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Decomposing Value Added Growth into Explanatory Factors

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  • W. Erwin Diewert

    (Vancouver School of Economics, University of British Columbia, and School of Economics, UNSW)

  • Kevin J. Fox

    (School of Economics and CAER, UNSW Business School, UNSW)

Abstract

A method for decomposing nominal value added growth is presented, which identifies the contributions from efficiency change, growth of primary inputs, changes in output and input prices, technical progress and returns to scale. In order to implement the decomposition, an estimate of the relevant cost constrained value added function for the two periods under consideration is required. This is taken to be the free disposal hull of past observations. Aggregation over sectors is also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014.

Suggested Citation

  • W. Erwin Diewert & Kevin J. Fox, 2017. "Decomposing Value Added Growth into Explanatory Factors," Discussion Papers 2017-02, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2017-02
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2017-02.pdf
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    Cited by:

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    More about this item

    Keywords

    Symmetry; Measurement of output; input and productivity; value added functions; revenue functions; variable profit functions; duality theory; economic price and quantity indexes; technical progress; total factor productivity; revenue efficiency; aggregation over sectors.;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • 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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