The Effects of External and Internal Strikes on Total Factor Productivity

Abstract

This paper examines structural changes that occur in the total factor produc tivity (TFP) within countries. It is possible that some episodes of high economic growth or economic decline are associated with permanent productivity shocks; therefore, this research has two objectives. The Örst one is to estimate the structural changes present in TFP for a sample of 77 countries between 1950(60) and 2000. The second one is to identify possible explanations for breaks. Two sources were analyzed: (i) episodes in political and economic history; (ii) changes in inter national trade - a measure of absorption of technology. The results suggest that about one-third of the TFP time-series present at least one structural break. Down wards breaks are more common, indicating that after a break the TFP has much di¢ culty to recover. When we investigated factors related with structural change, developed countries presented a break near the Örst oil shock while the developing countriesíbreaks are more spread along the decades. Thus, external strikes seem to be more relevant for developed countries. However, for each country and break date, it was possible to Önd an event close to the break date endogenously detected. Last, the relevance of international trade, measured by trade share percentage of GDP, seems to be limited to explain abrupt changes in TFP.