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PRODUCTION FACTOR CONTRIBUTIONS TO THE ECONOMIC GROWTH OF OECD ECONOMIES AT THE INDUSTRY LEVEL. Saša Drezgić, PhD University of Rijeka Faculty of Economicy. 15 th Dubrovnik Economic Conference. CONTENTS. INTRODUCTION LITERATURE OVERVIEW METHODOLOGY DATA RESULTS. INTRODUCTION.
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PRODUCTION FACTOR CONTRIBUTIONS TO THE ECONOMIC GROWTH OF OECD ECONOMIES AT THE INDUSTRY LEVEL Saša Drezgić, PhD University of Rijeka Faculty of Economicy 15th Dubrovnik Economic Conference
CONTENTS • INTRODUCTION • LITERATURE OVERVIEW • METHODOLOGY • DATA • RESULTS
INTRODUCTION • industry level growth accounting applied on the case of OECD economies • Development of new databases (EU-KLEMS, STAN) • OECD countries – available data and homogenous group of countries
ECONOMIC GROWTH AT THE INDUSTRY LEVEL • Voluminous aggregate industry level research - Sturm (1998), Kamps (2004) • Minasian, 1969, Lynde and Richmond, 1993, Jorgenson and Stiroh, 2000 • Value added vs. gross output
= a + b + b + b + Y K H L u it it 1 it 2 it it METHODOLOGY • Are variables stationary? • Within, Random effects and Olley-Pakes procedure • FMOLS – fully modified OLS
DATA • 15 OECD countries • Australia, Austria, Czech Republic, Denmark, Finland, Germany, Italia, Japan, Korea, Netherlands, Portugal, Slovenia, Sweden, United Kingdom and United States • 1995 to 2005
DATA – variables used • value added • net capital stock • gross fixed capital formation • total hours worked by persons engaged • total hours worked by high-skilled persons engaged
RESULTS – unit root tests • Levin, Liu and Chu (LLC) test, Im, Peseran and Shin, (IPS) test, ADF, PP test • Small sample issue • Differenty dynamics? • Mix of stationary and non-sationary variables
RESULTS – traditional estimation • Coefficients on capital input high and significant • Endogeneity issue – Olley-Pakes procedure • human capital variable shows robust positive and significant results only in the sector of manufacturing
RESULTS – FMOLS • Variables are cointegrated • Endogeneity not resolved • Point estimates differ significantly • Human capital positive at the aggregate industry level
CONCLUSION • positive effects of capital accumulation across all sectors and share of high-skilled persons engaged in the sector of manufacturing. • Issue of endogeneity remains • Further research