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Integrated Industry and Economy-wide TFP-Measures with Different Prices in Different Uses


  • Pirkko Aulin-Ahmavaara
  • Perttu Pakarinen


We derive a consistent system of industry and economy-wide measures of TFP growth based on weaker assumptions than used in the literature so far. We allow different industries to pay different prices for the same product. These price differences are not assumed to cancel out at the economy-wide level. Our economy-wide concepts of output are the average growth rates of deliveries to final demand and of the industries' value added. In the case of the former, both net taxes on products and imported intermediates contribute, in addition to labour and capital, to the output growth and even the reallocation of intermediates contributes to the economy-wide TFP growth. In the case of the latter only capital and labour contribute to the output growth and the contribution of the reallocation of intermediates is largely offset by that of value added. We demonstrate the consequences of the non-additivity of the Tornqvist index formula.

Suggested Citation

  • Pirkko Aulin-Ahmavaara & Perttu Pakarinen, 2007. "Integrated Industry and Economy-wide TFP-Measures with Different Prices in Different Uses," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 253-276.
  • Handle: RePEc:taf:ecsysr:v:19:y:2007:i:3:p:253-276 DOI: 10.1080/09535310701571927

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    References listed on IDEAS

    1. Rikard Forslid & Jan I. Haaland & Karen Helene M. Knarvik & Ottar Maestad, 2002. "Integration and transition: Scenarios for the location of production and trade in Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 93-117, March.
    2. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    3. Karl Aiginger & Stephen W. Davies, 2004. "Industrial specialisation and geographic concentration: Two sides of the same coin? Not for the European Union," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 231-248, November.
    4. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, August.
    5. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    7. repec:hhs:iuiwop:430 is not listed on IDEAS
    8. Julda Kielyte, 2008. "Estimating Panel Data Models in the Presence of Endogeneity and Selection," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 1-19.
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    Cited by:

    1. Bert M. Balk, 2015. "Measuring and relating aggregate and subaggregate total factor productivity change without neoclassical assumptions," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 69(1), pages 21-48, February.

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    Growth accounting; productivity; aggregation;


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