Saša Drezgić

Trace output growth sector by sector to three main factors of productionReal capitalRaw laborHuman capital

… by converting nominal to real values sector by sector using a different PPP conversion factor for each sector reflecting relative price changes

In principle, clear advantage over current practice Tracing aggregate output growth to factors of

production without PPP adjustment, orTracing sectoral output growth to factors of

production using the same PPP conversion factor for all sectors

But where is

efficiency? – trade,

institutions, etc.

Total hours worked by high-skilled persons engagedDifferences in hours reflect several factors,

including social security, tradition, etc. Other possibility: Mincer equation

u = years of schoolingv = 0.1, so each year of schooling

increases H/L by 10%Can measure u by school life expectancy school life expectancy as

reported by UNESCOSLE varies significantly across countries

It would be helpful if the value added in the new approach could be demonstratedE.g., by showing that it reduces the Solow

residual (“measure of our ignorance”)E.g., by comparing the disaggregated sources-

of-growth analysis with the results of similar growth analysis based on aggregate output I.e., it would be helpful to demonstrate the

quantitative benefits of disaggregationE.g., perhaps disaggregation systematically

affects our measures of the relative contributions to growth by individual factors

For starters, why not compare traded and non-traded output? – e.g., contribution of education

Need more room for explicit consideration of efficiency – e.g., as a residual Openness Governance EU perspective

Other work suggests that efficiency may be more important for growth than investment

Hence, main question could be rephrased as Does proper accounting for sector-by-sector

PPP conversion alter our views on the contributions of investment, education, and efficiency to economic growth?

Marina TkalecMaruška Vizek

Deviations from PPP are only one of several indicators of currency misalignments

Other indicators of overvaluation includePersistent and large current account deficitsEscalation of external debtHigh inflationLow reserves

In violation of the Giudotti-Greenspan rule