Technological development and eco-efficiency: Drivers of total factor productivity in OECD countries

Abstract

This study delves into the total factor productivity growth in OECD countries, focusing on the crucial role of technological advancement and environmental management. By utilizing the Malmquist-Luenberger index, the paper encompasses both positive and negative outputs, such as pollution, providing a comprehensive productivity analysis by breaking it down into efficiency and technical change. Data from 36 OECD countries from 2000 to 2021 were examined to uncover trends and patterns in productivity growth and its unintended environmental consequences. The results emphasize the dominant influence of technological progress, particularly after 2006, as the primary driver of productivity growth, surpassing improvements in technical efficiency. A significant increase in technical change (1.56 in 2021) compared to technical efficiency (1.05) underscores the importance of sustained investment in research and development (R&D), which correlates positively with patent generation and technological advancement. The study also illustrates that OECD countries have effectively integrated eco-efficient practices, aligning with global trends in environmentally conscious productivity analyses. By integrating environmental outputs such as PM2.5 pollution, the analysis demonstrates that countries mitigating these adverse effects achieve higher productivity growth. These findings challenge conventional productivity models, where productivity diminishes when environmental aspects are considered. The analysis emphasizes the necessity for tailored policy approaches to address disparities in R&D investments, technological adoption, and eco-efficiency among countries. Countries with more significant R&D investments consistently demonstrate superior technological advancement in patents (0.745). Policymakers are urged to prioritize long-term strategies that foster technological innovation and environmental sustainability to ensure sustained productivity growth and economic resilience.

Keywords

• eco-efficiency
• efficiency changes
• Malmquist-Luenberger Index
• productivity
• technical changes