Productivity in Emerging-Market Economies: Slowdown or Stagnation?

Abstract

This paper analyzes productivity growth trends in emerging-market economies vis-à-vis advanced economies, both in the recent global productivity slowdown and from a long-term perspective. While income has converged in most countries in the last three decades, total factor productivity has diverged. Periods of high productivity growth coincide with episodes of output accelerations, while during normal times productivity growth is modest. Most recently, the correlation between productivity growth in emerging markets and advanced economies has increased. This paper analyzes potential factors explaining this increase, which presumably is due to the slowdown in trade and microeconomic factors that underlie technology diffusion. It concludes with a discussion of long-term challenges and opportunities facing emerging-market economies in a low productivity environment.

If Technology Has Arrived Everywhere, Why Has Income Diverged?

“…• Firms maximize profits taking prices as given. The resulting optimality conditions yield the demand for labor and intermediate goods for each 14 For simplicity, we assume ζ τx to be constant across all vintages of technology τ. Simplicity also motivated our choice of having only two taxes, one economy-wide and another sector-specific.…”

“…We note that combining (11) and the labor demands from the producers of vintage-level services associated to all technologies, (B2), it follows that the wage rate is given by (14) W…”

“…For this case, we derive an estimating equation for input measures. We take the logarithm of technology-τ intermediate goods, equation 20, and combine it with the sectoral price deflator (19), the equilibrium wage rate (14), and the expression for sectoral TFP A τ , (17). Approximating A τ using (27), we obtain the following expression, which inherits the properties from (28):…”

The Phenomenon of Hybrid State Capitalism in Emerging Market Economies: Present and Future

“…At the same time, it is impossible to ignore the significant structural changes that had taken place in output, due to the increased competitiveness of the national economy with emerging markets. The intensity of technological modernization and economic renewal is evidenced by at least a significant raise of the most important relevant indicator -total factor productivity (TFP) (De Gregorio, 2018). To a significant extent, the renewal process was also expressed in an increase in the quantity of qualified personnel (Dieppe ed., 2021), which in turn manifested itself in an uprising in the differentiation of wages and personal incomes.…”