Location of Repository

Development Accounting with Intermediate Goods

By Jan Grobovsek

Abstract

Do intermediate goods help explain relative and aggregate productivity differences\ud across countries? Three observations suggest they do: (i) intermediates are relatively expensive in poor countries; (ii) goods industries demand intermediates more\ud intensively than service industries; (iii) goods industries are more prominent intermediate suppliers in poor countries. I build a standard multi-sector growth model accommodating these features to show that inefficient intermediate production strongly depresses aggregate labor productivity and increases the price ratio of final goods to services. Applying the model to data, low and high income countries in fact reveal similar relative efficiency levels between goods and services despite clear differences in relative sectoral labor productivity. Moreover, the main empirical exercise suggests that poorer countries are substantially less efficient at producing intermediate relative to final goods and services. Closing the cross-country efficiency gap in intermediate input production would strongly narrow the aggregate labor productivity difference across countries as well as turn final goods in poorer countries relatively cheap compared to services

Publisher: University of Edinburgh
Year: 2013
OAI identifier: oai:repo.sire.ac.uk:10943/469
Provided by: SIRE

Suggested articles

Preview


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.