Estimating total factor productivity in the Saudi Arabia construction sector
Keywords:
Saudí Arabia, Total Factor Productivity, Construction Sector, Cobb Douglas production function.
Abstract
The study aims to estímate the total factor productivity in Saudi Arabia construction sector. Using Cobb Douglas production function. The results showed that that there is a long-run equilibrium relationship between the value of production and the factors of production labour and capital. The study also showed that the coefficient of labour is positive with a value of 0.015. While the elasticity of production with respect to capital is about 0.42 the elasticity of production with respect to the capital component is greater than the labour component and the construction sector in KSA operates in light of decreasing returns to scale (DRS). The results indicates that the construction sector in Saudi Arabia during the coming years will witness a positive growth rate with interest in strengthening the partnership between the government and the private sector in order to develop the construction sector. The study also recommends expanding the production process within the construction sector and moving towards research and development in the field of construction and working to increase investment in the human capital component by training employment and encouragement of investment, in addition to, loans facilitates to the construction sector.
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References
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Nazarko, J., & Chodakowska, E. (2015). Measuring productivity of construction industry in Europe with Data Envelopment Analysis. Procedia Engineering, 122, 204-212. https://doi.org/10.1016/j.proeng.2015.10.026
Oxford business group. (2018). Building activity in Saudi Arabia picks up as government launches new projects. Saudi Arabia report. https://oxfordbusinessgroup.com/saudi-arabia-2018
Park, H. S. (2006). Conceptual framework of construction productivity estimation. KSCE Journal of Civil Engineering, 10(5), 311-317. https://doi.org/10.1007/BF02830084
Rakib, F.H., Howlader, S., Rahman, M., & Hossain, A. (2020). Factors Affecting the Construction Productivity in the Context of Khulna City of Bangladesh. In Proceedings of the 5th International Conference on Civil Engineering for Sustainable Development, Khulna, Bangladesh (pp. 7-9).
Robles, G., Stifi, A., Ponz-Tienda, J.L., & Gentes, S. (2014). Labor productivity in the construction industry-factors influencing the Spanish construction labor productivity. International Journal of Civil and Environmental Engineering, 8(10), 1061-1070.
Rojas, E.M., & Aramvareekul, P. (2003). Labor productivity drivers and opportunities in the construction industry. Journal of management in engineering, 19(2), 78-82. https://doi.org/10.1061/(ASCE)0742-597X(2003)19:2(78)
Saudi Central Bank, (2020). Fifty sixth Annual Report. https://www.sama.gov.sa/en-us/economicreports/pages/annualreport.aspx
Tan, W. (2000). Total factor productivity in Singapore construction. Engineering construction and architectural management, 7(2), 154-158. https://doi.org/10.1046/j.1365-232x.2000.00146.x
Van Beveren, I. (2012). Total factor productivity estimation: A practical review. Journal of economic surveys, 26(1), 98-128. https://doi.org/10.1111/j.1467-6419.2010.00631.x
Xueqing, W., Chen, Y., Liu, B., Shen, Y. & Sun, H. (2013) A total factor productivity measure for the construction industry and analysis of its spatial difference: a case study in China, Construction Management and Economics, 31(10), 1059-1071, https://doi.org/10.1080/01446193.2013.826371
Ye, G., Wang, Y., Zhang, Y., Wang, L., Xie, H., Fu, Y., & Zuo, J. (2019). Impact of migrant workers on total factor productivity in Chinese construction industry. Sustainability, 11(3), 926. https://doi.org/10.3390/su11030926
Zhan, W., Pan, W., Javed, A.A., Chau, K.W. (2018) Correlation Analysis of Key Influencing Factors to the Total Factor Productivity of the Hong Kong Construction Industry. In: Chau K., Chan I., Lu W., Webster C. (eds) Proceedings of the 21st International Symposium on Advancement of Construction Management and Real Estate. Singapore: Springer, https://doi.org/10.1007/978-981-10-6190-5_51
Zhi, M., Hua, G. B., Wang, S. Q., & Ofori, G. (2003). Total factor productivity growth accounting in the construction industry of Singapore. Construction management and economics, 21(7), 707-718. https://doi.org/10.1080/0144619032000056126
Ahmad, S.B.S., Mazhar, M.U., Bruland, A., Andersen, B.S., Langlo, J.A., & Torp, O. (2020). Labour productivity statistics: a reality check for the Norwegian construction industry. International Journal of Construction Management, 20(1), 39-52. https://doi.org/10.1080/15623599.2018.1462443
Alzyadat, J.A., & Almuslamani, M.S. (2021). The Role of Technological Progress in the Distribution sector: Evidence from Saudi Arabia Wholesale and Retail Trade Sector. Journal of Distribution Science 19, 19(3), 15–23. https://doi.org/10.15722/JDS.19.3.202103.15
Alzyadat, J.A. (2021). Sectoral Banking Credit Facilities and Non-Oil Economic Growth in Saudi Arabia: Application of the Autoregressive Distributed Lag (ARDL). The Journal of Asian Finance, Economics, and Business, 8(2), 809-820. https://doi.org/10.13106/jafeb.2021.vol8.no2.0809
Arditi, D., & Mochtar, K. (2000). Trends in productivity improvement in the US construction industry. Construction Management & Economics, 18(1), 15-27. https://doi.org/10.1080/014461900370915
Chancellor, W., & Lu, W. (2016). A regional and provincial productivity analysis of the Chinese construction industry: 1995 to 2012. Journal of construction engineering and management, 142(11), 05016013. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001177
Chau, K.W. (2009). Explaining total factor productivity trend in building construction: Empirical evidence from Hong Kong. International Journal of Construction Management, 9(2), 45-54. https://doi.org/10.1080/15623599.2009.10773128
Chen, Y., Liu, B., Shen, Y., & Wang, X. (2018). Spatial analysis of change trend and influencing factors of total factor productivity in China’s regional construction industry. Applied Economics, 50(25), 2824-2843. https://doi.org/10.1080/00036846.2017.1409421
Choy, C.F., Skitmore, M. & Yan, F.Y. (2015). Total factor productivity in the Malaysian construction sector. In 21st Annual Pacific-Rim Real Estate Society Conference, Malaysia.
Cobb, C. W., & Douglas, P. H. (1928). A theory of production. The American Economic Review, 18(1), 139-165.
Comin, D. (2010) total factor productivity. In: Durlauf S.N., Blume L.E. (eds) Economic Growth. London: The New Palgrave Economics Collection. Palgrave Macmillan, 260-263. https://doi.org/10.1057/9780230280823_32
General Authority for Statistics. (2017). Survey of construction activity 2017 https://www.stats.gov.sa/en/1004-0
General Authority for Statistics. (2018). Survey of construction activity 2018. https://www.stats.gov.sa/en/1004-0
Green, B. (2016) Productivity in Construction: Creating a framework for the industry to thrive. Bracknell, UK: Chartered Institute of Building (CIOB)
Hu, X., & Liu, C. (2016). Energy productivity and total-factor productivity in the Australian construction industry. Architectural Science Review, 59(5), 432-444. https://doi.org/10.1080/00038628.2015.1038692
Idrovo-Aguirre, B.J. and Serey, V.D. (2018). Total Factor Productivity for the Chilean Construction Sector (1986-2015). Journal of Economic Analysis, 33(1), 29-54.
Irfan, M., Zahoor, H., Abbas, M., & Ali, Y. (2020). Determinants of labor productivity for building projects in Pakistan. Journal of Construction Engineering, Management & Innovation, 3(2), 85-100. https://doi.org/10.31462/jcemi.2020.02085100
Isaksson, A. (2007). Determinants of total factor productivity: a literature review. Research and Statistics Branch, UNIDO.
Jarkas, A. M., & Radosavljevic, M. (2013). Motivational factors impacting the productivity of construction master craftsmen in Kuwait. Journal of Management in Engineering, 29(4), 446-454.
Li, Y., & Liu, C. (2010). Malmquist indices of total factor productivity changes in the Australian construction industry. Construction Management and Economics, 28(9), 933-945. https://doi.org/10.1080/01446191003762231
Lipsey, R.G., & Carlaw, K. (2000). What does total factor productivity measure?. International Productivity Monitor, 1, 31-40.
Lipsey, R.G., & Carlaw, K.I. (2004). Total factor productivity and the measurement of technological change. Canadian Journal of Economics, 37(4), 1118-1150. https://doi.org/10.1111/j.0008-4085.2004.00263.x
Liu, L.P. (2011). An Empirical Analysis of the Function of STP to the Economic Growth in Construction Industry Based on TFP Theory-A Case Study of Anhui Province. Advanced Materials Research, 243, 6418-6424. https://doi.org/10.4028/www.scientific.net/AMR.243-249.6418
Navaratna, D. & Jayawardane, A.K.W. (2007). Total Factor Productivity in the Building Construction Industry in Sri Lanka. ENGINEER, 20(1), 63-70
Nazarko, J., & Chodakowska, E. (2015). Measuring productivity of construction industry in Europe with Data Envelopment Analysis. Procedia Engineering, 122, 204-212. https://doi.org/10.1016/j.proeng.2015.10.026
Oxford business group. (2018). Building activity in Saudi Arabia picks up as government launches new projects. Saudi Arabia report. https://oxfordbusinessgroup.com/saudi-arabia-2018
Park, H. S. (2006). Conceptual framework of construction productivity estimation. KSCE Journal of Civil Engineering, 10(5), 311-317. https://doi.org/10.1007/BF02830084
Rakib, F.H., Howlader, S., Rahman, M., & Hossain, A. (2020). Factors Affecting the Construction Productivity in the Context of Khulna City of Bangladesh. In Proceedings of the 5th International Conference on Civil Engineering for Sustainable Development, Khulna, Bangladesh (pp. 7-9).
Robles, G., Stifi, A., Ponz-Tienda, J.L., & Gentes, S. (2014). Labor productivity in the construction industry-factors influencing the Spanish construction labor productivity. International Journal of Civil and Environmental Engineering, 8(10), 1061-1070.
Rojas, E.M., & Aramvareekul, P. (2003). Labor productivity drivers and opportunities in the construction industry. Journal of management in engineering, 19(2), 78-82. https://doi.org/10.1061/(ASCE)0742-597X(2003)19:2(78)
Saudi Central Bank, (2020). Fifty sixth Annual Report. https://www.sama.gov.sa/en-us/economicreports/pages/annualreport.aspx
Tan, W. (2000). Total factor productivity in Singapore construction. Engineering construction and architectural management, 7(2), 154-158. https://doi.org/10.1046/j.1365-232x.2000.00146.x
Van Beveren, I. (2012). Total factor productivity estimation: A practical review. Journal of economic surveys, 26(1), 98-128. https://doi.org/10.1111/j.1467-6419.2010.00631.x
Xueqing, W., Chen, Y., Liu, B., Shen, Y. & Sun, H. (2013) A total factor productivity measure for the construction industry and analysis of its spatial difference: a case study in China, Construction Management and Economics, 31(10), 1059-1071, https://doi.org/10.1080/01446193.2013.826371
Ye, G., Wang, Y., Zhang, Y., Wang, L., Xie, H., Fu, Y., & Zuo, J. (2019). Impact of migrant workers on total factor productivity in Chinese construction industry. Sustainability, 11(3), 926. https://doi.org/10.3390/su11030926
Zhan, W., Pan, W., Javed, A.A., Chau, K.W. (2018) Correlation Analysis of Key Influencing Factors to the Total Factor Productivity of the Hong Kong Construction Industry. In: Chau K., Chan I., Lu W., Webster C. (eds) Proceedings of the 21st International Symposium on Advancement of Construction Management and Real Estate. Singapore: Springer, https://doi.org/10.1007/978-981-10-6190-5_51
Zhi, M., Hua, G. B., Wang, S. Q., & Ofori, G. (2003). Total factor productivity growth accounting in the construction industry of Singapore. Construction management and economics, 21(7), 707-718. https://doi.org/10.1080/0144619032000056126
Published
2021-05-31
How to Cite
Alzyadat, J. A., Alotaibi, A. F., Almubdel, A. H., & Alrshaid, N. A. (2021). Estimating total factor productivity in the Saudi Arabia construction sector. Amazonia Investiga, 10(40), 45-53. https://doi.org/10.34069/AI/2021.40.04.5
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