The Drivers of the Total Factor Productivity

Keywords: dynamics of Total Factor Productivity, Solow model, innovation, productivity, drivers of Total Factor Productivity

Abstract

The Total Factor Productivity (TFP) is now widely recognized as an important factor in both long-term economic growth and short-term growth fluctuations. Researchers of the International Monetary Fund came to the conclusion that the growth of the TFP was the most important long-term factor in raising the living standards. Therefore, the IMF and academics from different countries has been scrutinizing the reasons for the slowdown in TFP and investigating the underlying factors. The low rates of GDP grow in Ukraine call for finding the drivers, one of which is TFP growth. It raises the importance of analysis of the factors promoting this growth in Ukraine. 

The purpose of this work is to define TFP drivers, which would be most effective for Ukraine. TFP drivers in foreign countries are analyzed, TFP dynamics for Ukraine is calculated by use of Solow model, and TFP drivers over 2000–2017 are determined.        

The analysis of publications about TFP drivers at global level shows that they include: international transfer of knowledge and technologies, activities of small innovative fast-growing firms, the enhanced quality of quality of education, the increased expenditures on R&D and innovations, especially by business sector, the increased investments in intangible assets, the intensified patent activity, access of enterprises to lending.

The TFP dynamics in Ukraine, calculated by the Solow model, is characterized by high growth rates by 2012, a sharp fall in 2013-2015, and a return to the growth path in 2016-2017, but, as in the whole world, by very moderate pace. The factors contributing to this return are capital investment in intangible assets, the increasing patent activity of Ukrainian researchers, the intensified innovation in the high-tech sector. Factors constraining the TFP and the contribution of innovation to economic growth are a significant proportion of technology transfer in the form of “know-how, agreements for the acquisition (transfer) of technologies”, which holds back the widespread introduction of cutting-edge technologies, and the reduction of funding for R&D and innovation.

Further studies should be focused on searching for political decisions promoting implementation of structural reforms aimed to solve the existing problems and eliminate their consequences, especially in of the innovation and education field.

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Published
2019-08-22
How to Cite
Kvasha, T. K. (2019). The Drivers of the Total Factor Productivity . Statistics of Ukraine, 85(2), 12-20. https://doi.org/10.31767/su.2(85)2019.02.02