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Natural Decomposition Of Total Factor Productivity Growth

In: Econometric Modeling Of China

Author

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  • Zhou Fang

    (Institute of Quantitative and Technical Economics, CASS, China)

Abstract

Natural decomposition of total factor productivity (TFP) growth is carried out in this chapter. Total factor productivity growth consists of two components: (1) Solow's technical progress and (2) economies of scale. The former is independent of the change in production scale and referred to as "disembodied technological change", while the latter is associated with a change of production scale and depends upon the output elasticities of input factors. It is referred to as "embodied technological change". Product output growth can be divided into two components: extensive growth and intensive growth. The former is numerically equal to the total factor (TF) growth, and the latter equals the total factor productivity (TFP) growth. The purpose of this paper is to reveal the natural decomposition of total factor productivity growth and product output growth. The method of decomposition, developed in this paper, can be used for measuring the TFP growth components and the output growth components at either a micro-level (for firm, industry) or a macro-level (for regional or national economy). In illustration of the methodology, an example is presented.

Suggested Citation

  • Zhou Fang, 2000. "Natural Decomposition Of Total Factor Productivity Growth," World Scientific Book Chapters, in: Lawrence R Klein & Shinichi Ichimura (ed.), Econometric Modeling Of China, chapter 7, pages 291-306, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812792457_0007
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    Cited by:

    1. Jorg Scheibe, 2003. "The Chinese Output Gap During the Reform Period 1978-2002," Economics Series Working Papers 179, University of Oxford, Department of Economics.

    More about this item

    Keywords

    China; Macroeconometric Models; Current Account; Factor Productivity; Substitution Elasticity; Economic Reform;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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