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Biased Technical Change, Intermediate Goods and Total Factor Productivity

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  • Moro, Alessio

Abstract

Biased technical change can be defined as changes that affect the elasticity of output with respect to inputs. In this paper, I analyze the effect of biased technical change on total factor productivity (TFP). I construct an input-output economy in which firms produce gross output using capital, labor and intermediate goods. In equilibrium, biased technical change appears as an explicit part of TFP in the value added aggregate production function, where the latter is obtained through the aggregation of individual firms optimal decisions. A larger elasticity of gross output with respect to intermediates implies a smaller TFP level. I use the model to quantify the impact of biased technical change for measured TFP growth in Italy. The exercise shows that biased technical change can account for the productivity slowdown observed in Italy from 1994 to 2004.

Suggested Citation

  • Moro, Alessio, 2008. "Biased Technical Change, Intermediate Goods and Total Factor Productivity," UC3M Working papers. Economics we076034, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we076034
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    References listed on IDEAS

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    Cited by:

    1. Jan, Grobovsek, 2013. "Development Accounting Within Intermediate Goods," SIRE Discussion Papers 2013-42, Scottish Institute for Research in Economics (SIRE).
    2. Julieta Caunedo, 2014. "Aggregate Fluctuations and the Industry Structure of the US Economy," 2014 Meeting Papers 1194, Society for Economic Dynamics.
    3. Manoj Atolia & Ryan Chahrour, 2013. "Intersectoral Linkages, Diverse Information, and Aggregate Dynamics," Boston College Working Papers in Economics 832, Boston College Department of Economics, revised 12 May 2015.
    4. Thomas Strobel, 2013. "Embodied Technology Diffusion and Sectoral Productivity Evidence for 12 OECD Countries," ifo Working Paper Series 156, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Ryan Chahrour & Manoj Atolia, 2015. "Intersectoral Linkages, Diverse Information, and Aggregate Dynamics in a Neoclassical Model," 2015 Meeting Papers 398, Society for Economic Dynamics.
    6. Jan Grobovsek, 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
    7. Chen, Xi, 2017. "Biased Technical Change, Scale, And Factor Substitution In U.S. Manufacturing Industries," Macroeconomic Dynamics, Cambridge University Press, vol. 21(02), pages 488-514, March.
    8. Hiroaki HAYAKAWA, 2016. "Theory of the Firm: A Reformulation with Primary Factors of Production and Procurement of Ingredient Inputs," Journal of Economics and Political Economy, KSP Journals, vol. 3(3), pages 418-439, September.
    9. Jan Grobovšek, 2011. "Development Accounting with Intermediate Goods," Working Papers 2011.85, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Total factor productivity growth;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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