Productivity and its determinants: the case of the Colombian industry
No. 57 (2006-01-01)Author(s)
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Echavarría Juan José**Co-Director, Banco de la República, Bogotá, Colombia. Correo electrónico: jechavso@banrep.gov.co.
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Arbeláez María Angélica***Investigadora asociada, Fedesarrollo, Bogotá, Colombia. Correo electrónico: marbelaez@fedesarrollo.org.
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Rosales María Fernanda****Economista junior, Oficina del Economista Jefe para América Latina, Banco Mundial, Bogotá, Colombia. Correo electrónico: mrosales@worldbank.org.
Abstract
This paper analyses the dynamics of productivity in the Colombian manufacturing sector between 1981 and 2002. Total factor productivity (TFP) is estimated using semiparametric techniques and plant-level data. TFP did not fall during the 1980’s or the 1990’s when factors and inputs are properly measured and when appropriate econometric methods are used.
Our study finds that the growth of TFP during the 1990’s was larger than during the 1980’s, partially due to the effects of the structural market reforms implemented in the early 1990’s. Moreover, we show that the evolution of TFP has been determined by “inward openness” (i.e. high imports and/or low tariff and non-tariff barriers) and not by exports or export subsidies. Innovation in Colombia has been led by large firms, with large investments (or high capital-labor ratio) and low debt, and by firms operating in low-concentrated sectors. Finally, our results suggest that foreign direct investment was not a key factor for innovation.