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Total factor productivity and the measurement of technological change

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  • Richard G. Lipsey
  • Kenneth I. Carlaw

Abstract

. TFP is interpreted in the literature in different, mutually contradictory ways. Changes in TFP are shown to measure not technological change, only the super‐normal returns to investing in such change – returns that exceed the full opportunity cost of the activity. Thus, in the limit, technological change can proceed with unchanged TFP. Measuring the effects of technological change instead requires counterfactual estimates. Reasons why changes in TFP are imperfect measures of super normal returns are also studied – reasons connected with the timing of output responses, the treatment of R&D in the national accounts, the omission of resource inputs, and two types of aggregation. La productivité totale des facteurs et la mesure du changement technologique. La productivité totale des facteurs (PTF) est interprétée dans la littérature de manières différentes et mutuellement contradictoires. On montre que les changements dans la PTF ne mesurent pas le changement technologique, mais seulement les rendements supra‐normaux sur les investissements dans de tels changements – des rendements qui dépassent le plein coût d’opportunité de cette activité. Donc, à la limite, le changement technologique peut procéder sans que la PTF change. Mesurer les effets du changement technique réclame des évaluations d’hypothèses de rechange. Les raisons pour lesquelles les changements dans la PTF sont des mesures imparfaites des rendements supra‐normaux sont aussi étudiées – raisons connectées avec la réponse des niveaux de production, le traitement de la R&D dans les comptes nationaux, l’omission des intrants de ressources, et deux types d’agrégation.

Suggested Citation

  • Richard G. Lipsey & Kenneth I. Carlaw, 2004. "Total factor productivity and the measurement of technological change," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(4), pages 1118-1150, November.
    • Handle: RePEc:wly:canjec:v:37:y:2004:i:4:p:1118-1150
    DOI: 10.1111/j.0008-4085.2004.00263.x
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