On the Tiranny of Numbers: Causes of Labor Productivity in Argentina

ARIEL COREMBERG

iariw

IARIW

Año: 2006 p. 1 - 33

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The main purpose of the paper is to show some evidence that  the main cause of  labor productivity growth in Argentina during 1993-2001 would have been capital  intensity growth, instead of the Solow´s residual or  Total Factor Productivity (TFP).  This result is analogous to the findings of Alwyn Young (1992) (1994) (1995) (1997) and Timmer and Van Ark (2000), spread by Krugman (1994) for the Southeast Asian countries ,   but are different  from other previous results  on the Argentine experience, for example Kydland and Zarazaga (2002), which found that TFP was the principal cause of GDP growth during the 1990s  based on the calibration of a real business cycle model.  The main conclusion is that the Argentine economy during the 1993-2001 period  would present   an extensive growth profile, based on factor accumulation rather than positive shifts in the production function  (similar to the case of Southeast Asian NICs in the 80?s). Technological change would have been of an embodied type, stimulated by the fall in the relative price of capital goods as a result of the appreciation of the domestic currency and  the  increase in the  openness to external  trade during the 1990?s, but without having a substantial positive effect on the organization of the argentine economy in the long run. During the post mega devaluation and crises period (2002-2004), GDP growth would have been explained by the reduction of capital intensity originated in a higher relative labor demand, as a consequence of increases in the capacity utilization previously underused during five years of deep economic depression (1999-2001) and some influence of the high decrease of unit labor costs due to the high increase of real exchange rate.  It is possible to ask if the deep changes of factor prices  stemming  from  the 2002 devaluation will produce higher labor-GDP elasticity sustainable in the long term.  As a consequence of these stylized facts, some doubts arise about the capacity of the Argentine economy to generate the necessary  gains in strictly TFP (regardless of the changes in relative prices of goods and factors) that allow sustainable growth in the long run.