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Variable factor shares and the index number problem: a generalization. Abstract Factor shares vary over time and across countries, so incorporating variable factor shares into growth and development accounting is both warranted and desirable. However, variable factor shares create an index number problem in analyses that rely on our most commonly used production functions. We show that in the presence of competitive factor markets, the problem exists for all workhorse production functions exhibiting constant returns to scale. Therefore, attempts to align empirical growth research with the reality of the factor share data cannot be made using standard techniques. New techniques need to be developed

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  • Brad Sturgill

    (Sewanee: The University of the South)

  • Hernando Zuleta

    (Universidad de Los Andes)

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  • Brad Sturgill & Hernando Zuleta, 2017. "Variable factor shares and the index number problem: a generalization. Abstract Factor shares vary over time and across countries, so incorporating variable factor shares into growth and development a," Economics Bulletin, AccessEcon, vol. 37(1), pages 30-37.
    • Handle: RePEc:ebl:ecbull:eb-16-00602
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    References listed on IDEAS

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    12. repec:fth:prinin:413 is not listed on IDEAS
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    More about this item

    Keywords

    Factor Share; Growth Accounting; Production Function; Index Number;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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