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Is there really a gap between aggregate productivity and technology?

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  • M. Ali Choudhary
  • Vasco Gabriel

Abstract

The important contribution by Basu and Fernald (2002) shows that, in practice, there is a statistically significant gap between aggregate productivity and technology that can be attributed to inefficient product and labour markets. This is important, as it implies that the Solow residual is an imperfect index for aggregate technology change. We take a related approach and find that when we control for capacity utilization, time varying markup and account for externalities between industries, by employing a superior system estimator, the gap between the aggregate productivity and technology is shown to narrow considerably.

Suggested Citation

  • M. Ali Choudhary & Vasco Gabriel, 2009. "Is there really a gap between aggregate productivity and technology?," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3499-3503.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:27:p:3499-3503
    DOI: 10.1080/00036840701537851
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    References listed on IDEAS

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    1. Caballero, Ricardo J. & Lyons, Richard K., 1992. "External effects in U.S. procyclical productivity," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 209-225, April.
    2. Subal C. Kumbhakar, 2003. "Factor productivity and technical change," Applied Economics Letters, Taylor & Francis Journals, vol. 10(5), pages 291-297, April.
    3. Basu, Susanto & Fernald, John G., 2002. "Aggregate productivity and aggregate technology," European Economic Review, Elsevier, vol. 46(6), pages 963-991, June.
    4. Daniel Ryan, 2000. "Cyclical behaviour of productivity growth and price-cost margins: asymmetry and market power effects," Applied Economics Letters, Taylor & Francis Journals, vol. 7(5), pages 297-300.
    5. Daniel Ryan, 1997. "The behaviour of productivity growth rates and price-cost margins during contractions and expansions," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 889-893.
    6. John Mullen, 2001. "Long-run technical change and multifactor productivity growth in US manufacturing," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 301-308.
    7. M. Ali Choudhary & J. Michael Orszag, 2007. "Costly customer relations and pricing," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 641-661, October.
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    Cited by:

    1. Moutinho, Ricardo & Au-Yong-Oliveira, Manuel & Coelho, Arnaldo & Manso, José Pires, 2015. "Beyond the “Innovation's Black-Box”: Translating R&D outlays into employment and economic growth," Socio-Economic Planning Sciences, Elsevier, vol. 50(C), pages 45-58.

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