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Measuring TFP: A Latent Variable Approach

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  • Rodrigo Fuentes
  • Marco Morales

Abstract

Despite the important role that total factor productivity (TFP) has played in growth literature, few attempts have been made to change the methodology to estimate it. This paper proposes a methodology based on state–space model to estimate TFP and its determinants. With this methodology it is possible to reduce the measurement of our ignorance. As a by-product, this estimation yields the capital share in output and the long-term growth rate. When applied to Chile, the estimation shows a capital share around 0.5 and long term growth of TFP around 1%. Capital accumulation tends to explain more the growth rate in the fast growth periods under the econometric estimation compared to the traditional growth accounting methodology. l II) could be helpful on this task.

Suggested Citation

  • Rodrigo Fuentes & Marco Morales, 2007. "Measuring TFP: A Latent Variable Approach," Working Papers Central Bank of Chile 419, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:419
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_419.pdf
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    References listed on IDEAS

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    Cited by:

    1. Monique Reid & Gideon Rand, 2015. "A Sticky Information Phillips Curve for South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(4), pages 506-526, December.

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