Working Paper Series: Special Edition of 2016 to 2018 Interns

Table 3: Production Function, Average Years of Schooling General Specification with Select Dummy Variables and Quality-Adjusted Capital, 1970-2014 Dependent Variable: GDP/worker

j = Primary j =Secondary j = Tertiary Total Avg Yrs

Explanatory Variables

5.555*** (3.320) 1.627* (1.829) -0.466 (-0.513)

2.992*** (3.645) 1.704** (2.039)

Constant

2.867*** (4.264) 1.595** (2.084)

3.295*** (2.740) 1.976*** (3.345) -0.391 (-0.705) 0.031 (0.390) 0.117** (2.521) 0.163* (1.927) 0.390**

% Change of ADJCapital/Worker

-1.021

-0.511

% Change of ADJCapital/Worker [-1]

(-1.300)

(-0.595)

-

-

-

-

Log GDP/Worker [-1]

0.381**

0.520** 0.165** (2.299) 0.246*** (4.846) 0.148***

0.443** -0.015 (-0.198) 0.681*** (3.819) 0.150*** (3.646) - 0.121**

-0.133

Log ADJCapital/Worker [-1]

(-1.328)

Log J Avg Years of Schooling [-1]

-

0.489** 0.138*** (3.209) - 0.122**

DUMMY1972 A

(3.978)

-

-

DUMMY1975

0.125**

0.117**

R-Squared

0.567 1.462 0.045 3.684 0.002

0.674 1.644 0.039 5.834 0.000

0.589 1.607 0.044 4.035 0.001

0.611 1.517 0.042 4.421 0.001

Durbin Watson B S.E. of Regression

F-Stat

Prob

N

43

43

43

43

*** - Significant at 1%, ** - Significant at 5%, * - Significant at 10%, T-statistics in parenthesis, Source: Author’s Calculations. A – Only significant dummies are reported. B - Breusch-Godfrey test finds no evidence for the presence of first and second order correlation in the residuals. Since the lagged capital variable, which interacts with the loading coefficient (GDP/worker) to generate the long-run capital elasticity, is statistically insignificant, this measure is not reported. However, the impact of the physical capital accumulation variable on short-run growth was both significant and positive. The inference being that measures geared towards increasing investment are likely to impact short-run growth in the country. Unlike in Loening’s (2005) investigation of Guatemala, the constant, which is the proxy for technology, was positive in the case of St Vincent and the Grenadines. This suggests that technological progress has played a role in

216