Measuring Switzerland's Productivity Performance (1960-2008)

The paper analyzes Switzerland’s improvement in standard of living over the year 1960-2008. The paper utilizes index number and Translog production framework approach developed by Diewert, Lawrence, Wales, Morrison, Kohli and others. First a standard TFP measure is computed using index number approach followed by Kohli type real income decomposition. This is done for both gross output and the more theoretically preferable net output framework. The author find that under the gross framework Switzerland has an average TFP growth of 0.99%, while in the 80s and 90s it was less than 0.5%. This finding is consistent with those obtained using Solow residual econometric method of TFP growth measurement. It seems increasing TOFT provides part of the answer for real income growth, but labour also played a crucial role. Since Switzerland was not affected seriously during WWII, it entered the 50s and 60s with high income; as a result its growth rate is not that high. The author finds there has been definite improvement in standard of living in terms of increase consumption and leisure over investigated period. Then based on framework developed by Diewert etal the author investigates the production and consumer side of the economy, estimating requisite elasticity of labour, export, output etc. In each of these cases, succinct description of the theoretical framework involved is also provided. Finally benchmarking exercise is undertaken for the economy and it is found that within 1984-2008 periods, 2007 is the only efficient observation. Efficiency performance from mid 80s to mid 90s is very poor but after 2003 there has been improvement in efficiency performance but the longevity of this trend is a suspect given the recent economic crisis. The author in the conclusion also provides some rationale for the low TFP performance of Switzerland.