Productivity and Economic Development

This chapter provides both theoretical and empirical reviews on productivity and economic development. Its starting point is the surveys on literature that stress the importance of productivity enhancement to fill the so-called twin gaps of development. The first part of the chapter reviews the concept papers of productivity, such as labor productivity and total factor productivity, and the measurement issues in productivity and growth accounting. The second part of the chapter reviews theoretical models on the relationship between productivity and economic growth and development. The third part of the chapter reviews empirical studies on productivity-development linkage and recent country-specific case studies on how productivity enhancement has contributed to economic growth and income distribution. The roles of human capital, institutions, intangible capital, and natural capital are emphasized in enhancing productivity in many underdeveloped and developing countries.