World Productivity Growth: A Model Averaging Approach


The paper provides a discussion of panel data and productivity analysis in applied economic modeling. We discuss a variety of modeling scenarios and justifications for them based on classical economic theory and on more recent advances in production modeling, which formulate methods to decompose productivity growth based on a Solow-type residual (Solow, 1957) into innovation and catch-up. Methods to combine the various estimates based on different empirical specifications that model and estimate productivity growth are then discussed and these provide the econometric approaches we use to estimate world productivity growth. We also provide a counterfactual analysis of a scenario in which the rise in income inequality since the 1970's in the US is tempered by distributing productivity growth to wage compensation growth as had been the case during the post-WWII years to the early 1970’s.
JEL: D24, C23, O47.1