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Prepared by Sandesh Dhungana.
The HP filter separates the trend and cyclical components of output through a purely statistical filtering technique, while the production function approach first uses a standard Cobb-Douglas production function to calculate productivity, and then uses trend values of unemployment and productivity to calculate potential output. The MVF approach allows for the inclusion of two structural relationships, namely Phillips curve and Okun’s law, thereby adding pertinent information on output, inflation, and unemployment to the potential output estimation process (Blagrave et al., 2015).
The growth accounting exercise assumes output is generated by a Cobb-Douglas production function. Human capital augmented labor is used. Perpetual inventory method with geometric depreciation rate of 7 percent is used to calculate capital stock. Contributions from TFP are calculated as a residual.
Multifactor Productivity (MFP) is calculated by Statistics Mauritius (SM) as the ratio of real output to weighted combination of labor and capital inputs.
EOEs comprise manufacturing enterprises, formerly operating with an export certificate (for Export Processing Zones) and export manufacturing enterprises holding a registration certificate issued by the Board of Investment. In 2016, this sector accounted for 40 percent of the manufacturing output and 5.2 percent of total output.
As discussed in
The most binding constraint is the one that, if relaxed, would lead to the largest increase in long run growth. See Hausmann, Rodrik and Velasco (HRV, 2005) for the theoretical exposition of the approach. Also see Hausmann, Klinger and Wagner (2008) for a handbook on doing growth diagnostics in practice.
If a constraint is binding, the price/shadow price for the constraint should be high. Also, episodes of the constraint loosening (if available), should lead to growth spurts.
For example, if political risk is high, large firms invest in security infrastructure. If financing is an issue, firms invest using retained earnings.
Singapore, the United Arab Emirates, Ireland and Switzerland are used as comparator GFCs.
Among some of the other GFCs, access to finance is rated the most important problem in the United Arab Emirates, the third most important for Ireland and the sixth most important for Singapore and Switzerland.
The cost of starting a business is 0.1 percent of per capita income in Singapore, and 1.1 percent for the U.S.
According to the WEF index, Mauritius also lags most middle-income countries in terms of R&D industry-university collaboration.
Tertiary enrollment rates are higher in Singapore (83 percent), Switzerland (77 percent) and Ireland (58 percent). The average for upper-middle income economies is 52 percent.
Production sophistication data is mostly unavailable at a sectoral level; hence export sophistication is generally used in the literature. Overall, the two tend to be highly correlated.
See, e.g., the Atlas of Economic Complexity developed by the Harvard Center for International Development (http://atlas.cid.harvard.edu/). The export complexity measure combines diversification and ubiquity. Ubiquity measures the number of countries exporting the same product (with low values indicating a more complex product, as it is only produced by a few countries). An export basket with high diversification and low ubiquity is more complex.
The index is calculated as
Due to lack of granular data, this analysis only uses service categories at the 1-digit level. The United Arab Emirates (UAE) is not included as the database does not have any data on the UAE.