International-price and terms-of-trade effects on factor productivity: international comparisons
AbstractIn this paper, we present a technique to decompose changes in factor prices into the contribution of major determinants, namely movements in domestic and international prices, changes in capital and labour quantities, and technological progress. This is done in an open-economy framework. While building on the same principles as GDP growth accounting, our technique considers the specific form of factor demand functions when these are derived from a GDP Translog function. We also break down the combined effect of changes in export and import (i.e. international) prices into a pure terms-of-trade effect and a residual international-price effect. This distinction is important, and is illustrated by the fact that an equiproportional change in international prices, while not affecting terms of trade, can trigger changes in factor productivity and therefore impact on workers' and capital owners' welfare. Decomposition of movements in factor productivity is implemented empirically using data from ten OECD countries.
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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 0408002.
Length: 40 pages
Date of creation: 12 Aug 2004
Date of revision: 07 Sep 2004
Note: Type of Document - pdf; pages: 40
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factor productivity; GDP functions; international prices; terms of trade;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
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