Globalization, productivity growth and employment-a cross country analysis

This study examines the dynamics of the effects of total factor productivity (TFP), globalization and the relative position of sample countries in relation to the Global Technology Frontier (GTF) and the Global Productivity Frontier (GPF), on the cross country differentials in the level and growth of per capita real GDP (PCGDP) and the per capita real GDP per unit of employment (PCGDPPE) using financial development, human capital as instrumental variables in terms of dynamic panel regression (dpd) analysis. It also tries to find out the correlates of the cross country differentials in the growth of TFP. Furthermore, we also explore the crucial explanatory factors explaining the cross country variations in the growth of total employment of our sample countries. We find that globalization, TFP and the relative positions of the countries make economically and statistically significant contributions to the dynamics of level and growth of PCGDP and PCGDPPE. In case of differentials in the TFP growth also the relative position of the countries, globalization and weighted R&D are found to be the crucial explanatory factors in explaining the dynamics. Our DPD exercise gives similar results in case of cross country variations in growth of total employment. We conclude that for catching up the GPF and GTF, the laggard countries should not only emphasize on the innovation and imitation of the modern technology but it must be complimented by greater emphasis on the financial development and the development of their human capital also.