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A decomposition of US business sector TFP growth into technical progress and cost efficiency components

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  • W. Erwin Diewert

    (University of British Columbia and UNSW Sydney)

  • Kevin J. Fox

    (UNSW Sydney)

Abstract

A problem with index number methods for computing TFP growth is that during recessions these methods show declines in TFP. This is rather implausible since it implies technological regress. We develop a new method to decompose TFP growth into technical progress and inefficiency arising from the short run fixity of capital and labour, and apply this to new data on the US corporate nonfinancial sector and the noncorporate nonfinancial sector. The analysis sheds light on sources of the productivity growth slowdowns over the period 1960–2014.

Suggested Citation

  • W. Erwin Diewert & Kevin J. Fox, 2018. "A decomposition of US business sector TFP growth into technical progress and cost efficiency components," Journal of Productivity Analysis, Springer, vol. 50(1), pages 71-84, October.
    • Handle: RePEc:kap:jproda:v:50:y:2018:i:1:d:10.1007_s11123-018-0535-9
    DOI: 10.1007/s11123-018-0535-9
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    Cited by:

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    2. Josh Martin & Rebecca Riley, 2023. "Productivity measurement - Reassessing the production function from micro to macro," Working Papers 033, The Productivity Institute.
    3. Juan Aparicio & Magdalena Kapelko & Bernhard Mahlberg & Jose L. Sainz-Pardo, 2017. "Measuring input-specific productivity change based on the principle of least action," Journal of Productivity Analysis, Springer, vol. 47(1), pages 17-31, February.
    4. Wroński Marcin, 2019. "The productivity growth slowdown in advanced economies: causes and policy recommendations," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 55(4), pages 391-406, December.
    5. Yan He & Yung-ho Chiu & Bin Zhang, 2020. "Prevaluating Technical Efficiency Gains From Potential Mergers and Acquisitions in China’s Coal Industry," SAGE Open, , vol. 10(3), pages 21582440209, July.
    6. W. Erwin Diewert & Kevin J. Fox, 2018. "A decomposition of US business sector TFP growth into technical progress and cost efficiency components," Journal of Productivity Analysis, Springer, vol. 50(1), pages 71-84, October.

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    More about this item

    Keywords

    Technical and allocative inefficiency; Nonparametric production theory;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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