Growth, Investment and Productivity in Papua New Guinea

Abstract

This paper examines Papua New Guinea’s economic growth record within a simple growth ccounting framework. The analysis shows that reductions in growth are mostly accounted for by a significant slowdown in capital inputs and lower total factor productivity growth. On average, no productivity improvements in labour have been recorded since independence. With an investment to GDP ratio of only 13 per cent during the past decade, significantly higher productivity growth and investment will be needed to sustain GDP growth rates at 5 per cent or higher. The historical performance also indicates that, in the absence of structural reforms and stronger institutions, higher rates of productivity growth will be hard to achieve.

Keywords: GDP Growth, Total Factor Productivity, Papua New Guinea

JEL Classification: E25, E31, E32, E37