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Decompositions of Productivity Growth into Sectoral Effects: Some Puzzles Explained

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  • Diewert, Erwin

Abstract

An earlier paper by Diewert (2013) provided some new decompositions of economy wide labour productivity growth and Total Factor Productivity (TFP) growth into sectoral effects. The economy wide labour productivity growth rate turned out to depend on the sectoral labour productivity growth rates, real output price changes and changes in sectoral labour input shares. A puzzle is that empirically, the real output price change effects, when aggregated across industries, did not matter much. The economy wide TFP growth decomposition into sectoral explanatory factors turned out to depend on the sectoral TFP productivity growth rates, real output and input price changes and changes in sectoral aggregate input shares. The puzzle with this decomposition is that empirically all of these price change effects and input share effects did not matter much when they were aggregated over sectors; only the sectoral TFP growth rates contributed significantly to overall TFP growth. The present paper explains these puzzles.

Suggested Citation

  • Diewert, Erwin, 2014. "Decompositions of Productivity Growth into Sectoral Effects: Some Puzzles Explained," Economics working papers erwin_diewert-2014-48, Vancouver School of Economics, revised 03 Nov 2014.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2014-48
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    File URL: http://www.economics.ubc.ca/files/2014/11/pdf_paper_erwin-diewert-14-10-Puzzles.pdf
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    References listed on IDEAS

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    1. Jianmin Tang & Weimin Wang, 2004. "Sources of aggregate labour productivity growth in Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 421-444, May.
    2. W. Diewert, 2015. "Decompositions of productivity growth into sectoral effects," Journal of Productivity Analysis, Springer, vol. 43(3), pages 367-387, June.
    3. Jesus Dumagan & Bert Balk, 2016. "Dissecting aggregate output and labour productivity change: a postscript on the role of relative prices," Journal of Productivity Analysis, Springer, vol. 45(1), pages 117-119, February.
    4. Jesus C. Dumagan, 2013. "A Generalized Exactly Additive Decomposition of Aggregate Labor Productivity Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(1), pages 157-168, March.
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    Cited by:

    1. Jesus Dumagan & Bert Balk, 2016. "Dissecting aggregate output and labour productivity change: a postscript on the role of relative prices," Journal of Productivity Analysis, Springer, vol. 45(1), pages 117-119, February.
    2. Ilya B. Voskoboynikov, 2020. "Structural Change, Expanding Informality and Labor Productivity Growth in Russia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 394-417, June.
    3. V. Blyznyuk & Y. Yuryk, 2018. "Asymmetricity in the development of the industrial segment of Ukrainian labor market," Economy and Forecasting, Valeriy Heyets, issue 4, pages 65-80.

    More about this item

    Keywords

    Total Factor Productivity; labour productivity; index numbers; sectoral contributions to growth.;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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