Further Development of the Model
Iteration 1 of Prototype
We now set out the initial iteration of the model, and its conceptual framework.[i]
We model productivity as a function of factors which have a direct impact on productivity in a country. These factors are themselves influenced by the policy decisions of a country. The factors affecting productivity are: stock of foreign direct investment, stock of capital provided by the financial sector, health expenditures, and human capital stock per worker. However, fuel exports, and ore and metal exports need to be considered as these could distort a nation’s productivity particularly if it relies on them unduly. Health expenditures may be a weak proxy for health outcomes, and in future work other proxies might be used. The policy decisions are captured using our three indicators: Property Rights Protection, Domestic Competition, and International Competition. The structure of the estimation and the results are described below Productivity is measured in terms of GDP per capita. We estimate a reduced-form model to determine the factors which affect productivity. These factors are themselves influenced by the scores for Domestic Competition, International Competition, and Property Rights Protection. Our productivity model is:
[i] There have been a number of attempts to model the economic impact of ACMDs. There is ongoing work emanating out of the Singham-Rangan-Bradley model, and there is also work done by the Centre for Economics and Business Research, see Shanker A. Singham and Douglas McWilliams, “Improving the Economic Modeling of Trade Agreements,” Cebr (20 May 2020), https://cebr.com/reports/improving-the-economic-modelling-of-trade-agreements/.
