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A model of TFP

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Author Info
Ricardo Lagos

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Abstract

This paper proposes an aggregative model of Total Factor Productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labor market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labor market as summarized by the job-destruction decision. The model is also used to study the effects of labor-market policies on the level of measured TFP.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 345.

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Date of creation: 2006
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Publication status: Published in Forthcoming In: Review of Economic Studies
Handle: RePEc:fip:fedmsr:345

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Keywords: Industrial productivity ; Economic development ; Labor market;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics. [Downloadable!]
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  2. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April. [Downloadable!] (restricted)
  3. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October. [Downloadable!] (restricted)
  4. Conlisk, John, 1989. "An Aggregate Model of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 787-821, November. [Downloadable!] (restricted)
  5. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 563-606, May. [Downloadable!] (restricted)
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  6. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
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  7. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October. [Downloadable!] (restricted)
  8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
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  9. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October. [Downloadable!] (restricted)
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  10. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  11. Stephen L. Parente & Edward C. Prescott, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December. [Downloadable!] (restricted)
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  12. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  13. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, January.
  14. Veracierto, Marcelo, 2001. "Employment Flows, Capital Mobility, and Policy Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 571-95, August.
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  15. Charles I. Jones, 2004. "The Shape of Production Function and the Direction of Technical Change," NBER Working Papers 10457, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bassanini, Andrea & Nunziata, Luca & Venn, Danielle, 2008. "Job Protection Legislation and Productivity Growth in OECD Countries," IZA Discussion Papers 3555, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Guner, Nezih & Ventura, Gustavo & Xu, Yi, 2007. "Macroeconomic Implications of Size-Dependent Policies," CEPR Discussion Papers 6138, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Ricardian selection," MPRA Paper 16950, University Library of Munich, Germany. [Downloadable!]
  4. V.V. Chari & Patrick J. Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," NBER Working Papers 10351, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Alessio Moro, 2008. "Biased Technical Change, Intermediate Goods and Total Factor Productivity," Economics Working Papers we076034, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  6. L. Guiso & Fabiano Schivardi, 2006. "What determines entrepreneurial clusters?," Working Paper CRENoS 200616, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
    Other versions:
  7. Sara G. Castellanos & Rodrigo Garcia-Verdu & David S. Kaplan, 2004. "Nominal Wage Rigidities in Mexico: Evidence from Social Security Records," NBER Working Papers 10383, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Galvão, Antonio Carlos F & Pessoa, Samuel de Abreu & Ferreira, Pedro Cavalcanti Gomes, 2007. "The Effects of External and Internal Strikes on Total Factor Productivity," Economics Working Papers (Ensaios Economicos da EPGE) 655, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  9. Ruy Lama, 2009. "Accounting for Output Drops in Latin America," IMF Working Papers 09/67, International Monetary Fund. [Downloadable!]
  10. Ellen R. McGrattan, 2004. "Comment on Gali and Rabanal's "Technology shocks and aggregate fluctuations: how well does the RBC model fit postwar U.S. data?"," Staff Report 338, Federal Reserve Bank of Minneapolis. [Downloadable!]
  11. Francisco J. Buera & Yongseok Shin, 2009. "Productivity Growth and Capital Flows: The Dynamics of Reforms," NBER Working Papers 15268, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Ian Dew-Becker & Robert J. Gordon, 2008. "The Role of Labor Market Changes in the Slowdown of European Productivity Growth," NBER Working Papers 13840, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Costas Azariadis & Leo Kaas, 2009. "Capital misallocation and aggregate factor productivity," Working Papers 2009-028, Federal Reserve Bank of St. Louis. [Downloadable!]
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  14. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October. [Downloadable!] (restricted)
    Other versions:
  15. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Trade-revealed TFP," MPRA Paper 16951, University Library of Munich, Germany. [Downloadable!]
  16. Bart Hobijn & Aysegül Sahin, 2007. "Firms and flexibility," Staff Reports 311, Federal Reserve Bank of New York. [Downloadable!]
  17. Andrea Bassanini & Danielle Venn, 2008. "The Impact of Labour Market Policies on Productivity in OECD Countries," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 3-15, Fall. [Downloadable!]
  18. Kunieda, Takuma, 2008. "Financial Development, Capital Flow, and Income Differences between Countries," MPRA Paper 11342, University Library of Munich, Germany. [Downloadable!]
  19. Charles I. Jones, 2004. "The Shape of Production Function and the Direction of Technical Change," NBER Working Papers 10457, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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