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Aggregating and Decomposing Productivity

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  • J. Van Biesebroeck

Abstract

We illustrate how the aggregate level of total factor productivity, as obtained from aggregate input and output statistics, can be replicated by summing appropriately weighted firm-level measures. This exact aggregation has a number of advantages over existing practices. First, the contribution of different sub-samples to a well-defined aggregate is easily identified. Second, the importance of patterns at the micro level, such as larger size or higher capital intensity for more productive firms, for the aggregate can be calculated. Third, it allows the exact decomposition of aggregate output growth into the contribution of several factors, among which firm-level total factor productivity growth, an inherently relative concept. A sample of all Chinese manufacturing firms with annual sales above five million RMB is used to illustrate the usefulness of the different decompositions.

Suggested Citation

  • J. Van Biesebroeck, 2008. "Aggregating and Decomposing Productivity," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(2), pages 112-146.
  • Handle: RePEc:ete:revbec:20080201
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    Citations

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    Cited by:

    1. Péter Harasztosi, 2011. "Growth in Hungary 1994-2008: The role of capital, labour, productivity and reallocation," MNB Working Papers 2011/12, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. Massimo Armenise & Giorgia Giovannetti & Gianluca Santoni, 2011. "FDI in Business Services has general TFP effects : evidence from Italy," Working Papers - Economics wp2011_12.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    3. Giuseppe Berlingieri & Patrick Blanchenay & Chiara Criscuolo, 2017. "The Great Divergence(s)," CEP Discussion Papers dp1488, Centre for Economic Performance, LSE.
    4. Churen Sun & Zhihao Yu & Tao Zhang, 2012. "Agglomeration, Productivity, and Firms¡® Exports: Evidence from Chinese Firm-level Data," ERSA conference papers ersa12p882, European Regional Science Association.
    5. Massimo Del Gatto & Adriana Di Liberto & Carmelo Petraglia, 2011. "Measuring Productivity," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 952-1008, December.
    6. Martijn Boermans & Daan Willebrands, 2012. "Financial constraints, risk taking and firm performance: Recent evidence from microfinance clients in Tanzania," DNB Working Papers 358, Netherlands Central Bank, Research Department.
    7. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.

    More about this item

    Keywords

    labor productivity; total factor productivity; exact aggregation; China; manufacturing;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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