Capital-labor ratios and total factor productivity in the Baassa-Samuelson model

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)166-176
Journal / PublicationReview of International Economics
Volume10
Issue number1
Publication statusPublished - 2002

Abstract

The paper investigates the relationship between sectoral capital-labor ratios and total factor productivity (TFP) in the context of the Balassa-Samuelson model. It is shown that, under certain assumptions, the model implies that both traded- and nontraded-goods sectors' capital-labor ratios should be cointegrated with the traded-goods sector's TFP. Evidence from an intersectoral database for 14 OECD countries broadly supports this implication of the model. In addition to shedding light on the evolution of sectoral capital-labor ratios, the results also alleviate concerns regarding the reliability of capital stock data.