Productivity and future political economy: Cyprus

Abstract

The paper attempts to generate simulated values for Total Factor Productivity (TFP) growth in North and South Cyprus between 1996 and 2003. Using estimated values of respective growth rates of output and physical capital per worker, we obtain alternative possible values of TFP growth, each based on a unique assumption about the growth rate of human capital per worker in each economy. Based on rough estimates obtained from the available data about number of immigrant workers and their education levels for North Cyprus, human capital per worker could be slightly declining in both North and South Cyprus. Based on this assumption, TFP growth seems to be slightly negative over the period of our study, which in turn, raises questions about the possible worsening of efficiency in resource allocation for both regions of Cyprus. In the second part of our paper we generate nine alternative combinations of "Internal Conditions" and "External Conditions" each of which represents a unique "Political Economy" scenario about North Cyprus for 2007-2015. Based on some assumptions we generate projections for the possible behavior of respective growth rates of 'TFP', physical capital per worker, human capital per worker and output per worker between 2007 and 2015 © Serhan Ciftçio?lu, Mustafa Besim, 2006.