PRODUCTION FACTOR CONTRIBUTIONS TO THE ECONOMIC GROWTH OF OECD ECONOMIES AT THE INDUSTRY LEVEL Saša Drezgić, PhD University of Rijeka Faculty of Economicy 15 th Dubrovnik Economic Conference

CONTENTS INTRODUCTION LITERATURE OVERVIEW METHODOLOGY DATA RESULTS

INTRODUCTION industry level growth accounting applied on the case of OECD economies Development of new databases (EU- KLEMS, STAN) OECD countries – available data and homogenous group of countries

ECONOMIC GROWTH AT THE INDUSTRY LEVEL Voluminous aggregate industry level research - Sturm (1998), Kamps (2004) Minasian, 1969, Lynde and Richmond, 1993, Jorgenson and Stiroh, 2000 Value added vs. gross output

METHODOLOGY Are variables stationary? Within, Random effects and Olley-Pakes procedure FMOLS – fully modified OLS it uLHKY  21 

DATA 15 OECD countries Australia, Austria, Czech Republic, Denmark, Finland, Germany, Italia, Japan, Korea, Netherlands, Portugal, Slovenia, Sweden, United Kingdom and United States 1995 to 2005

DATA – variables used value added net capital stock gross fixed capital formation total hours worked by persons engaged total hours worked by high-skilled persons engaged

DATA - industries

RESULTS – unit root tests Levin, Liu and Chu (LLC) test, Im, Peseran and Shin, (IPS) test, ADF, PP test Small sample issue Differenty dynamics? Mix of stationary and non-sationary variables

RESULTS – traditional estimation Coefficients on capital input high and significant Endogeneity issue – Olley-Pakes procedure human capital variable shows robust positive and significant results only in the sector of manufacturing

RESULTS – FMOLS Variables are cointegrated Endogeneity not resolved Point estimates differ significantly Human capital positive at the aggregate industry level

CONCLUSION positive effects of capital accumulation across all sectors and share of high- skilled persons engaged in the sector of manufacturing. Issue of endogeneity remains Further research