Determinants of total factor productivity : a literature review

Based on micro, sectoral and macro studies, this review identifies several determinants that have an impact on TFP growth. Of these, education, health, infrastructure, imports, institutions, openness, competition, financial development, geographical predicaments and absorptive capacity (including capital intensity) appear to be the most important. Whereas most past papers reviewed only establish statistical associations and provide no causal direction, any policy discussion can only be indicative rather than directive. Nonetheless, these determinants suggest areas for policymaking. Examples include investment in human capital to enhance the absorptive capacity, which in turn, facilitates technology transfer, or trade reforms to increase access to foreign capital and intermediate goods.