarra, Pamplona, Spain

    Luis A. Gil-Alana

  2. Universidad Francisco de Vitoria, Madrid, Spain

    Luis A. Gil-Alana

  3. University of Nottingham - Malaysia Campus, 43500, Semenyih, Selangor, Malaysia

    Sakiru Adebola Solarin

  4. Eastern Mediterranean University, Turkish Republic of North Cyprus, Famagusta, Turkey

    Mehmet Balcilar

  5. OSTIM Technical University, Ankara, Turkey

    Mehmet Balcilar

  6. University of Pretoria, Pretoria, South Africa

    Rangan Gupta

Authors
  1. Luis A. Gil-Alana
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  2. Sakiru Adebola Solarin
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  3. Mehmet Balcilar
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  4. Rangan Gupta
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Contributions

LAG-A conceived the idea of the paper and wrote the introduction, analysis and conclusion parts of the project. SAS contributed to the introduction, literature review and discussion of the paper. MB contributed to the panel estimation of the long-memory parameter. RG contributed to the introduction, data section as well as the conclusion parts of the paper, besides conceiving the idea as well.

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Correspondence to Sakiru Adebola Solarin.

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Gil-Alana, L.A., Solarin, S.A., Balcilar, M. et al. Productivity and GDP: international evidence of persistence and trends over 130 years of data. Empir Econ 64, 1219–1246 (2023). https://doi.org/10.1007/s00181-022-02281-x

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  • DOI: https://doi.org/10.1007/s00181-022-02281-x

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