Aggregate and Sectoral Productivity Growth in Thailand and Indonesia

Total factor productivity growth is studied in this paper for two countries, Thailand and Indonesia, from 1980 to 2006. The analysis is conducted at both the aggregate and sectoral levels. A feature of the analysis is the decomposition of aggregate total factor productivity growth into two components: productivity growth in individual sectors, and a resource reallocation effect: the movement of resources from low productivity to high productivity sectors. In both countries, virtually all factor productivity growth at the sectoral level derived from agriculture, but the reallocation of resources away from agriculture was a much larger source of aggregate productivity growth.