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Neoclassical Growth Accounting and Frontier Analysis: A Synthesis

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  • Thijs Raa

    ()

  • Pierre Mohnen

    ()

Abstract

The standard measure of productivity growth is the Solow residual. Its evaluation requires data on factor input shares or prices. Since these prices are presumed to match factor productivities, the standard procedure amounts to accepting at face value what is supposed to be measured. In this paper we estimate total factor productivity growth without recourse to data on factor input prices. Factor productivities are defined as Lagrange multipliers to the program that maximizes the level of domestic final demand. The consequent measure of total factor productivity is shown to encompass not only the Solow residual, but also the efficiency change of frontier analysis and the hitherto slippery terms-of-trade effect. Using input-output tables from 1962 to 1991 we show that the source of Canadian productivity growth has shifted from technical change to terms-of-trade effects. Copyright Kluwer Academic Publishers 2002

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Bibliographic Info

Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 18 (2002)
Issue (Month): 2 (September)
Pages: 111-128

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Handle: RePEc:kap:jproda:v:18:y:2002:i:2:p:111-128

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Web page: http://www.springerlink.com/link.asp?id=100296

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Keywords: total factor productivity growth; efficiency change; terms-of trade effect; growth accounting; data envelopment analysis;

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  1. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
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  3. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-79, September.
  4. de Jong, G., 1996. "Canada's Post-War Manufacturing Performance: A Comparison with the United States," Papers 32, Groningen State, Institute of Economic Research-.
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  7. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Perelman, Sergio, 1995. "R&D, Technological Progress and Efficiency Change in Industrial Activities," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(3), pages 349-66, September.
  9. Morrison, Catherine J., 1986. "Productivity measurement with non-static expectations and varying capacity utilization : An integrated approach," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 51-74.
  10. Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
  11. Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-87, May.
  12. Siegel, Donald, 1994. "Errors in Output Deflators Revisited: Unit Values and the Producer Price Index," Economic Inquiry, Western Economic Association International, vol. 32(1), pages 11-32, January.
  13. Fare, Rolf & Grosskopf, Shawna, 1996. "Productivity and intermediate products: A frontier approach," Economics Letters, Elsevier, vol. 50(1), pages 65-70, January.
  14. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
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