Technological Change, Technological Catch-up, and

Capital Deepening: Relative Contributions to

Growth and Convergence During 90’s ∗
Oleg Badunenko†
and
Valentin Zelenyuk‡
October, 2004

Abstract
In this paper we investigate three sources of economic growth and evolution of
world income distribution during the 90’s: (i) technological change, (ii) efficiency
change (the catching-up) and (iii) capital deepening. Our research is an extension to
recent study of Kumar and Russell (2002), which we complement in two ways: we
considering a more recent period (the 90’s instead of 1965-90) and, as a result, we
include data on transitional economies. In contrast to study by Kumar and Russell
(2002), which concluded that the capital deepening was the major force of growth
and of changing the world income distribution over 1965-1990, our analysis shows
that, during the 90’s, this major force was technological change, whereas capital
accumulation played the minor role.

JEL Classification: O47, P27, P52.

Keywords: Economic Growth, TFP, Transition.

∗
Authors would like to thank Daniel Henderson, and participants of seminars at the Davis Center
at Harvard University, Economics Department of Central European University (CEU), Round Table on
Economic Growth (Kiev, Ukraine), and a workshop at German Institute for Economic Research (DIW
Berlin) for their valuable comments.
†
European University Viadrina, Frankfurt Oder and German Institute for Economic Research (DIW
Berlin), Germany. E-Mail: obadunenko@diw.de.
‡
Institut de Statistique Université Catholique de Louvain, Louvain, Belgium.
E-mail: zelenyuk@stat.ucl.ac.be.
2 BADUNENKO AND ZELENYUK

Introduction

Our note is inspired by the recent study of Kumar and Russell (2002) that has built a
bridge between the two streams of literature: macroeconomic convergence and technology
frontier estimation. One of the main conclusions of their study was that: “It is primarily

capital deepening, as opposed to technological catch-up, that has contributed the most

to both growth and bipolar international divergence of economies”1 . Indeed, during the

period they studied, 1965 to 1990, fast growing countries, as for example Asian Tigers,
have undergone heavy capital accumulation (e.g., see Mankiw et al., 1992). Noteworthy,

the effect of computers on economic growth during that time was found to be negligible,

but quite considerable during the 90’s (e.g., see Brynjolfsson and Hitt, 2000).

In this paper, we investigate the same sources of labor productivity growth and evolu-
tion of world income per worker2 distribution as in Kumar and Russell (2002), using their
methodology, but now with data for 90’s. First of all, as in Kumar and Russell (hereafter

K&R), we identified further (unconditional β-type) divergence in GDP per worker among

countries—in the sense that the richer the countries the greater was the growth. We also
find evidence for ‘Twin-Peak’ phenomenon in world income per worker distribution (earlier

noticed and justified by Quah, 1996), with further divergence between the two peaks repre-

senting the ‘club of rich’ and the ‘club of poor’. Second, most importantly and opposite to
period of 1965-90, we found that the technological change was the largest driving force of

growth and of changing the distribution of income per worker in the world, causing further
divergence. Both the poor and the rich countries have benefited from the technological

change, but the richer the country the more was the benefit—again suggesting about the

divergence, now driven by the technological change. Finally, the capital accumulation
1
Henderson and Russell (2004) have applied similar methodology as K&R to similar data but with
human capital and found that part of the effect identified by K&R is in fact due to human capital accu-
mulation. Lacking the human capital data for our study, we follow the K&R approach.
2
The same as K&R, we take Jones’s (1997) suggestion that GDP per worker would be most appropriate
definition of welfare, and hence income, once developing countries are included into analysis.
 BADUNENKO AND ZELENYUK 3

and efficiency change effects, on average, were a negligible source of change in the world
distribution of income per worker.

Our paper is structured as follows. In the next section we briefly consider the essence
of methodology and data used, referring for details to K&R. The subsequent section sum-
marizes the main results and the final section concludes.

Methodology and data

For the sake of brevity of this paper we refer readers to Kumar and Russell (2002) and Färe

et al. (1994) for details of methodology, notation, related literature, etc., but mentioning

here only the main issues of estimation and our main results. The key relation of our
analysis is the K&R (see their eq.6, p. 535) decomposition given by:

∆y = ∆EF F × ∆T ECH × ∆CAP (1)

³ ´ ³ ´
Yt Ys
where ∆y = Lt
/ Ls
is the labor productivity index between periods s and t, which is
decomposed into three sources: (i) efficiency change (∆EF F ), representing the notion of
‘catching-up’ with the world ‘best practice frontier’, (ii) technological change (∆T ECH),
representing the shifts of the world ‘best practice frontier’, and (iii) the capital deepening

(∆CAP ), representing the movement along the frontier due to change in the level of capital

per worker. The world ‘best practice frontier’ is estimated as the ‘upper’ boundary of the
smallest convex free disposal cone of the observed data on inputs and outputs in each period

s and t, using data envelopment analysis (DEA) estimator3 . We apply this estimator to

sample of 73 countries over the period 1992-2000. One important distinctive feature of

the 90’s (relative to K&R period of study) is the emergence of new transitional countries,
15 of which we have in our sample. We use series for variables pop, rgdpch, rgdpwok and
3
Kneip et al. (1998) shows consistency of the DEA estimator and derives its rate of convergence. The
limiting distribution of the DEA estimator is provided by Kneip et al. (2003).
4 BADUNENKO AND ZELENYUK

ikon from Penn World Tables (PWT) 6.1 to retrieve data on aggregate output (Y ) and
aggregate employment (L); we also apply perpetual inventory method to construct the

capital stock variable (K)4 .

Results

Upon making appropriate computations5 , we observe that Luxembourg, United Kingdom

and United States appeared on the “best-practice” frontier in 1992 and Argentina, Ireland,

Luxembourg and United Kingdom were on the frontier of 2000 (United States’ efficiency
score being 0.99 in 2000). The results of estimation of components of conceptual decom-
position are illustrated on four panels of Figure 16 , made analogously to those of K&R.

Panel A suggests that relatively poorer countries have grown slower than relatively
richer ones. This endorses previous findings on divergence of economies in the world (e.g.

DeLong, 1988, Quah, 1996, Kumar and Russell, 2002, etc).

According to Panel B, the efficiency has collapsed in the majority of countries. This
can be explained by at least two major reasons. Firstly, many transitional countries in the
sample have experienced sudden decrease in their total output while stocks of inputs did not
drop as much (e.g., Azerbaijan, Belarus, Bulgaria, Czech Rep., Poland, Romania, Slovenia).

Theoretical explanation for this can be given via, for example, the disorganization argument

of Blanchard and Kremer (1997). Some transitional countries (China, Estonia, Kazakhstan,
Kyrgyzstan, Russia and Ukraine), however, have experienced positive efficinecy change or

‘catching-up’ impact, but mainly due to a low efficiency level in the base period. Secondly,
some countries have moved the technological frontier so fast that even most devloped
4
For constructing K we used PWT methodology (Summers and Heston, 1991). Only those countries,
for which all the data for Y , L, and K were available, were included into our sample.
5
Results may be found in Table 2, in Appendix.
6
Bold lines on four panels of Figure 1 are OLS fitted lines with Huber/White/Sandwich estimators of
variance used (slope coefficients on panels A and C are significant at 0.1%, and 8% levels of significance
respectively; slope coefficients on panel B and D are insignificant; see Table 3 in Appendix for details).
 BADUNENKO AND ZELENYUK 5

Panel (A) Panel (B)

20 40 60 80 100
75
Percentage Change in

Percentage Change in
Output per Worker
50

Efficiency Index
25
0

−60 −40 −20 0

−25
−50

0 10000 20000 30000 40000 50000 60000 70000 0 10000 20000 30000 40000 50000 60000 70000

Output per Worker in 1992 Output per Worker in 1992

Panel (C) Panel (D)

25 50 75 100 125
60

Capital Accumulation Index

Percentage Change in

Percentage Change in
Technology Index
40
20

−75 −50 −25 0

0
−20

0 10000 20000 30000 40000 50000 60000 70000 0 10000 20000 30000 40000 50000 60000 70000

Output per Worker in 1992 Output per Worker in 1992

Note: Each panel contains a GLS regression line.

Figure 1: Percentage Changes between 1992 and 2000 in Output per Worker and three
Decomposition Indexes, plotted against 1992 Output per Worker.

countries (except Denmark, Finland, Ireland and Norway) were not able to catch-up with it

to maintain their 1992-efficiency level. This finding goes hand in hand with general purpose
technology argument, emphasizing that it takes time before newly implemented technology

can be utilised 100% efficiently (Helpman and Rangel, 1999). Estimated positive slope here

suggests that, on average, relatively richer countries benefited slightly more (or rather lost

less) from efficiency change than relatively poorer countries, i.e., the richer the country
the better its catch-up (or the smaller its lagging-behind); the estimate however is not

statistically significant from zero.

6 BADUNENKO AND ZELENYUK

Table 1: Distribution Hypotheses Tests.

H0 : Distributions are equal Value of Bootstrap Conclusion

HA : Distributions are not equal statistic p-value of the test
f (y1992) vs. g(y2000) 1.3160 0.0554 Reject at 10%
E
f (y1992) vs. f (y1992 · ∆EF F ) 0.0554 0.9358 Do not reject
f (y1992) vs. f T (y1992 · ∆T ECH) 1.8737 0.0268 Reject at 5%
f (y1992) vs. f C (y1992 · ∆CAP ) 0.0107 0.9886 Do not reject
CT
f (y1992) vs. f (y1992 · ∆CAP · ∆T ECH) 2.2904 0.0140 Reject at 5%
f (y1992) vs. f ET (y1992 · ∆EF F · ∆T ECH) 1.0735 0.0896 Reject at 10%
f (y1992) vs. f EC (y1992 · ∆EF F · ∆CAP ) 0.0394 0.9560 Do not reject
Notes: f (·) and g(·) are density functions for distributions of income per worker in 1992 and 2000,
respectively. f E , f T , f C , f CT , f ET and f EC are densities for the counterfactual distributions ob-
tained by adjusting the 1992 data for the effects of, respectively, efficiency changes, technological
change, capital deepening, both capital deepening and technological change, both efficiency changes
and technological change, and, finally, both efficiency changes and capital deepening.

Panel C suggests that technological change have contributed to productivity growth

positively in most of the countries. Moreover, relatively richer countries have benefited
from this technological change more than relatively poorer countries—as indicated by the
positive and significant coefficient. Most remarkably, the impact of technological change

was the largest among the three components of the decomposition. Panel D reveals that
the capital deepening impact on labor productivity was negligible for all countries with

some exceptions (e.g., Brazil, China). Notably, the last two results are very different from

those obtained for 1965-1990 period by Kumar and Russell (2002).

We now consider the world income per worker distributions, a lá K&R, by using the
kernel density estimator to visualize estimated densities of ‘actual’ and ‘counterfactual’

income (per worker) distributions (Figure 2) and by applying the Li (1996) test for equality

of density functions (Table 1).7

First thing to note is that the bi-modal or the “Twin-Peak” distribution of income (per
7
In all cases we used Gaussian kernel. For computation of the optimal bandwidth, we used the Sheather
and Jones (1991) method in case of density estimation, while in the bootstrap for the Li (1996) test we
used Silverman (1986) adaptive (robust) rule of thumb (for computational reasons).
 BADUNENKO AND ZELENYUK 7

Panel (A) Panel (B)

.00003
.00003

y_2000 y_2000
y_1992 y_1992 * TECH
Kernel Distribution

Kernel Distribution
.00002
.00002

.00001
.00001
0

0
0 30000 60000 90000 115000 0 30000 60000 90000 115000
Output per Worker Output per Worker

Panel (C) Panel (D)

.00003

.00003
y_2000 y_2000
y_1992 * TECH * EFF y_1992 * TECH * EFF * CAP
Kernel Distribution

Kernel Distribution
.00002

.00002
.00001

.00001
0

0 30000 60000 90000 115000 0 30000 60000 90000 115000

Output per Worker Output per Worker

Note: In each panel solid vertical line represents sample mean value of output per worker
for 2000; dashed lines represent corresponding counterfactual sample means.

Figure 2: Counterfactual Distributions of Output per Worker.

worker) in the world, which theoretically was explained by Quah (1996) and empirically
identified by a number of studies including K&R, has persisted through the end of XX

century. Most remarkably, the major source of further divergence in the two modes was
no longer the capital accumulation, as in period studied by K&R, but the technological

change. This is inferred from comparing panel B of Figure 2, (which gives the counter-

factual distribution of variable y1992 · ∆T ECH, thus isolating the effect of technological

change) to other panels. One can see that the technological change effect alone has consti-
tuted the most of the shift of y1992 distribution towards that of y2000 —causing statistically

significant change at less than 5% level, according to the bootstrap p-value of the Li test
8 BADUNENKO AND ZELENYUK

(Table 1). None of the two other effects alone has contributed to a (statistically) signifi-
cant change in the distribution over the 8 years, according to the Li test (or to just visual

inspection). Moreover, efficiency change and capital change even when taken together also

did not introduce statistically significant change over this period. Interestingly, capital
change taken together with the technological change have slightly improved significance of

the difference to almost 1% level, while efficiency change taken together with the techno-
logical change yielded smaller significance (about 9%) than when the technological change

was considered alone. This again suggests that efficiency change has mostly contributed
to regress rather than progress in the world income per worker distribution.

Finally, both figures (1 and 2) give evidence that the divergence of growth rates in labor
productivity between the rich and the poor countries has persisted during 90’s. Figure 2.A,

for example illustrates that the right (smaller) mode of the estimated density of income per
worker distribution in the world (i.e., the mode of the ‘club of rich’), have shifted further

to the right over 8 years, while the left mode (for the ‘club of poor’) has virtually remained
the same. Also recall that the positive and significant slope on Figure 1.A also supported
the hypothesis that, on average, the richer the country the higher was the rate of growth

of income (per worker).

One may wonder that the reason our results for 90’s are radically different from those

for 1965-90 of K&R might be because our sample also includes transitional countries (some

of which did not even exist before 1991). So did we—and thus have checked for this by
performing same analysis for updated K&R sample of countries for 1992-20008 —and found

that our conclusions are qualitatively the same (and also statistically significant) as those

obtained when the transitional countries were in the sample.

8
Six countries were dropped from K&R sample since data were not available for them. Tables and
Figures for this sample are available from authors as Supplement 2, upon request.
 BADUNENKO AND ZELENYUK 9

Conclusions

The approach originally employed by Kumar and Russell (2002) enables decomposing the

growth of labor productivity into efficiency change, technological change and capital deep-

ening. In this comment we have extended the Kumar and Russell (2002) study to cover
the period of 90’s.

We have identified further (unconditional β–type) divergence in income per worker in

the world—in the sense that the richer the countries the greater the growth, on average.

The distribution of income per worker persisted to be bi-modal, with evidence for further

divergence between the ‘club or rich’ and the ‘club of poor’. Most remarkably, we discovered
that during the 90’s it was the technological change and not the capital deepening (as it was
during K&R study for 1965-1990) that constituted the major (significant) source of change
in income per worker distribution in the world, towards further divergence. Moreover, the

capital deepening and the efficiency change (catching-up) effects on the income per worker
(or labor productivity) were negligible for causing such changes. Overall, these results
have shed additional light onto the World development during the era of 90’s—the time of
major structural changes in the world—shaped by the collapse of the Soviet empire in one

part of the globe and the High-Tech boom in other parts.

References

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10 BADUNENKO AND ZELENYUK

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 BADUNENKO AND ZELENYUK 11

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12 BADUNENKO AND ZELENYUK

Appendix

Table 2: Percentage Change of Tripartite Decomposition Indexes, 1992-2000

Contribution to percentage change

in output per worker of:

Country TE1 TE2 ∆y ∆EF F ∆T ECH ∆CAP

Argentina 0.78 1.00 9.36 29.00 -13.87 -1.57
Armenia 0.09 0.08 16.31 -4.65 23.39 -1.14
Australia 0.79 0.79 22.64 0.00 22.08 0.46
Austria 0.76 0.70 16.39 -7.75 24.49 1.34
Azerbaijan 0.09 0.06 -0.07 -34.34 52.19 0.01
Belarus 0.22 0.16 6.00 -30.28 52.18 -0.10
Belgium 0.77 0.68 16.47 -12.16 28.19 3.43
Brazil 0.75 0.85 15.88 14.53 -13.38 16.82
Bulgaria 0.25 0.18 -12.06 -29.42 23.08 1.23
Canada 0.79 0.80 23.81 0.80 22.39 0.36
Chile 0.28 0.24 31.75 -13.38 49.97 1.42
China 0.18 0.19 69.56 6.17 -13.19 83.99
Colombia 0.18 0.12 -6.62 -34.09 45.66 -2.73
Costa Rica 0.21 0.18 7.81 -12.34 27.95 -3.88
Czech Republic 0.41 0.35 7.75 -14.18 23.41 1.74
Denmark 0.72 0.74 28.70 2.22 23.52 1.93
Dominican Republic 0.19 0.25 55.50 26.60 22.23 0.49
Ecuador 0.19 0.11 -13.62 -43.23 52.24 -0.04
Estonia 0.23 0.26 40.08 14.17 22.21 0.40
Finland 0.67 0.73 34.46 8.76 22.57 0.87
France 0.80 0.73 12.14 -8.76 22.36 0.45
Germany 0.78 0.71 11.17 -9.22 22.10 0.29
Greece 0.46 0.34 13.14 -25.94 52.57 0.12
Guatemala 0.29 0.29 5.82 -3.14 6.15 2.92
Hong Kong 0.73 0.76 29.33 3.79 23.00 1.31
Hungary 0.32 0.28 36.96 -12.50 29.94 20.45
Iceland 0.55 0.44 21.86 -20.09 42.96 6.67
India 0.12 0.09 9.98 -27.75 52.17 0.04
Indonesia 0.12 0.09 9.98 -27.75 52.27 -0.03
Ireland 0.98 1.00 71.40 2.00 7.13 56.85
Israel 0.70 0.66 15.84 -5.30 22.08 0.20
Italy 0.72 0.52 10.62 -27.23 51.69 0.20
Jamaica 0.14 0.11 -5.64 -22.81 22.74 -0.40
Japan 0.53 0.38 7.06 -29.70 52.20 0.05
Kazakhstan 0.21 0.23 29.43 7.06 22.91 -1.64
Kenya 0.07 0.05 -4.86 -21.53 3.14 17.54
Korea, Republic of 0.40 0.36 36.51 -10.36 52.18 0.07
Kyrgyzstan 0.27 0.38 -4.83 41.83 -13.59 -22.34
Lithuania 0.38 0.35 2.87 -8.10 -7.84 21.46
Luxembourg 1.00 1.00 52.22 0.00 39.81 8.88
 BADUNENKO AND ZELENYUK 13

Table 2: Percentage Change of Tripartite Decomposition Indexes, 1992-2000, Continued

Contribution to percentage change

in output per worker of:

Country TE1 TE2 ∆y ∆EF F ∆T ECH ∆CAP

Madagascar 0.03 0.02 -3.81 -25.99 26.99 2.35
Malaysia 0.39 0.43 33.67 11.64 18.67 0.89
Mauritius 0.36 0.45 55.93 26.24 22.68 0.68
Mexico 0.41 0.37 12.86 -8.21 22.37 0.48
Morocco 0.21 0.17 2.96 -15.68 22.12 -0.01
Netherlands 0.85 0.79 15.38 -6.35 22.61 0.49
New Zealand 0.64 0.60 18.26 -5.42 19.28 4.83
Nigeria 0.05 0.02 -28.66 -54.21 12.54 38.44
Norway 0.77 0.78 26.57 0.78 23.56 1.65
Paraguay 0.23 0.10 -34.31 -56.88 52.29 0.05
Peru 0.41 0.43 4.27 4.76 -13.72 15.36
Philippines 0.14 0.13 11.49 -8.72 22.15 -0.01
Poland 0.53 0.37 53.71 -29.63 -1.46 121.66
Portugal 0.43 0.34 20.54 -21.02 51.14 0.98
Romania 0.12 0.08 4.55 -31.28 52.24 -0.07
Russia 0.33 0.34 -9.47 4.83 14.22 -24.39
Sierra Leone 0.05 0.03 -18.79 -32.98 22.55 -1.11
Singapore 0.67 0.78 43.92 17.19 22.87 -0.05
Slovak Republic 0.35 0.34 22.78 -2.40 23.44 1.90
Slovenia 0.38 0.32 39.35 -14.79 39.44 17.28
Spain 0.57 0.43 13.83 -25.21 51.97 0.16
Sri Lanka 0.12 0.12 18.09 -3.94 22.33 0.50
Sweden 0.69 0.67 19.80 -3.36 23.03 0.76
Switzerland 0.85 0.72 4.18 -14.49 22.08 -0.20
Syria 0.25 0.24 15.35 -5.46 22.80 -0.64
Thailand 0.19 0.19 22.93 1.35 22.56 -1.04
Ukraine 0.52 0.88 -44.30 69.03 -13.61 -61.85
United Kingdom 1.00 1.00 22.98 0.00 -4.85 29.26
Uruguay 0.36 0.32 10.61 -9.42 22.22 -0.10
USA 1.00 0.99 21.16 -0.99 19.32 2.55
Venezuela 0.32 0.19 -17.21 -40.04 44.91 -4.72
Zambia 0.05 0.03 -10.16 -32.86 24.78 7.23
Zimbabwe 0.16 0.31 -5.20 98.12 -13.90 -44.43
Average 12.68 -9.91 21.98 2.54

Table 3: Regression results

regression (A) regression (B) regression (C) regression (D)
constant 3.91 (0.411) -9.6 (0.125) 19.37 (0.000) -5.56 (0.315)
slope 0.00047 (0.001) 0.00009 (0.593) 0.00022 (0.08) -0.00004 (0.748)
Notes: p-value in parentheses; Regression (A) means regression for Panel (A) of Figure 1, etc.
14 BADUNENKO AND ZELENYUK

Supplement 2

Table 4: Percentage Change of Tripartite Decomposition Indexes, 1992-2000. ‘Updated’

Kumar and Russell Sample.

Contribution to percentage change

in output per worker of:

Country TE1 TE2 ∆y ∆EF F ∆T ECH ∆CAP

Argentina 0.78 1.00 9.36 29.00 -13.87 -1.57
Australia 0.79 0.79 22.64 0.00 22.08 0.46
Austria 0.76 0.70 16.39 -7.75 24.49 1.34
Belgium 0.77 0.68 16.47 -12.16 28.19 3.43
Canada 0.79 0.80 23.81 0.80 22.39 0.36
Chile 0.28 0.24 31.75 -13.38 49.97 1.42
Colombia 0.18 0.12 -6.62 -34.09 45.66 -2.73
Denmark 0.72 0.74 28.70 2.22 23.52 1.93
Dominican Republic 0.19 0.25 55.50 26.60 22.23 0.49
Ecuador 0.19 0.11 -13.62 -43.23 52.24 -0.04
Finland 0.67 0.73 34.46 8.76 22.57 0.87
France 0.80 0.73 12.14 -8.76 22.36 0.45
Germany 0.78 0.71 11.17 -9.22 22.10 0.29
Greece 0.46 0.34 13.14 -25.60 52.22 -0.10
Guatemala 0.29 0.29 5.82 -3.14 6.15 2.92
Hong Kong 0.73 0.76 29.33 3.79 23.00 1.31
Iceland 0.55 0.44 21.86 -20.09 42.96 6.67
India 0.12 0.09 9.98 -27.75 52.17 0.04
Ireland 0.98 1.00 71.40 2.00 7.13 56.85
Israel 0.70 0.66 15.84 -5.30 22.08 0.20
Italy 0.72 0.52 10.62 -27.23 51.69 0.20
Jamaica 0.14 0.11 -5.64 -22.81 22.74 -0.40
Japan 0.53 0.38 7.06 -29.70 52.20 0.05
Kenya 0.07 0.05 -4.86 -21.53 3.14 17.54
Korea, Republic of 0.40 0.36 36.51 -10.36 52.18 0.07
Luxembourg 1.00 1.00 52.22 0.00 39.81 8.88
Madagascar 0.03 0.02 -3.81 -25.99 26.99 2.35
Malaysia 0.39 0.43 33.67 11.64 18.67 0.89
Mauritius 0.36 0.45 55.93 26.24 22.68 0.68
Mexico 0.41 0.37 12.86 -8.21 22.37 0.48
Morocco 0.21 0.17 2.96 -15.68 22.12 -0.01
Netherlands 0.85 0.79 15.38 -6.35 22.61 0.49
New Zealand 0.64 0.60 18.26 -5.42 19.28 4.83
Nigeria 0.05 0.02 -28.66 -54.21 12.54 38.44
Norway 0.77 0.78 26.57 0.78 23.56 1.65
Paraguay 0.23 0.10 -34.31 -56.88 52.29 0.05
Peru 0.41 0.43 4.27 4.76 -13.72 15.36
Philippines 0.14 0.13 11.49 -8.72 22.15 -0.01
Portugal 0.43 0.34 20.54 -21.02 51.14 0.98
Sierra Leone 0.05 0.03 -18.79 -32.98 22.55 -1.11
 BADUNENKO AND ZELENYUK 15

Table 4: Percentage Change of Tripartite Decomposition Indexes, 1992-2000. ‘Updated’

Kumar and Russell Sample, Continued

Contribution to percentage change

in output per worker of:

Country TE1 TE2 ∆y ∆EF F ∆T ECH ∆CAP

Spain 0.57 0.43 13.83 -25.21 51.97 0.16
Sri Lanka 0.12 0.12 18.09 -3.94 22.33 0.50
Sweden 0.69 0.67 19.80 -3.36 23.03 0.76
Switzerland 0.85 0.72 4.18 -14.49 22.08 -0.20
Syria 0.25 0.24 15.35 -5.46 22.80 -0.64
Thailand 0.19 0.19 22.93 1.35 22.56 -1.04
United Kingdom 1.00 1.00 22.98 0.00 -4.85 29.26
Uruguay 0.36 0.32 10.61 -9.42 22.22 -0.10
USA 1.00 0.99 21.16 -0.99 19.32 2.55
Zambia 0.05 0.03 -10.16 -32.86 24.78 7.23
Zimbabwe 0.16 0.31 -5.20 98.12 -13.90 -44.43
MEAN 13.06 -11.26 24.43 2.39

Table 5: Regression results, ‘Updated’ Kumar and Russell Sample

regression (A) regression (B) regression (C) regression (D)
constant -0.156 (0.975) -12.01 (0.167) 20.7875 (0.000) 1.54 (0.699)
slope 0.00057 (0.000) 0.00013 (0.550) 0.0001853 (0.136) 0.00006 (0.602)
Notes: p-value in parentheses; Regression (A) means regression for Panel (A) of Figure 1, etc.
16 BADUNENKO AND ZELENYUK

Panel (A) Panel (B)

20 40 60 80 100
80
Percentage Change in

Percentage Change in
Output per Worker

Efficiency Index
40
20

−60 −40 −20 0

0
−40 −20

0 10000 20000 30000 40000 50000 60000 70000 0 10000 20000 30000 40000 50000 60000 70000

Output per Worker in 1992 Output per Worker in 1992

Panel (C) Panel (D)

60

75
Capital Accumulation Index
Percentage Change in

Percentage Change in
Technology Index

50
40

25
20

0
0

−25
−20

−50

0 10000 20000 30000 40000 50000 60000 70000 0 10000 20000 30000 40000 50000 60000 70000

Output per Worker in 1992 Output per Worker in 1992

Note: Each panel contains a GLS regression line.

Figure 3: Percentage Changes between 1992 and 2000 in Output per Worker and three
Decomposition Indexes, plotted against 1992 Output per Worker, ‘Updated’ Kumar and
Russel Sample.
 BADUNENKO AND ZELENYUK 17

Panel (A) Panel (B)

.00003

.00003
y_2000 y_2000
y_1992 y_1992 * TECH
Kernel Distribution

Kernel Distribution
.00002

.00002
.00001

.00001
0

0 30000 60000 90000 115000 0 30000 60000 90000 115000

Output per Worker Output per Worker

Panel (C) Panel (D)

.00003

.00003

y_2000 y_2000
y_1992 * TECH * EFF y_1992 * TECH * EFF * CAP
Kernel Distribution

Kernel Distribution
.00002

.00002
.00001

.00001
0

0 30000 60000 90000 115000 0 30000 60000 90000 115000

Output per Worker Output per Worker

Note: In each panel solid vertical line represents sample mean value of output per worker
for 2000; dashed lines represent corresponding counterfactual sample means.

Figure 4: Counterfactual Distributions of Output per Worker, ‘Updated’ Kumar and Rus-
sell Sample.
18 BADUNENKO AND ZELENYUK

Table 6: Distribution Hypotheses Tests, ‘Updated’ Kumar and Russell Sample.

H0 : Distributions are equal Value of Bootstrap Conclusion

HA : Distributions are not equal statistic p-value of the test
f (y1992) vs. g(y2000) 1.5689 0.0478 Reject at 5%
E
f (y1992) vs. f (y1992 · ∆EF F ) 0.1148 0.8802 Do not reject
f (y1992) vs. f T (y1992 · ∆T ECH) 2.7059 0.0132 Reject at 1%
f (y1992) vs. f C (y1992 · ∆CAP ) 0.0468 0.9506 Do not reject
f (y1992) vs. f CT (y1992 · ∆CAP · ∆T ECH) 3.5566 0.0036 Reject at 1%
f (y1992) vs. f ET (y1992 · ∆EF F · ∆T ECH) 1.0690 0.0826 Reject at 10%
f (y1992) vs. f EC (y1992 · ∆EF F · ∆CAP ) 0.0094 0.9918 Do not reject
Notes: f (·) and g(·) are density functions for distributions of income per worker in 1992 and 2000,
respectively. f E , f T , f C , f CT , f ET and f EC are densities for the counterfactual distributions ob-
tained by adjusting the 1992 data for the effects of, respectively, efficiency changes, technological
change, capital deepening, both capital deepening and technological change, both efficiency changes
and technological change, and, finally, both efficiency changes and capital deepening.