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Volume :17 Issue : 2 2010      Add To Cart                                                                    Download

Total Factor Productivity in the Non-Oil Saudi Economic Sector

Auther : Mamdouh A. al-Khatib

This study aims to estimate the total factor productivity (TFP) and its determinants in the non oil Saudi economic sector by applying the extensive growth accounting methodology. The estimation of the TFP growth rate, named as Solow residuals, allows for the definition of the contribution of the capital stock, the human capital, and other factors influencing the economic growth. This study is based on annual data covering the period 1970-2007. To calculate the capital stock, the study applies the growth accounting approach and permanent inventory method. To evaluate the human capital, the labor force is weighted by the average years of schooling and the rate of return of the investment on education. The capital stock elasticity is estimated by applying the Johansen cointegration methodology. The TFP is estimated after the estimation of Solow residuals by OLS. The econometric results prove that the contribution of the TFP in the economic growth is low (1%). The capital stock and the human capital contributions are respectively 53% and 46%. To test the TFP determinants, Johanson cointegration is applied. The estimation proved that FDI inflow, import of productive capital, public expenditures on education, foreign labor fore are not significant variables, while the oil revenue, the economic openness and the inflation rate are significant determinants of the TFP in non oil Saudi economic sector.

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Nov 19, 2019

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