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Decomposing Value Added Growth over Sectors into Explanatory Factors

Listed author(s):
  • Diewert, W. Erwin
  • Fox, Kevin J.

A decomposition of nominal value added growth over multiple sectors of an economy into explanatory factors is presented. The explanatory factors over a single sector are changes in the efficiency of the sector, growth of primary inputs, changes in sectoral output and input prices, technical progress and returns to scale. In order to implement the decomposition for a sector, an estimate of the sector’s cost constrained value added function for the two periods under consideration is required, which is taken to be the free disposal hull of past observations. The problems associated with aggregating over sectors are also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014.

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Paper provided by Vancouver School of Economics in its series working papers with number erwin_diewert-2016-10.

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Length: 55 pages
Date of creation: 27 Sep 2016
Date of revision: 27 Sep 2016
Handle: RePEc:ubc:pmicro:erwin_diewert-2016-10
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