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Productivity Growth, Changes in Efficiency and Technical Progress in the Private Sectors of the Australian Economy

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Abstract

This paper estimates the private sector productivity growth in the Australian economy by decomposing productivity growth into growth of efficiency and technical progress. The paper computes Malmquist indices of Total factor productivity (TFP) using a Data Envelopment Analysis (DEA)-like linear programming technique. In view of the lack of any study examining components of productivity growth at the sectoral level, the decomposition pattern of TFP growth as revealed in this paper should significantly contribute to the existing knowledge and policy debate on Australia’s private sector competitiveness. The results indicate that mean rates of technical efficiency growth and technical change over the period have been highest for Transport, Storage and Communication (TSC) and Mining (MIN) industries, respectively. It has been also found that although the average growth rates of efficiency and technical progress have been slow over the study period, annual average productivity growth rates improved in recent years. The findings also suggest that increased efficiency growth played a significant role in raising overall private sector productivity. The results reveal the benefits of deregulation and industry reforms introduced in the Australian economy since the 1980s.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2006-14eco.pdf
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Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2006_14.

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Date of creation: 12 Oct 2006
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Handle: RePEc:dkn:econwp:eco_2006_14

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  1. Mahadevan, Renuka & Asafu-Adjaye, John, 2005. "The productivity-inflation nexus: the case of the Australian mining sector," Energy Economics, Elsevier, vol. 27(1), pages 209-224, January.
  2. 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.
  3. Guido Cella & Giovanni Pica, 2001. "Inefficiency Spillovers in Five OECD Countries: An Interindustry Analysis," Economic Systems Research, Taylor & Francis Journals, vol. 13(4), pages 405-416.
  4. Nadiri, M Ishaq, 1970. "Some Approaches to the Theory and Measurement of Total Factor Productivity: A Survey," Journal of Economic Literature, American Economic Association, vol. 8(4), pages 1137-77, December.
  5. R. Mahadevan, 2002. "Productivity growth in Australian manufacturing sector: some new evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 1017-1023.
  6. Dean Parham, 2004. "Sources of Australia's Productivity Revival," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 239-257, 06.
  7. Nadiri, M Ishaq, 1972. "International Studies of Factor Inputs and Total Factor Productivity: A Brief Survey," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 18(2), pages 129-54, June.
  8. Bert Balk, 2001. "Scale Efficiency and Productivity Change," Journal of Productivity Analysis, Springer, vol. 15(3), pages 159-183, May.
  9. Gerald Granderson, 1997. "Parametric analysis of cost inefficiency and the decomposition of productivity growth for regulated firms," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 339-348.
  10. Charles Bean, 2000. "The Australian Economic 'Miracle': A View from the North," RBA Annual Conference Volume, in: David Gruen & Sona Shrestha (ed.), The Australian Economy in the 1990s Reserve Bank of Australia.
  11. Rolf Färe & Shawna Grosskopf & Dimitri Margaritis, 2001. "Productivity Trends in Australian and New Zealand Manufacturing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(2), pages 125-134.
  12. Lee, Lung-Fei & Tyler, William G., 1978. "The stochastic frontier production function and average efficiency : An empirical analysis," Journal of Econometrics, Elsevier, vol. 7(3), pages 385-389, April.
  13. Kwon, Jene K., 1986. "Capital utilization, economies of scale and technical change in the growth of total factor productivity : An Explanation of South Korean manufacturing Growth," Journal of Development Economics, Elsevier, vol. 24(1), pages 75-89, November.
  14. Gong, Byeong-Ho & Sickles, Robin C., 1992. "Finite sample evidence on the performance of stochastic frontiers and data envelopment analysis using panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 259-284.
  15. Paul W. Bauer, 1988. "Decomposing TFP growth in the presence of cost inefficiency, nonconstant returns to scale, and technological progress," Working Paper 8813, Federal Reserve Bank of Cleveland.
  16. Diewert, W E, 1992. "The Measurement of Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 163-98, July.
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