Determinants of Potential Output Growth: Empirical Evidence in 18 OECD Countries, 1990-2016

Abstract

In this paper, we examine the contribution of labor quantity, labor quality, ICT capital, non-ICT capital, and the productivity of production system to potential output growth for 18 OECD countries from 1990 to 2016. For this, we develop a measure of a country’s potential output growth using a timeseries analysis and apply panel data regressions to find empirical evidence. Empirical findings suggest that in developed countries, improvements in productivity and labor quality are major determinants that lead to an increase in economic potential.