An Economic Approach to the Measurement of Productivity Growth Using Differences Instead of Ratios
AbstractTraditional index number theory decomposes a value ratio into the product of a price index times a quantity index. Growth accounting is based on this traditional approach to index number theory. This paper takes an alternative approach which decomposes a value difference into the sum of a price difference plus a quantity difference. We apply this new exact difference methodology in order to decompose the growth of a new measure of labour productivity into additive explanatory factors. This new measure of labour productivity takes into account changes in the terms of trade. We apply our methodology to investigate the growth in living standards per unit of labour for the Japanese economy over the years 1955-2004. The paper also introduces a new flexible functional form for a GDP function that is based on the normalized quadratic functional form pioneered by Diewert and Wales.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Vancouver School of Economics in its series Economics working papers with number erwin_diewert-2009-2.
Length: 44 pages
Date of creation: 09 Jan 2009
Date of revision: 09 Jan 2009
Contact details of provider:
Web page: http://www.economics.ubc.ca/
Flexible functional form; producer theory; Japanese economic growth; difference approach; Bennet indicators; labour productivity; exact index numbers;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
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.:
- Kevin Fox & Ulrich Kohli, 1998.
"GDP growth, terms-of-trade effects, and total factor productivity,"
The Journal of International Trade & Economic Development,
Taylor & Francis Journals, vol. 7(1), pages 87-110.
- Kholi, U. & Fox, K., 1996. "GDP Growth, Terms-of-Trade Effects and Total Factor Productivity," Papers 96/28, New South Wales - School of Economics.
- Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
- Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
- Ulrich Kohli, 2004. "An Implicit Törnqvist Index of Real GDP," Journal of Productivity Analysis, Springer, vol. 21(3), pages 337-353, May.
- W. Diewert & Alice Nakamura, 2003. "Index Number Concepts, Measures and Decompositions of Productivity Growth," Journal of Productivity Analysis, Springer, vol. 19(2), pages 127-159, April.
- Diewert, Walter E & Wales, Terence J, 1987.
"Flexible Functional Forms and Global Curvature Conditions,"
Econometric Society, vol. 55(1), pages 43-68, January.
- W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
- Diewert, W. E. & Wales, T. J., 1988. "A normalized quadratic semiflexible functional form," Journal of Econometrics, Elsevier, vol. 37(3), pages 327-342, March.
- Ulrich Kohli, 2006. "Real GDP, Real GDI and Trading Gains: Canada, 1981-2005," International Productivity Monitor, Centre for the Study of Living Standards, vol. 13, pages 46-56, Fall.
- Diewert, W E & Wales, T J, 1992. "Quadratic Spline Models for Producer's Supply and Demand Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 705-22, August.
- Bert Balk, 2003. "The Residual: On Monitoring and Benchmarking Firms, Industries, and Economies with Respect to Productivity," Journal of Productivity Analysis, Springer, vol. 20(1), pages 5-47, July.
- Diewert, W E & Wales, T J, 1988. "Normalized Quadratic Systems of Consumer Demand Functions," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 303-12, July.
- Kohli, Ulrich, 2003. "Growth accounting in the open economy: international comparisons," International Review of Economics & Finance, Elsevier, vol. 12(4), pages 417-435.
- Ulrich R. Kohli, 1978. "A Gross National Product Function and the Derived Demand for Imports and Supply of Exports," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 167-82, May.
- Chambers, Robert G, 2001. "Consumer's Surplus As an Exact and Superlative Cardinal Welfare Indicator," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 105-19, February.
- Samuelson, Paul A & Swamy, S, 1974. "Invariant Economic Index Numbers and Canonical Duality: Survey and Synthesis," American Economic Review, American Economic Association, vol. 64(4), pages 566-93, September.
- Robert B. Archibald, 1977. "On the Theory of Industrial Price Measurement Output Price Indexes," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 6, number 1, pages 57-72 National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maureen Chin).
If references are entirely missing, you can add them using this form.