A Contribution to the Empirics of Total Factor Productivity∗

Our paper analyzes the causal links between human capital accumulation and growth in total factor productivity (TFP). In particular, it tests the NelsonPhelps hypothesis that human capital is crucial in enabling the imitation of technologies developed at the frontier. To this end we calculate TFP for a sample of 86 heterogeneous countries over the period 1960-1990 and investigate whether there has been (conditional) convergence in TFP. Our regressions use a variety of GMM estimators in a dynamic panel framework with fixed effects. Human capital is found to have a positive and significant effect on the long run growth path of TFP. Countries are found to be converging to these growth paths at a rate of about 3% a year. This work goes some way in resolving the debate over whether factor accumulation or TFP increases are more important for economic growth; while TFP differences explain most of the static variation in GDP across countries, human capital accumulation is a crucial determinant of the dynamic path of TFP