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The Solow Residual, Domar Aggregation, and Inefficiency: A Synthesis of TFP Measures

In: Efficiency and Input-Output Analyses Theory and Applications

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  • Thijs ten Raa
  • Victoria Shestalova

Abstract

We consolidate and interrelate the four main approaches to the measurement and decomposition of total factor productivity growth, namely Solow’s residual analysis, the index number approach, Data Envelopment Analysis, and Domar aggregation. Two new results link the general technology TFP growth measure to the industry Solow residuals and inefficiency.

Suggested Citation

  • Thijs ten Raa & Victoria Shestalova, 2021. "The Solow Residual, Domar Aggregation, and Inefficiency: A Synthesis of TFP Measures," World Scientific Book Chapters, in: Efficiency and Input-Output Analyses Theory and Applications, chapter 2, pages 23-38, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811233296_0002
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    1. Thijs ten Raa & Pierre Mohnen, 2009. "The Location of Comparative Advantages on the Basis of Fundamentals Only," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 23, pages 425-446, World Scientific Publishing Co. Pte. Ltd..
    2. Victoria Shestalova, 2001. "General Equilibrium Analysis of International TFP Growth Rates," Economic Systems Research, Taylor & Francis Journals, vol. 13(4), pages 391-404.
    3. Thijs ten Raa & Pierre Mohnen, 2009. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 19, pages 347-370, World Scientific Publishing Co. Pte. Ltd..
    4. Melleny Black & Melody Guy & Nathan McLellan, 2003. "Productivity in New Zealand 1988 to 2002," New Zealand Economic Papers, Taylor & Francis Journals, vol. 37(1), pages 119-150.
    5. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
    6. Diewert, W. Erwin & Fox, Kevin J., 2008. "On the estimation of returns to scale, technical progress and monopolistic markups," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 174-193, July.
    7. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    8. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    9. Fare, Rolf & Grosskopf, Shawna, 1992. "Malmquist Productivity Indexes and Fisher Ideal Indexes," Economic Journal, Royal Economic Society, vol. 102(410), pages 158-160, January.
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    Citations

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    Cited by:

    1. Jakub Growiec, 2013. "On the measurement of technological progress across countries," Bank i Kredyt, Narodowy Bank Polski, vol. 44(5), pages 467-504.
    2. Burda, Michael C. & Severgnini, Battista, 2014. "Solow residuals without capital stocks," Journal of Development Economics, Elsevier, vol. 109(C), pages 154-171.
    3. Theo Santini & Ricardo Azevedo Araujo, 2021. "Productivity growth and sectoral interactions under Domar aggregation: a study for the Brazilian economy from 2000 to 2014," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-30, December.
    4. Peneder, Michael & Rammer, Christian (ed.), 2018. "Measuring Competitiveness," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 181906.
    5. Michael Peneder & Christian Rammer, 2018. "Measuring Competitiveness," WIFO Studies, WIFO, number 60838, June.
    6. Karina Alfaro‐Moreno & José Javier Núñez‐Velázquez & Luisa Fernanda Bernat‐Diaz, 2019. "How does wage polarization affect productivity? The case of Spanish regions," Papers in Regional Science, Wiley Blackwell, vol. 98(3), pages 1317-1333, June.
    7. Diogo Cunha Ferreira & Rui Cunha Marques, 2016. "Malmquist and Hicks–Moorsteen Productivity Indexes for Clusters Performance Evaluation," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 15(05), pages 1015-1053, September.
    8. Tian, Xu & Yu, Xiaohua, 2012. "The Enigmas of TFP in China: A meta-analysis," China Economic Review, Elsevier, vol. 23(2), pages 396-414.
    9. Yang, Fuxia & Yang, Mian & Nie, Hualin, 2013. "Productivity trends of Chinese regions: A perspective from energy saving and environmental regulations," Applied Energy, Elsevier, vol. 110(C), pages 82-89.
    10. 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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    More about this item

    Keywords

    Efficiency; Input-Output; Benchmarking; Performance Measurement; TFP; Environmental Policy Analysis; Mark-ups; Consumer Surplus; CES Demand; Linkages; Heckscher-Ohlin Trade Flows; Leontief;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D - Microeconomics

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