Published Articles

Back to the Basics: Revisiting the Development Accounting Methodology. Journal of Macroeconomics. forthcoming.

Abstract: The standard baseline estimate in development accounting is imprecise because of a mismatch between the estimate of physical capital and the estimate of physical capital’s share, the fraction of total income accruing to physical capital. I adjust for this mismatch, and in so doing, incorporate natural capital. I also treat factor shares as variables, not constant parameters. To accommodate these adjustments, I carry out a development accounting analysis using translog multilateral indices of outputs, inputs and productivity. Results reveal that the correction for the mismatch between physical capital and its share, which is the weight assigned to the physical capital input in development accounting, reduces the variation in output per worker explained by observables by as much as 15 percentage points relative to the standard baseline. Most of this reduction is due to a decline in the explanatory power of physical capital per worker. Natural capital per worker, which is usually ignored, is found to explain up to 7.2% of the variation in cross-country output per worker. Variation in factor shares, also omitted from most studies, explains up to 6.3% of the variation in cross-country output per worker, which is nearly half as much as all observables together explain.

JEL Codes: C43, E25, O11, O57

Keywords : development accounting, translog multilateral index, factor share

Supplemental Appendix

Money Growth and Economic Growth in Developed Nations – An Empirical Analysis. Journal of Applied Business and Economics. forthcoming.

Abstract: Money growth and output growth are positively correlated across a small homogeneous group of OECD countries. This relationship has received little attention. I perform a cross-country growth analysis and find that the relationship holds after controlling for standard determinants of economic growth. Estimation of vector autoregressions and tests for Granger Causality reveal that money growth helps drive economic growth in the OECD sample. Evidence indicates that this positive influence is a result of higher levels of economic freedom in more developed nations, which may create an environment where nominal money helps facilitate the production process or expedites capital accumulation.

JEL Codes: E4, O47, O57,

Keywords : economic growth, money growth, vector autoregressions, Granger causality

The Relationship between Factor Shares and Economic Development. Journal of Macroeconomics. 2012, 34: 1044-1062.

Abstract: The stability of factor shares has long been considered one of the ‘‘stylized facts’’ of macroeconomics. Most factor share studies, however, acknowledge only two factors of production (total capital and total labor), which yields misleading results. I distinguish between reproducible and non-reproducible factors of production. I disentangle physical capital’s share from natural capital’s share and human capital’s share from unskilled labor’s share. Results reveal that non-reproducible factor shares decrease with the stage of economic development, and reproducible factor shares increase with the stage of economic development. This evidence suggests that studies relying on the macroeconomic paradigm of constant factor shares should be revisited. The evidence also supports endogenous growth models that allow technical progress to manifest itself via changes in factor shares.

JEL Codes: E25, O30, O11

Keywords : factor shares, technological progress, economic development