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A revised approach to productivity convergence in long-term scenarios

Author

Listed:
  • Yvan Guillemette

    (OECD)

  • Alexandre Kopoin

    (OECD)

  • David Turner

    (OECD)

  • Andrea De Mauro

    (OECD)

Abstract

The paper describes revisions to the trend labour efficiency component of the production function underpinning long-term economic scenarios. The main goal of the revision is to add more policy and institutional determinants in the equation to enrich the scenarios that can be constructed. In the proposed equation, equilibrium trend labour efficiency depends on a broad measure of the quality of institutions and governance (the World’s Bank rule of law indicator), human capital (based on average years of schooling attainment), product market regulation (PMR), openness to trade adjusted for country size, the stability of the macroeconomic framework (based on inflation and its variance), income inequality (based on GINI coefficients) as well as domestic and global research and development (via accumulated stocks of R&D). Apart from the innovation effects, the sizes of the other effects are jointly estimated in a conditional convergence framework with a sample of about 120 countries, without the use of country fixed effects. Rule of law and openness are also estimated to influence the speed of convergence toward the long-term equilibrium.

Suggested Citation

  • Yvan Guillemette & Alexandre Kopoin & David Turner & Andrea De Mauro, 2017. "A revised approach to productivity convergence in long-term scenarios," OECD Economics Department Working Papers 1385, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1385-en
    DOI: 10.1787/0b8947e3-en
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    Citations

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    Cited by:

    1. Balázs Égert, 2017. "The quantification of structural reforms: Extending the framework to emerging market economies," OECD Economics Department Working Papers 1442, OECD Publishing.
    2. Balazs Egert, 2020. "The Quantification of Structural Reforms: Taking Stock of the Results for OECD and Non-OECD Countries," CESifo Working Paper Series 8778, CESifo.
    3. Manuel Bétin & Tim Bulman & Thomas Chalaux & Boris Cournède & Alain de Serres & Claude Giorno & Yvan Guillemette, 2020. "OECD contribution to the evaluation of the ESM financial assistance programme for Greece," Discussion Papers 12, European Stability Mechanism, revised 27 Oct 2021.
    4. Yvan Guillemette & David Turner, 2018. "The Long View: Scenarios for the World Economy to 2060," OECD Economic Policy Papers 22, OECD Publishing.

    More about this item

    Keywords

    conditional convergence; development; long-term model; long-term scenarios; openness; productivity; projections; rule of law; TFP; trend labour efficiency;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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