Testing production functions used in empirical growth studies

We estimate and test two alternative functional forms, which have been used in the growth literature, representing the aggregate production function for a panel of countries: the model of Mankiw, Romer and Weil (Quarterly Journal of Economics, 1992), and a mincerian formulation of schooling-returns to skills. Estimation is performed using instrumental-variable techniques, and both functional forms are confronted using a Box-Cox test, since human capital inputs enter in levels in the mincerian specification and in logs in the extended neoclassical growth model.

Testing production functions used in empirical growth studies

We estimate and test two alternative functional forms representing the aggregate production function for a panel of countries: the extended neoclassical growth model, and a mincerian formulation of schooling-returns to skills. Estimation is performed using instrumentalvariable techniques, and both functional forms are confronted using a Box-Cox test, since human capital inputs enter in levels in the mincerian specification and in logs in the extended neoclassical growth model. Our evidence rejects the extended neoclassical growth model in favor of the mincerian specification, with an estimated capital share of about 42%, a marginal return to education of about 7.5% per year, and an estimated productivity growth of about 1.4% per year. Differences in productivity cannot be disregarded as an explanation of why output per worker varies so much across countries: a variance decomposition exercise shows that productivity alone explains 54% of the variation in output per worker across countries.

Um estudo sobre a produtividade total dos fatores em setores de diferentes intensidades tecnólogicas

Este trabalho investigou o problema da determinação da produtividade total dos fatores em diversos setores industriais. Tal determinação se dá por meio de estimação de funções de produção, obtendo-se a produtividade a partir do resíduo destas estimações. A questão que aflora deste procedimento é a existência de correlação entre os resíduos e as variáveis explicativas, implicando em diversos vieses, entre eles o de simultaneidade, de variáveis omitidas e de seleção. Neste trabalho foram abordados diversos métodos de estimação de funções de produção, entre eles os métodos de Olley e Pakes e Levinsohn e Petrin. Todos os métodos foram aplicados a diversos setores da economia. A escolha dos setores se deu com base na intensidade tecnológica de cada um, sendo então escolhidos quatro setores de alta intensidade tecnológica e quatro de baixa intensidade tecnológica. A hipótese básica, fio condutor deste trabalho, é que os diversos métodos de estimação de funções de produção apresentam diferentes resultados quando aplicados a setores de diferentes intensidades tecnológicas. Um dos objetivos deste estudo foi identificar se determinado método seria mais adequado a setores de baixa intensidade tecnológica, enquanto outro seria mais apropriado a setores de alta intensidade tecnológica. Conclui-se que o método de Olley e Pakes é levemente superior ao de Levinsohn e Petrin em ambos os grupos de setores, mas não a ponto de se descartar o segundo método. A sensibilidade dos resultados aos diferentes métodos sugere que todos devem ser consultados. Um resultado adicional deste trabalho é a constatação de que houve queda ou estagnação da produtividade nos setores selecionados para a década de 1996 a 2005.

On the nature of income inequality across nations

In this paper, we investigate the nature of income inequality across nations. First, rather than functional forms or parameter values in calibration exercises that can potentially drives results, we estimate, test, and distinguish between types of aggregate production functions currently used in the growth literature. Next, given our panel-regression estimates, we perform several exercises, such as variance decompositions, simulations and counter-factual analyses. The picture that emerges is one where countries grew in the past for different reasons, which should be an important ingredient in policy design. Although there is not a single-factor explanation for the difference in output per-worker across nations, inequality, followed by distortions to capital accumulations and them by human capital accumulation.

Three essays on education from the perspective of the economics of public setor

This work consists of three essays organized into chapters that seek to answer questions at first sight unrelated, but with one common denominator, which is the scarcity of public resources devoted to education, overall, especially in lower education. . The first chapter deals with the scarcity of resources devoted to education in a context of population aging. Two hypotheses were tested for Brazilian municipalities on the relationship between the aging of the population and educational expenditure. The first, already proven in the literature, is that there is an intergenerational conflict for resources and the increase of the share of elderly in the population reduces the educational expenditure. The second, proposed here for the first time, is that there should be reduction of competition for resources if there is a relationship of co-residence between young and old. The results indicated that an increase in the share of elderly reduces the educational expenditure per youth. But the results also illustrate that an increase in the share of elderly co-residing with youth (family arrangement more common in Latin American countries) raises the educational expenditure, which reflects a reduction of competition for resources between generations. The second chapter assesses the allocative efficiency of investments in Higher Education. Using the difference between first-year and last-year students’ scores from Enade aggregated by HEI as a product in the Stochastic Production Function, is possible to contribute with a new element in the literature aimed at estimating the production function of education. The results show that characteristics of institutions are the variables that best explain the performance of students, and that public institutions are more inefficient than the private ones. Finally, the third chapter presents evidence that the allocation of public resources in early childhood education is important for a better future school performance. In this chapter was calculated the effects of early childhood education on literacy scores of children attending the 2nd grade of elementary school. The results using OLS and propensity score matching show that students who started school at the ages to 5, 4, and 3 years had literacy scores between 12.22 and 19.54 points higher than the scores of those who began school at the ages 6 years or late. The results also suggest that the returns in terms of literacy scores diminish in relation to the number of years of early childhood education.

Inada conditions imply that production function must be asymptotically Cobb-Douglas

We show that every twice-continuously differentiable and strictly concave function f : R+ → R+ can be bracketed between two C.E.S. functions at each open interval. In particular, for the Inada conditions to hold, a production function must be asymptotically Cobb-Douglas.