Macroeconomic Dynamics

Articles

ON THE DETERMINANTS OF TOTAL FACTOR PRODUCTIVITY GROWTH: EVIDENCE FROM SPANISH MANUFACTURING FIRMS

Fabio Castiglionesia1 c1 and Carmine Ornaghia2

a1 Tilburg University

a2 University of Southampton

Abstract

This paper explores the main determinants of productivity growth. The analysis is performed using Spanish firm-level data. We define a framework where the relative magnitudes of alternative, but not exclusive, sources of technical change are simultaneously estimated. Our main finding is that the average total factor productivity (TFP) growth is fully explained by embodied technical progress (i.e., either new capital goods or human capital). Our results contradict the existence of a positive contribution of economywide neutral technological progress in determining average TFP growth. They also leave little room for large, unpriced effects external to the firm, both at the aggregate and at the industry level. We find evidence of firm-specific learning by doing, short-lived and due to adoption of new processes.

Keywords:

  • TFP Growth;
  • Technical Change;
  • Human Capital;
  • Learning by Doing

Correspondence

c1 Address correspondence to: Fabio Castiglionesi, Department of Finance, Tilburg University, Postbus 90153, 5000 LE Tilburg, the Netherlands; e-mail: fabio.castiglionesi@uvt.nl.

Footnotes

  A previous version of the paper circulated with the title “An Empirical Assessment of the Determinants of TFP Growth.” We thank Michele Boldrin, Sandro Brusco, Berthold Herrendorf, Jordi Jaumandreu, Boyan Jovanovic, Pedro Marin, Manuel Santos, Gianluca Violante, and Frank Windmeijer as well as seminar participants at Universidad Carlos III de Madrid, Universitat Autónoma de Barcelona, ITAM de Mexico, the XVIII Annual Congress of the European Economic Association, and the XVIII Simposio de Analísis Economico for helpful comments and suggestions. The usual disclaimer applies. Financial support from the FBBVA project “Competencia e innovación en la nueva economía” is kindly acknowledged.

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