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Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries

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  • Hiau Looi Kee

    (The World Bank)

Abstract

For both primal and dual TFP growth accounting to properly account for productivity growth, assumptions of constant returns to scale and perfect competition are necessary. This paper shows that without these assumptions, while both TFP growth accounting measures remain equal if factor shares are constant, they are also equally bad at measuring productivity growth. This paper proposes a structural regression to estimate productivity growth based on more general production and cost functions. Using Singapore's industries as illustrations, this paper finds that the assumptions are widely rejected, and the estimated productivity growth exceeds both the accounting measures. When the same methodology is applied to the aggregate Singapore data, the estimated productivity growth is 4.4 percent per year, significantly higher than that of Young's (1992) and Hsieh's (2002).

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1193&context=bejeap
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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): topics.4 (2004)
Issue (Month): 1 ()
Pages: 26

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Handle: RePEc:bpj:bejeap:v:topics.4:y:2004:i:1:n:26

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Web page: http://www.degruyter.com

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Related research

Keywords: Productivity; TFP growth; markups; scale economies; factor shares.;

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Cited by:
  1. Fachin, Stefano & Gavosto, Andrea, 2007. "The decline in Italian productivity: a study in estimation of long-Run trends in Total Factor Productivity with panel cointegration methods," MPRA Paper 3112, University Library of Munich, Germany.
  2. Pablo, Agnese, 2009. "Japan and her dealings with offshoring: An empirical analysis with aggregate data," MPRA Paper 16505, University Library of Munich, Germany.
  3. Kong Weng Ho & Hian Teck Hoon, 2006. "Growth Accounting for a Follower-Economy in a World of Ideas : The Example of Singapore," Development Economics Working Papers 22435, East Asian Bureau of Economic Research.
  4. Dobrinsky, Rumen & Korosi, Gabor & Markov, Nikolay & Halpern, Laszlo, 2006. "Price markups and returns to scale in imperfect markets: Bulgaria and Hungary," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 92-110, March.
  5. Kee, Hiau Looi & Hoekman, Bernard, 2003. "Imports, entry, and competition law as market disciplines," Policy Research Working Paper Series 3031, The World Bank.
  6. Ho, Kong Weng & Hoon, Hian Teck, 2009. "Growth accounting for a technology follower in a world of ideas: The case of Singapore," Journal of Asian Economics, Elsevier, vol. 20(2), pages 156-173, March.

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