Productivity Growth and Economic Reform : Evidence from Rwanda

Trade, financial, and exchange rate reforms are shown to have exerted a positive impact on the growth of total factor productivity in Rwanda during the period 1995-2003. Based on a constant returns-to-scale Cobb-Douglas production function, this p...

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Bibliographic Details
Main Authors:	Coulibaly, Kalamogo, Ezemenari, Kene, Duffy, Neal
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE VALUE ACCOUNTING ACCOUNTING FRAMEWORK ADVANCED TECHNOLOGY AGRICULTURAL SECTOR AMOUNT OF CAPITAL ANNUAL GROWTH AUCTIONS BANK POLICY BANKING SYSTEM BROAD MONEY BUSINESS CONFIDENCE CAPITAL FLOW CAPITAL FLOWS CAPITAL INVESTMENT CAPITAL SHARE CAPITAL STOCK CENTRAL BANK CIVIL WAR CIVIL WARS COMMERCIAL BANKS COMMODITIES COMMUNICATIONS TECHNOLOGIES COMPETITIVENESS CONSTANT RETURNS TO SCALE CONTRIBUTIONS OF CAPITAL CONTROL VARIABLE COOPERATIVE BANKS COST OF CAPITAL CURRENCY EXCHANGE CURRENCY REGIME CURRENT ACCOUNT DEMAND FOR CAPITAL DEMAND FOR MONEY DEPENDENT VARIABLE DEPRECIATION DEPRECIATION RATE DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT POLICIES DEVELOPMENT STRATEGY DIMINISHING RETURNS DISBURSEMENT DISEQUILIBRIUM DISTORTIONS DIVERSIFICATION DOMESTIC PRICE DUMMY VARIABLE DYNAMIC ECONOMY ECONOMETRICS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC RESEARCH ECONOMIC RESOURCES ECONOMIC STABILITY ECONOMIC STRUCTURE ECONOMIC SYSTEM ECONOMIC TIME SERIES EDUCATIONAL ATTAINMENT ELASTICITY ERROR CORRECTION MODEL ERROR CORRECTION TERM ERROR TERM EXCESS PROFITS EXCHANGE RATE EXCHANGE RATE REFORMS EXCHANGE RATE SYSTEM EXCHANGE RATES EXCHANGE TRANSACTIONS EXCHANGE-RATE EXCLUSION EXPENDITURES EXPLANATORY VARIABLES EXPORT EARNINGS EXPORTERS EXPORTS EXTERNAL COMPETITIVENESS EXTERNAL SHOCKS FINANCIAL ASSISTANCE FINANCIAL DEVELOPMENT FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL REFORM FINANCIAL REFORMS FINANCIAL REGIMES FINANCIAL SECTOR FINANCIAL SYSTEM FIXED CAPITAL FIXED EXCHANGE RATE FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATES FOREIGN CAPITAL FOREIGN COMPETITION FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN EXCHANGE ACCOUNTS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE TRANSACTIONS FOREIGN INVESTMENT FOREIGN MARKETS FOREIGN RESERVES FREE TRADE GDP GDP PER CAPITA GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM ANALYSIS GLOBALIZATION GOVERNMENT POLICIES GROSS CAPITAL FORMATION GROSS DOMESTIC PRODUCT GROSS FIXED CAPITAL FORMATION GROWTH RATE GROWTH RATES HUMAN CAPITAL HUMAN RESOURCES IMPORT IMPORT LIBERALIZATION IMPORTS INCREASING RETURNS INCREASING RETURNS TO SCALE INDUSTRIALIZATION INEFFICIENCY INFANT INDUSTRY ARGUMENT INFLATION INSTITUTIONAL REFORMS INTEREST RATES INTERNATIONAL BANK INTERNATIONAL COMPETITION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVENTORIES KNOWLEDGE ECONOMY LABOR FORCE LEGAL SYSTEM LOCAL CURRENCY LOCAL MARKETS LONG-RUN EQUILIBRIUM M2 MACROECONOMIC POLICIES MACROECONOMIC STABILIZATION MANUFACTURING INDUSTRIES MARKET ECONOMY MAXIMUM LIKELIHOOD ESTIMATION MONETARY FUND MONOPOLY NEW CURRENCY OPEN ECONOMY OUTPUT OUTPUT RATIO PHYSICAL CAPITAL POLITICAL INSTABILITY POVERTY REDUCTION PRIVATE SECTOR CREDIT PRIVATE SECTOR CREDITS PRIVATIZATION PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS RATE OF DEPRECIATION RATE OF GROWTH RE-EXPORTS REAL COST REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL GDP REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REJECTION REMITTANCE RETURN RETURNS TO SCALE SHARE COEFFICIENT SHARE OF CAPITAL SOCIAL CAPITAL STABLE GROWTH TARIFF BARRIERS TARIFF REDUCTION TAX RATES TECHNOLOGICAL CHANGE TOTAL FACTOR PRODUCTIVITY TRADABLE GOODS TRADE BARRIERS TRADE LIBERALIZATION TRADE OPENNESS TRADE POLICIES TRADE POLICY TRADE REFORMS TRADE STRATEGY TRADE TAX UNCERTAINTY UNDERDEVELOPED COUNTRIES WITHDRAWAL WORLD TRADE WORLD TRADE ORGANIZATION WTO
Online Access:	http://documents.worldbank.org/curated/en/2008/03/9072140/productivity-growth-economic-reform-evidence-rwanda http://hdl.handle.net/10986/6572

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Summary:	Trade, financial, and exchange rate reforms are shown to have exerted a positive impact on the growth of total factor productivity in Rwanda during the period 1995-2003. Based on a constant returns-to-scale Cobb-Douglas production function, this paper regresses total factor productivity on indices of trade, financial, and exchange rate reforms. The analysis determines that trade reforms and financial reforms each contributed positively to improvements in total factor productivity. The data also suggest that the allocation of official development assistance to human capital made a significant contribution to productivity. In contrast, the appreciation of the real exchange rate of the late 1980's hindered productivity or the growth of TFP. Taken together, the findings for Rwanda presented in this paper show that the strong growth of the past decade has not just been due to a "bounce back" effect following the genocide. The results support the notion that policies favorable to trade development, a deepening of the financial sector, and formation of human capital have been effective for increasing aggregate productivity of the economy and stimulating growth in Rwanda. For sustained growth, the Rwandan authorities should continue to build on these policies, while also taking care to maintain an appropriate exchange rate.

Productivity Growth and Economic Reform : Evidence from Rwanda

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