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Production Ability and Economic Growth

Author

Listed:
  • Sebastian Bustos

    (Center for International Development at Harvard University)

  • Muhammed A. Yildirim

    (Center for International Development at Harvard University)

Abstract

Production is shaped by capability requirements of products and availability of these capabilities across locations. We propose a capabilities based production model and an empirical strategy to measure product sophistication and location’s production ability. We apply our framework to international trade data, and employment data in the US, recovering measures of production ability for countries and cities, and sophistication of products and industries. We show that both country and city level measures have a strong correlation with income, and economic growth at different time horizons. Product sophistication is positively correlated with measures like education and training needed in the industry. Our model-based estimations also predict the diversification patterns through the extensive margin.

Suggested Citation

  • Sebastian Bustos & Muhammed A. Yildirim, 2019. "Production Ability and Economic Growth," Growth Lab Working Papers 133, Harvard's Growth Lab.
    • Handle: RePEc:glh:wpfacu:133
    as

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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2019-03-cid-fellows-wp-110-production-growth.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Production capability;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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