A cross country analysis of components of economic growth through the growth accounting approach

Abstract

The method of growth accounting has been widely used for examining the components of economic growth for different countries. This method comprises of determining the relative shares of capital accumulation and Total Factor Productivity (TFP) in GDP growth (though the share of other factors can be also considered). This paper attempts to analyze the share of capital accumulation and TFP growth in economic growth for four countries groups – low income, lowermiddle income, upper-middle income and high-income (as classified by the World Bank), over the time period 1991-2019. From the results obtained, it can be concluded that the share of TFP growth has been relatively less as compared to the share of capital accumulation, except for lower-middle income countries. Also, lower and upper-middle income countries have made considerable progress in economic growth, as compared to the other two country groups. The results indicate that there is significant scope for boosting TFP growth by focusing on increased efficiency of labour and capital, which would definitely contribute to the long-term growth process.

Keywords

• economic growth
• capital deepening
• total factor productivity
• solow residual
• growth accounting