Total Factor Productivity in Bangladesh: An Analysis Using Data from 1981 to 2014

Abstract

This paper examines the total factor productivity (TFP) growth rate in Bangladesh during 1981-2014, carrying out the growth accounting exercise, and exploring the determinants of TFP growth in Bangladesh. We found that the capital share, obtained from the estimation of the neoclassical Cobb-Douglas production function, varies from half to two-thirds based on the different methods and assumptions used. The growth of factor accumulation still drives the growth of Bangladesh as the share of TFP has been found negative in most of the specifications. Government expenditure on education and instituions, particularly voice and accountability, turn out to be robust and significant in explaining positive TFP growth. On the contrary, increased regulatory control, broad money, inflation, and globalisation are found to impact TFP negatively. Therefore, this paper entails policy suggestions of investment in human capital, ensuring good governance and reforming public administration to enhance the TFP growth in Bangladesh.