Measurement and analysis of capital, productivity and economic growth

PhD cerermony: A.A. Erumban, 16.15 uur, Academiegebouw, Broerstraat 5, Groningen

Thesis: Measurement and analysis of capital, productivity and economic growth

Promotor(s): prof. H.H. van Ark, prof. M.P. Timmer

Faculty: Economics and Business

 

Abdul Erumban has examined important issues in the measurement of capital for analyzing sources of economic growth. In particular he examined various ways of measuring aggregate capital input, and the sensitivity of analyses of capital accumulation and multifactor productivity growth (MFPG), to these alternative assumptions. Erumban also examined sources of economic growth and cross-country differences in economic growth during the last three decades. The sensitivity analysis shows the importance of incorporating asset heterogeneity while measuring capital input. Neglecting this causes a bias in the contribution of capital and MFP to economic growth. An analysis of the lifetimes of capital assets shows the importance of better measures of cross-country asset lifetime and depreciation estimates. Also, the thesis shows that capital investment and discard decisions are endogenous decisions by firms, determined by innovation, technological specificities of firm and tear-and-wear. The cross-country growth analysis shows the importance of differences in MFPG in driving growth divergence across countries, implying that poorer countries cannot achieve faster growth without adopting better technologies. Nevertheless, it also shows the strengthened relationship between MPFG and capital accumulation which indicates, given that frontier technologies are becoming highly capital intensive, the need for increasing capital accumulation in poor countries. An examination of the differences in cross-country technology adoption suggests that cultural constraints on the adoption of better technologies may partly explain the productivity gap between countries as it can affect the speed at which technology diffusion occur.