TFP Growth and Structural Change in Transition Economies a discussion of the paper by El-hadj Bah and

Josef Brada

Athanasios Vamvakidis

14th Dubrovnik Economic Conference

A challenging task

• Estimating TFP growth for transition economies is a challenge:– Short time series– Measurement errors– Structural breaks– No data for capital stock– Structural transformation

Paper’s contribution

• TFP estimates “without resource to capital stock data,” using sectoral employment and GDP per capita data

• Sectoral estimates to explicitly address structural transformation

What have we learned?

• Transition economies have lower TFP than Austria

• They are caching up, but not always and not very fast

• Structural transformation (inter-sectoral movement of labor) does not play a large role

Potential problems

• Can one use the US parameters for transition economies?

• Not clear how the initial and subsequent capital stocks were estimated: I would not be able to replicate it based on what is in the paper

• Other studies find a large growth contribution of TFP growth in transition economies

• Why use Austria for comparisons and not the euro area average?

Related workIMF, “Regional Economic Outlook, Europe,”

April 2008, Chapter 3

Sources: IMF, World Economic Outlook; and IMF staff calculations. Note: Country names are abbreviated according to the ISO standard codes.

ln(PPP per capita GDP), 2002

TR

ROPL

BA

MK

HR

LT

HU

RS

LV

EE

SK

CZ

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BG

AL

BY

0

5

10

15

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6 7 8 9 10 11 12

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Potential and Actual Growth of Real GDP in Emerging Europe (Percent)

Growth Model Estimates Growth in 2007

Potential growth without Potential growth with Average (Actual orfurther reforms reforms Average Growth in preliminary

2003-07 estimates)Lower Higher Lower Higher

Transition economies 2.4 3.2 4.1 5.0 3.7 6.5 7.1 of which Southeastern Europe 3.2 4.1 5.2 6.1 4.6 6.6 6.3 Baltics 5.3 6.3 7.5 8.4 6.9 8.9 8.9 Central-eastern Europe 3.0 3.9 4.3 5.2 4.1 5.1 6.0

Albania 3.5 4.4 4.9 5.8 4.6 5.6 6.0Bulgaria 3.2 4.1 5.2 6.1 4.7 6.1 6.2Croatia 3.2 4.1 4.9 5.8 4.5 4.9 5.8Czech Republic 3.1 4.0 4.1 5.1 4.1 5.5 6.5Estonia 5.3 6.2 7.4 8.3 6.8 8.8 7.1Hungary 3.0 3.9 4.0 4.9 4.0 3.7 1.3Latvia 4.3 5.2 6.3 7.2 5.7 9.7 10.2Lithuania 5.8 6.7 8.1 9.0 7.4 8.4 8.8Poland 2.8 3.7 4.3 5.2 4.0 5.1 6.5Romania 3.1 4.0 5.3 6.2 4.7 6.3 6.0Russia 2.1 3.0 3.6 4.5 3.3 7.3 8.1Slovak Republic 3.6 4.5 5.2 6.1 4.8 7.1 10.4Turkey 1/ 3.0 4.7 3.4 5.1 3.2 7.0 5.0Ukraine 2.5 3.4 4.5 5.4 4.0 7.7 7.3

Emerging Europe: Growth Accounting, 2002–06(Percent per year)

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