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Panel Data, Factor Models, and the Solow Residual

In: Exploring Research Frontiers in Contemporary Statistics and Econometrics

Author

Listed:
  • Alois Kneip

    (University of Bonn, Department of Economics)

  • Robin C. Sickles

    (Rice University, Department of Economics - MS 22)

Abstract

In this paper we discuss the Solow residual (Solow, Rev. Econ. Stat. 39:312–320, 1957) and how it has been interpreted and measured in the neoclassical production literature and in the complementary literature on productive efficiency. We point out why panel data are needed to measure productive efficiency and innovation and thus link the two strands of literatures. We provide a discussion on the various estimators used in the two literatures, focusing on one class of estimators in particular, the factor model. We evaluate in finite samples the performance of a particular factor model, the model of Kneip, Sickles, and Song (A New Panel Data Treatment for Heterogeneity in Time Trends, Econometric Theory, 2011), in identifying productive efficiencies. We also point out that the measurement of the two main sources of productivity growth, technical change and technical efficiency change, may be not be feasible in many empirical settings and that alternative survey based approaches offer advantages that have yet to be exploited in the productivity accounting literature.

Suggested Citation

  • Alois Kneip & Robin C. Sickles, 2011. "Panel Data, Factor Models, and the Solow Residual," Springer Books, in: Ingrid Van Keilegom & Paul W. Wilson (ed.), Exploring Research Frontiers in Contemporary Statistics and Econometrics, chapter 0, pages 83-114, Springer.
    • Handle: RePEc:spr:sprchp:978-3-7908-2349-3_5
    DOI: 10.1007/978-3-7908-2349-3_5
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