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Vertically Integrated Productivity Measures: Tests of Standard Assumptions

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  • Miller, Jack L
  • Gowdy, John M

Abstract

In this paper we use an input-output framework to examine two criticisms of standard measures of total factor productivity. These criticisms are (1) that the contribution of capi tal to productivity growth is underestimated, and (2) that the use of co st shares to weigh factor input contribution is questionable. Using various vertically integrated productivity measures we find that capital's productivity contribution is underestimated in the neoclassical formulation. We also find that in a Pasinetti-Rymes growth model, factor shares do not approximate output elasticities. We conclude that the argument made by Pasinetti, Rymes, and others is supported, that in long-run productivity analysis capital should not be treated as a primary input, but should be measured as an intermediat e, produced input. Copyright 1992 by The International Association for Research in Income and Wealth.

Suggested Citation

  • Miller, Jack L & Gowdy, John M, 1992. "Vertically Integrated Productivity Measures: Tests of Standard Assumptions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(4), pages 445-453, December.
  • Handle: RePEc:bla:revinw:v:38:y:1992:i:4:p:445-53
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    1. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, World Bank Group, pages 357-382.
    2. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Economics Letters, Elsevier, pages 51-57.
    3. Ravallion, Martin & Datt, Gaurav, 1999. "When is growth pro-poor? Evidence from the diverse experiences of India's states," Policy Research Working Paper Series 2263, The World Bank.
    4. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-139, June.
    5. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
    6. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, pages 3-17.
    7. Chen, Shaohua & Datt, Gaurav & Ravallion, Martin, 1994. "Is Poverty Increasing in the Developing World?," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 359-376.
    8. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, pages 3-17.
    9. Ravallion, Martin & Datt, Gaurav & van de Walle, Dominique, 1991. "Quantifying Absolute Poverty in the Developing World," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 345-361.
    10. Chen, Shaohua & Datt, Gaurav & Ravallion, Martin, 1994. "Is Poverty Increasing in the Developing World?," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 359-376.
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