The Tyranny of the Identity: Growth Accounting Revisited
It has been argued in the literature that growth accounting may be undertaken by directly differentiating the national income and product accounts identity where total income equals labour's total compensation and total profits. This paper shows that this is simply an exercise in the manipulation of an accounting identity without necessarily having any theoretical foundation. Simulations show that the estimates of total factor productivity growth resulting from growth accounting performed with aggregate monetary data are not equivalent to the true rate of technological progress implied by the micro-data. This suggests that results from the orthodox growth accounting approach may be very misleading.
Volume (Year): 20 (2006)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIRA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIRA20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jesus Felipe & F. Gerard Adams, 2005. ""A Theory of Production" The Estimation of the Cobb-Douglas Function: A Retrospective View," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 427-445, Summer.
- Prescott, Edward C, 1998.
"Needed: A Theory of Total Factor Productivity,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
- Chang-Tai Hsieh, 2002. "What Explains the Industrial Revolution in East Asia? Evidence From the Factor Markets," American Economic Review, American Economic Association, vol. 92(3), pages 502-526, June.
- J. S. L. McCombie, 2001. "What Does the Aggregate Production Function Show? Further Thoughts on Solow's "Second Thoughts on Growth Theory"," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(4), pages 589-615, July.
- Jesus Felipe & J. S. L. McCombie, 2003. "Some methodological problems with the neoclassical analysis of the East Asian miracle," Cambridge Journal of Economics, Oxford University Press, vol. 27(5), pages 695-721, September.
- J. S. L. McCombie, 1998. "'Are There Laws of Production': an assessment of the early criticisms of the," Review of Political Economy, Taylor & Francis Journals, vol. 10(2), pages 141-173.
- Barro, Robert J, 1999.
"Notes on Growth Accounting,"
Journal of Economic Growth,
Springer, vol. 4(2), pages 119-37, June.
- Jesus Felipe & Carsten Holz, 2001. "Why do Aggregate Production Functions Work? Fisher's simulations, Shaikh's identity and some new results," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 261-285.
- Franklin M. Fisher & Robert M. Solow & James M. Kearl, 1977.
"Aggregate Production Functions: Some CES Experiments,"
Review of Economic Studies,
Oxford University Press, vol. 44(2), pages 305-320.
- F. M. Fisher & R. M. Solow & J. R. Kearl, 1974. "Aggregate Production Functions: Some CES xperiments," Working papers 136, Massachusetts Institute of Technology (MIT), Department of Economics.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Simon, Herbert A, 1979. " On Parsimonious Explanations of Production Relations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(4), pages 459-74.
- Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
- Jesus Felipe & J. S. L. McCombie, 2005. "How Sound are the Foundations of the Aggregate Production Function?," Eastern Economic Journal, Eastern Economic Association, vol. 31(3), pages 467-488, Summer.
When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:20:y:2006:i:3:p:283-299. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.