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The Stationary of Productivity Shocks: Evidence from 25 OECD and Big-7 Countries

Author

Listed:
  • Aviral Kumar Tiwari

    (Faculty of Management, IBS/IFHE, Hyderabad, Telangana, India)

  • Faridul Islam

    (Department of Economics, Morgan State University, USA)

  • Suleyman Bolat

    (Department of Public Finance, Faculty of Economics and Administrative Sciences, Aksaray University, Turkey)

  • Phouphet Kyophilavong

    (Faculty of Economics and Business Management, National University of Laos, Don Noun, Laos)

  • Byoungki Kim

    (Faculty of Economics, Graduate School, Shiga University, Japan)

Abstract

We apply the panel covariate augmented Dickey Fuller test to test stationarity of the productivity series for the OECD and Big-7 economies. The approach takes cross-sectional dependence into account. Using hours-worked per worker, we find that the series is non-stationary for the 25 OECD countries; but for the Big-7 the results are mixed. So, this paper achieves a battery of panel unit root tests to examine the stationarity properties of the series named hours worked per employee. The study period covers 1960-2012 for the OECD and the Big-7 countries. The tests we use account for cross-sectional dependence and those that do not account for such dependence. Our results suggest that an analyst might infer that hours worked fall after a positive technology shock, when it may go up in a true data-generating process. The findings also suggest that although in a true data-generating process, the series may go up from a positive technology shock, analysts may infer a fall. The stationarity of the series is relevant in determining the effect of positive technology shock on productivity.

Suggested Citation

  • Aviral Kumar Tiwari & Faridul Islam & Suleyman Bolat & Phouphet Kyophilavong & Byoungki Kim, 2017. "The Stationary of Productivity Shocks: Evidence from 25 OECD and Big-7 Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 613-618.
    • Handle: RePEc:eco:journ1:2017-01-77
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    More about this item

    Keywords

    Productivity Shock; Panel Unit Root; Cross-sectional Dependence; OECD and Big-7 Countries;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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