work of the OECD. As the methodology for measuring TFP growth indicates, excluding natural resources can result in misleading estimates of TFP growth. The methodology also shows that introducing natural resources as a factor of production will not always boost the measure of TFP growth compared to traditional measures.

Our results for 74 developing countries over 1996 to 2014 confirm that including natural resources in TFP growth estimation does have significant impacts on estimated TFP growth. In 59 of these countries, including the developing giants – China and India – including natural resources in estimates of TFP growth yields an increase in average TFP growth compared to traditional estimates. But including natural resources in TFP growth estimation reverses the sign of the average growth from negative using traditional methods to positive in 16 countries. When natural resources are included in TFP growth estimation, the results show TFP growth to be an important contributor to GDP growth in many countries – not only China and India, but the transition economies as well as selected African countries including Nigeria and Mozambique. A word of caution is in order for the overall picture of African TFP growth, however – some of the countries highlighted are subject to fragility, conflict and violence, and the data quality may therefore suffer.

Including natural resources in TFP growth estimation tends to reduce the variability of estimates from year to year, at least over the 1996-2014 period presented in this study. The full set of results for 74 developing countries in the Annex shows that in only 17 countries did the variability of TFP growth estimates with natural resources exceed the variability excluding natural resources. This could simply reflect the period chosen, but it may also be related to the introduction of another source of variation in the calculation of the weighted average growth rate of factor inputs.

Table 4 ranks the differences between TFP growth with and excluding natural resources, highlighting the top 20 countries where the former dominates. Not surprisingly, a long list of petroleum producers – Gabon, the Islamic Republic of Iran, Nigeria, Chad, Malaysia, the Arab Republic of Egypt, Azerbaijan, and Indonesia – appear in the top 20. But it is notable that China and India are also on this list.

Perhaps the most troubling result of our analysis is the very low TFP growth performance of developing countries in Latin America and the Caribbean. As seen in Figure 6, the average TFP growth of the region as whole over 1996-2014 amounted to 0.24% including natural resources and 0.15% excluding natural resources. This result is certainly consistent with recent analysis at the Inter-American Development Bank (2018).

In terms of how TFP including natural resources could inform policy work at the World Bank, one of the examples is analysis with the Long Term Growth Model (LTGM; website: www.worldbank.org/LTGM). TFP growth is used as an input into the LTGM which is used to analyze what growth targets are feasible for a country, what combination of growth fundamentals (TFP, human capital growth, investment, etc.) are required to reach the growth target, and what growth paths would prevail if current trends continue. The model also allows us to look at the implications of growth for poverty reduction. The calculation of trend TFP growth feeds into all these calculations. That is, it affects what growth or poverty targets are feasible, what would be 26