The Role of Total Factor Productivity Growth in Middle Income Countries
Abstract
Description
A study based on cross-country panel data shows that total factor productivity growth is the main factor explaining the income group transition of countries, especially for middle-income countries.
The TFP growth model reveals that the catch-up effect, human capital, smaller population, weak currency, and research and development (R&D) growth are significant sources explaining TFP growth. Strengthening innovative activities and building innovative capacities matter in overcoming middle-income country challenges. Governments in upper-middle-income countries need reform to motivate innovation by optimizing national R&D system and redesigning education system targeted toward promoting innovation.