The Contribution of Total Factor Productivity, Capital and Labor Force to the Output Growth of the Romanian Manufacturing Subsectors

Analyzing the drivers of output growth at the sectoral level facilitates the understanding of the Romanian industry growth profile and the economic factors that affect sectoral and structural evolutions. With this in mind, the paper identifies the contribution of total factor productivity, capital and labor force on the output growth for ten manufacturing subsectors of the Romanian economy. The contributions of the paper are twofold. From a methodological and statistical perspective, the paper calculates the capital stock for ten manufacturing subsectors using the permanent inventory method and builds a Cobb-Douglas production function for each of the ten subsectors as well as estimates of total factor productivity. From an applied perspective, the paper builds profiles and clusters of the Romanian manufacturing subsectors with similar behaviors in terms of the impact of production factors on output. This facilitates an understanding of the impact of economic policies affecting capital and labor force on the subsectors evolution.