Volume 44, Number 173,
April-June 2013

Economic Growth in Cuba: An Analysis of the Total Productivity of Factors, Yaima Doimeadiós, Institute of Economic Research – unam, cepal, 2011.

This book is composed of an introduction, three chapters, conclusions and recommendations for follow-ups to this study. There is also a section of annexes containing precise explanations of the following: the function of aggregate production, criticism of the neoclassical model (from Keynesianism), the Kaldor model of development, the results obtained from regressions calculated in the work, and more. Throughout the reading, there are boxes helping to clear up theoretical points used in developing the research.

The underlying theme of this work is determined by the fact that “in order to have a sustainable economic system, there must be a debate about how to generate the most growth, minimizing structural distortions that compromise this variable in the long term” (Doimeadiós, 2010: 14).

The first chapter, “Modern Theories of Economic Growth,” describes the economic tenets that have addressed growth, which have been configured since the rise of the Keynesian revolution.

The author discusses the background of the growth models. She mainly indicates the importance of the Harrod-Domar model, emphasizing the accumulation of production factors to explain growth. She continues with an analysis of the basic neoclassical model, focusing on the Solow model, as well as criticism surrounding it, such as the Cambridge Keynesian school. She also analyzes contributions from Von-Neuman, Friedman, and Mankiw, Romer and Weil. The variables used for each model are described, highlighting the utility of econometrics in these areas, and how they have developed.

Demand-oriented growth models are also included, focusing on contributions from Kaldor (especially for the importance of the industrial sector), Thirlwall and criticism from Rowthorn to Kaldor. This theoretical chapter also highlights contributions from Dixon, Wells and Imber, Krugman, and more.

However, it is curious that despite the analysis of so many theories, both orthodox and heterodox, there is practically no mention of contributions arising in Latin America itself. This is in contrast to the fact that this publication was awarded a prize that bears the name of a Latin American economist, who sought an explanation for growth and development that arose from within the region itself, such as structuralism.

This can be understood when only talking about growth, explained based on structural change. The author begins with a brief mention of the Economic Commission for Latin America and the Caribbean. However, when she talks about Raúl Prebisch, she attributes ideas to him such as Structural Heterogeneity, although he did not develop this. She continues with some reflections on neo-structuralism, from Paneder, Baumol, Cimoli, Porcile and Rovira, among others.

The examples of empirical studies such as those from Hall and Jones, with 127 countries, and Barro and Sala-i-Martin and Peneder, with 28 countries, are constant in this work. The variables used in these studies are brought up in order to analyze if they are based on supply or demand.

The author also proposes debate surrounding the institutional framework and growth, with emphasis on the regulatory system, institutions for macroeconomic stability, social security institutions and the legal system.

The second chapter, “Analysis of Economic Growth in Cuba as a Function of Aggregate Production,” examines possible determinants of economic growth in that country. She presents an analysis from 1974 to 2004 of the application of the neoclassical model on the island. This analyzes total-factor productivity (tfp) and its relation to the Gross Domestic Product (gdp). The author emphasizes that studies of the Cuban case have left out the idea of growth in the economic spectrum. As a result, she highlights that efficient growth is necessary for a proper analysis.

She describes studies of the statistical methods and global modeling, and how they have focused on aspects such as the growth of the Cuban economy starting in 1971 (a result of growth in investors), the expansion of the employment level, the pronounced increase in exports, the inflationary process that began due to restricted supply and how the behavior of import substitution industrialization was not favorable.

These studies have evolved in a framework of identifying other factors related to the growth of the product, including those related to population features (Rodríguez, Mesa and Figueras), as well as contributions from Torres, Vidal and Fundora, Madrid-Aris.

She alludes to the decomposition of the tfp and other variables that affect the behavior of the gdp, finding assistance in the Solow model, for example. She also mentions some criticism of the problem of multicollinearity (Harberger), which produces larger standard errors for the coefficients of the independent variables.

She clearly explains the role of capital stock, employment and human capital in the conformation of the gdp. This section concludes that growth of the product in the mentioned period was based on the accumulation of factors. However, its growth from 1986 to 1989 fell, which confirms the exhaustion of the model prior to the external shock and growth, starting in 1994, supported by gains in total-factor productivity rather than the accumulation of factors.

The third chapter, “Determinants of the Total-Factor Productivity in Cuba,” identifies the limits of the models described in the previous chapters and proposes research into possible causes of fluctuations in the product. To do so, she uses a differential linear equation, with the use of time series in the time period 1980-2004.

A model is built to determine the variables that influence tfp, which are classified as external, regulatory or institutional factors (flow of standards, laws and policies that govern the behavior of society) and factors related to the sector structure of the product.

Given this backdrop, the author proposes an index (compound indicator) that would allow for the quantification of oscillations using historical economic data from Cuba. The idea would be that the selected variables would comprehend the trends in quantitative terms in three dimensions:

Proxy for the Evolution of Business Autonomy

  • Subsidy for business losses with respect to current gdp.
  • Quantity of businesses with import permits.

Proxy for the Evolution of Territorial Autonomy

  • Percentage of public spending for the budgeted activity that is distributed to the provinces.

Proxy for the Size of the Private Sector

  • Household consumption with respect to total public spending for budgeted activities.
  • Percentage of persons employed in the state sector with respect to total number of employed.
  • Percentage of traditional consumption with respect to total household consumption.

The author concludes that “the results agree with international empirical evidence demonstrating that growth cannot be explained merely by traditional factors, emphasizing the incorporation of heterodox variables to elucidate the differences in growth rates” Doimeadiós, 2010: 151).

This reflection opens the door to new research and study of tfp, using non-traditional variables as an indispensable tool to explain the growth in product.

Aldo Blanco
Master’s Student in Latin American Studies
Department of Political and Social Sciences - unam

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