Selecting between different productivity measurement approaches: An application using EU KLEMS data
AbstractOver the years, a number of different approaches were developed to measure productivity change, both in the micro and the macro setting. Since each approach comes with its own set of assumptions, it is not uncommon in practice that they produce different, and sometimes quite divergent, productivity change estimates. This paper introduces a framework that can be used to select between the most common productivity measurement approaches based on a number of characteristics specific to the application/dataset at hand; these were selected based on the results of previous simulation analysis that examined the accuracy of different productivity measurement approaches under different conditions. The characteristics in question include input volatility through time, the extent of technical inefficiency and noise present in the dataset and whether the parametric approaches are likely to suffer from functional form miss-specification and are examined using a number of well-established diagnostics and indicators. Once assessed, the most appropriate approach can be selected based on its relative accuracy under these conditions; accuracy can in turn be assessed using simulation analysis, either previously published or designed specifically to emulate the characteristics of the application/dataset at hand. As an example of how this selection framework can be implemented in practice, we assess the productivity performance of a number of EU countries using the EU KLEMS dataset.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37965.
Date of creation: Mar 2012
Date of revision:
Data envelopment analysis; Productivity and competitiveness; Simulation; Stochastic Frontier Analysis; Growth accounting;
Find related papers by JEL classification:
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- 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-2012-04-17 (All new papers)
- NEP-CMP-2012-04-17 (Computational Economics)
- NEP-EFF-2012-04-17 (Efficiency & Productivity)
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