Estimating Total Factor Productivity and its Importance as a Component in the Economic Growth Rate in the Kingdom of Saudi Arabia in the (1970-2012) Period

The main object of the study is est-imating TFP as a component of the gro-wth rate of real GDP in Saudi Arabia in the period of (1970-2012). The study estimate nonlinear Cobb-Douglas prod-uction function using nonlinear-least squares. The results of the study refers that the average growth rate  of the whole period was 5.0077143% and the components of this growth rate were :
1-   Labor contribution= 0.249181% and ratio of total growth rate= 4.977%.
2-   Capital  contribution = 2.307865% which is about 46.091 % of total growth rate.
3-   TFP contribution = 2.450097% wh-ich is about 48.932% of total growth rate.
From 5% growth rate , TFP explains about 49% of total growth rate .
  It is referred that the contribution of capital is more that of labor by about nine fold and this reflects two things :


First : The high technical efficiency of capital components because most of them are imported from advanced countries.
Second:There is a need to raise effi-ciency of labor through education and training.
The study analyzed the time series of TFP into its components and found that the trend component(which is the growth component) dominates the other components and the noise components is very small and negative and cyclical is also very small and positive . Then , TFP  is almost a growth component and grows yearly at a constant rate of 12%, then :
174.16%
while the growth rate in real GDP grew to:
Total rate of increase in real GDP due to TFP=
When comparing the contribution of TFP with the contribution of factors accumulation in  the growth rate of real GDP, the estimates of the study gave the results :

 





period


Contribution of factor accumulation in
growth of real GDP


Contribution of TFP in real GDP growth of




1999-1990


13 %


87%




2009-2000


12%


88%




2012-1990


11.061%


88.93%




2012-1980


19.6%


80.4%




2012-1970


51%


49%




2012-2010


6%


94%




 
From these estimates, it is noticed that the contribution of TFP in growth of real GDP was high during the last three decades  and increased by high rates in ninth decade of the last century and thr-ough the  first twelve years of the cur-rent century comparing with the cont-ribution of factor accumulation. 
 
The study referred to many factors affecting TFP  from which institutional, social, economic  factors . In the Kin-gdom of Saudi Arabia enjoys many of these factors that affects TFP ,  from which :
 1-There is economic and political sta-bility where the inflation rate is low which protects the long term con-tracts.
2- A high level of accumulated inte-rnational reserves.
3- Protection of property rights  and investors contracts
4-Good level of social infrastructure , legal discipline
5-A big base of educational structure. 
6-Airports , telecommunications, high roads.
7- The location of  the two holy mosques
8-  The subsidized energy power .
9- Location in the roads of international trade.