Development accounting with intermediate goods

  • 1 University of Edinburgh, Edinburgh, United Kingdom of Great Britain and Northern Ireland
Jan Grobovšek
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  • University of Edinburgh, Department of School of Economics, Edinburgh, United Kingdom of Great Britain and Northern Ireland
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Abstract

I use a simple development accounting framework that distinguishes between goods and service industries on the one hand, and final and intermediate output on the other hand, to document the following facts. First, poorer countries are particularly inefficient in the production of intermediate relative to final output. Second, they are not necessarily inefficient in goods relative to service industries. Third, they present low measured labor productivity in goods industries because these are intensive intermediate users, and because their intermediate TFP is relatively low. Fourth, the elasticity of aggregate GDP with respect to sector-neutral TFP is large.

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