Total Factor Productivity Levels and Comparative Progress: The OECDs and The East Asian Countries

Abstract

This study aims to estimate the relative Total Factor Productivity (TFP) levels and its comparative progress during 1970-2004 among the OECDs and the selected East Asian Countries-36 countries in total. Utilising data from PWT 6.2 and WDI, the TFP level accounting is performed. It is found that the OECD’s members generally still have a higher level of TFP. The tops five are Luxemburg, the USA, Ireland, Norway, and the UK respectively. Meanwhile, the bottoms five (from the bottom) are the Philippines, Indonesia, India, China, and Turkey. Moreover, there is a strong evidence of TFP convergence among the selected countries. It suggests that the initial TFP level conversely relates to the speed of TFP growth (TFPG). Thus, the East Asian countries gain a comparatively higher rate of the estimated TFPG. Additionally, the study also shows that the countries’ openness to international trade could be a key to explain the differences in TFP levels among the nations. In contrast, there is no strong evidence supporting that foreign direct investment (FDI) relates to the TFPGs and thus TFP levels of the sampled countries.