Decomposing growth in revenues and costs into price, quantity and total factor productivity contributions
This article employs the superlative Fisher and Tornqvist indexes for exact decomposition of growth in nominal revenues and costs. The findings confirm the well-known result that these indexes very closely approximate each other, implying that the mathematically simpler and computationally easier Tornqvist is the more practicable index. Moreover, this article's nominal growth decomposition yields all the results from the more common real growth decomposition and is also more informative for policy purposes. Application to the US agricultural sector during 1948-2001 shows that of the 3.31% average annual growth in revenues, TFP growth contributed 1.90 percentage points (pct. pts.); growth in output prices added 1.43 pct. pts.; while growth in input quantities contributed - 0.02 pct. pts. (i.e. fewer inputs). Therefore, real output growth (or revenue growth less output price growth) was 1.88 pct. pts., revealing that TFP's 1.90 pct. pts. growth contribution was fully responsible for real output growth with fewer inputs. Since revenues measure incomes, these results suggest that policy should focus more on measures to foster TFP growth than on specific price or quantity instruments to enhance income growth.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 41 (2009)
Issue (Month): 23 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|