Participation in global value chains, human capital and total factor productivity in Morocco: Estimation using « ARDL bound testing »

Abstract

Abstract

The main objective of this contribution is to estimate empirically the long-run relationship and short-run dynamics between the level of TFP in Morocco and some factors that may affect it. We focus on human capital, participation in global value chains, the quality of institutions and the budget deficit. We use as an econometric tool an ARDL bound testing approach combined with the Toda-Yamamoto test to study causality.

Our research shows that the effects of these variables vary between the short and long term. In the short term, the impact of human capital and institutions is negative, the variable participation in global value chains has no instantaneous effect on TFP growth and the variable that captures macroeconomic stability, i.e. public budget deficit has an insignificant negative impact.

In the long term, the effects of human capital accumulation on TFP growth is positive. The quality of institutions has a positive impact on productivity. Differently with what we observed in the short-term, participation in global value chains has a negative impact on TFP.

Analysis of the impulse response function yields the following results. A shock to human capital results in an immediate increase in TFP, while a shock to the PVC variable results in an immediate drop in TFP. The immediate response of TFP to an impulse from the two variables INS and DB is negative, but becomes positive from the second year onwards.

Key words: Total factor productivity, Participation in value chains, Human capital, Morocco, ARDL bound testing.