- September 8, 2018
- Posted by: admin
- Category: Current News
Over the past 3 decades, Botswana has benefited immensely from rapid factor accumulation (both capital and labour), which has significantly spurred productivity and growth. In recent years, however, this growth seems to have run its course, while Total Factor Productivity (TFP) growth, which is understood to be a more sustainable driver of growth, has declined. This paper, therefore, examines the determinants of TFP growth in Botswana over the period 1977–2014.
Using an Autoregressive Distributive Lag (ARDL) bounds testing econometric approach, the results show that economic diversification and human capital have significant positive impact on TFP growth. Openness is also significant, particularly in the long-run, but its impact on TFP growth was negative in the short-run. The findings of the study also suggests that there is a certain level of inflation in the Botswana economy which promotes growth, beyond which it becomes inimical to short run productivity and growth. The study concludes that, to enhance TFP growth and help reverse the observed slow-down in real economic growth in Botswana, policy makers should implement policies aimed at enhancing economic diversification, human capital development, improving openness to trade, while maintaining macroeconomic stability.