Alternative Methods for Measuring Productivity Growth
AbstractThe present study is a contribution to the theory of the measurement of productivity growth. First, it examines the welfare-theoretic basis for measuring productivity growth and shows that the ideal welfare-theoretic measure is a chain index of productivity growth rates of different sectors which uses current output weights. Second, it lays out a technique for decomposing productivity growth which separates aggregate productivity growth into three factors -- the pure productivity effect, the effect of changing shares, and the effect of different productivity levels. Finally, it shows how to apply the theoretically correct measure of productivity growth and indicates which of the three different components should be included in a welfare-oriented measure of productivity growth. The study concludes that none of the measures generally used to measure productivity growth is consistent with the theoretically correct measure.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1282.
Length: 16 pages
Date of creation: Nov 2000
Date of revision:
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- William D. Nordhaus, 2001. "Alternative Methods for Measuring Productivity Growth," NBER Working Papers 8095, National Bureau of Economic Research, Inc.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-05-16 (All new papers)
- NEP-DEV-2001-05-16 (Development)
- NEP-EFF-2001-05-16 (Efficiency & Productivity)
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