Relationship between total factor productivity and economic growth: A comparative analysis on developed and developing countries

Efficiency is an important factor that provides an increase in outputs over inputs related to production in the economy. As for that total factor productivity, refers to the part of the increase in production that cannot be explained by basic inputs such as labor and capital. The determination of the factors affecting economic growth has gained more importance with the effect of increasing economic competition between countries. In this study, it is aimed to determine how the increases in total factor productivity affect economic growth for developed and developing countries comparatively. In this context, first of all, the concepts of productivity and economic growth were clarified, the relationship between total factor productivity and economic growth was researched and literature was searched. Then the economic growth and total factor productivity data of the determined developed and developing countries between the years 1991-2014 were interpreted and analyzed with panel data analysis. As a result of the study, it has been determined that total factor productivity has a positive effect on economic growth in developed countries, while it does not have a statistically significant effect on economic growth in developing countries.