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A model of TFP

  • Ricardo Lagos

This paper proposes an aggregative model of Total Factor Productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labor market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labor market as summarized by the job-destruction decision. The model is also used to study the effects of labor-market policies on the level of measured TFP.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 345.

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Date of creation: 2006
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Publication status: Published in Forthcoming In: Review of Economic Studies
Handle: RePEc:fip:fedmsr:345
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  1. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Working Papers tecipa-283, University of Toronto, Department of Economics.
  2. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  3. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers 660, Stockholm University, Institute for International Economic Studies.
  4. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
  5. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  6. Conlisk, John, 1989. "An Aggregate Model of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 787-821, November.
  7. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  8. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October.
  9. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
  10. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, June.
  11. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 517-549, May.
  12. Marcelo Veracierto, 2000. "Employment flows, capital mobility, and policy analysis," Working Paper Series WP-00-5, Federal Reserve Bank of Chicago.
  13. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  14. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
  15. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  16. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
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