Determinants of total factor productivity: a literature review

R e s e a r c h a n d S t a t i s t i c s B r a n c h s t a f f w o r k i n g p a p e r 0 2 / 2 0 0 7 The designations employed, descriptions and classifications of countries, and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. The responsibility for opinions expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO of the opinions expressed. Although great care has been taken to maintain the accuracy of information herein, neither UNIDO nor its Member States assume any responsibility for consequences which may arise from the use of the material. This document may be freely quoted or reprinted but acknowledgement is requested. This document has been produced without formal United Nations editing. The views expressed in this document do not necessarily reflect the views of the Secretariat of the United Nations Industrial Development Organization. Terms such as " developed, " industrialised " and " developing " are intended for statistical convenience and do not necessarily express a judgment. Any indication of, or reference to, a country, institution or other legal entity does not constitute an endorsement. Abstract Based on micro, sectoral and macro studies, this review identifies several determinants that have an impact on TFP growth. and absorptive capacity (including capital intensity) appear to be the most important. Whereas most past papers reviewed only establish statistical associations and provide no causal direction, any policy discussion can only be indicative rather than directive. Nonetheless, these determinants suggest areas for policymaking. Examples include investment in human capital to enhance the absorptive capacity, which in turn, facilitates technology transfer, or trade reforms to increase access to foreign capital and intermediate goods.