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Decompositions of Productivity Growth into Sectoral Effects: Some Puzzles Explained

In: Productivity and Efficiency Analysis

Author

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  • W. Erwin Diewert

    (School of Economics, University of British Columbia
    The School of Economics, University of New South Wales)

Abstract

An earlier paper by Diewert (J Prod Anal 43(3):367–387, 2015) provided some new decompositions of economy wide labour productivity growth and Total Factor Productivity (TFP) growth into sectoral effects. The economy wide labour productivity growth rate turned out to depend on the sectoral labour productivity growth rates, real output price changes and changes in sectoral labour input shares. A puzzle is that empirically, the real output price change effects, when aggregated across industries, did not matter much. The economy wide TFP growth decomposition into sectoral explanatory factors turned out to depend on the sectoral TFP productivity growth rates, real output and input price changes and changes in sectoral aggregate input shares. The puzzle with this decomposition is that empirically all of these price change effects and input share effects did not matter much when they were aggregated over sectors; only the sectoral TFP growth rates contributed significantly to overall TFP growth. The present paper explains these puzzles.

Suggested Citation

  • W. Erwin Diewert, 2016. "Decompositions of Productivity Growth into Sectoral Effects: Some Puzzles Explained," Springer Proceedings in Business and Economics, in: William H. Greene & Lynda Khalaf & Robin Sickles & Michael Veall & Marcel-Cristian Voia (ed.), Productivity and Efficiency Analysis, edition 1, chapter 0, pages 1-13, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-23228-7_1
    DOI: 10.1007/978-3-319-23228-7_1
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    Cited by:

    1. Ilya B. Voskoboynikov, 2020. "Structural Change, Expanding Informality and Labor Productivity Growth in Russia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 394-417, June.
    2. V. Blyznyuk & Y. Yuryk, 2018. "Asymmetricity in the development of the industrial segment of Ukrainian labor market," Economy and Forecasting, Valeriy Heyets, issue 4, pages 65-80.
    3. Alexander Murray, 2017. "What Explains the Post-2004 U.S.Productivity Slowdown?," CSLS Research Reports 2017-05, Centre for the Study of Living Standards.
    4. W. Erwin Diewert & Kevin J. Fox, 2017. "Decomposing Value Added Growth into Explanatory Factors," Discussion Papers 2017-02, School of Economics, The University of New South Wales.
    5. Matthew Calver and Alexander Murray, 2016. "Decomposing Multifactor Productivity Growth in Canada by Industry and Province, 1997-2014," CSLS Research Reports 2016-19, Centre for the Study of Living Standards.
    6. Roberta Montebello & Jude Darmanin, 2021. "Saving behaviour in Malta: Insights from the Household Budgetary Survey," CBM Working Papers WP/04/2021, Central Bank of Malta.
    7. Yismaw Ayelign & Lakhwinder Singh, 2019. "Labor productivity of Ethiopian large and Medium Scale Manufacturing Sector," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 64-70, September.
    8. Ilya B. Voskoboynikov, 2020. "Structural Change, Expanding Informality and Labor Productivity Growth in Russia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 394-417, June.

    More about this item

    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • 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

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