A Decomposition of U.S. Business Sector TFP Growth into Technical Progress and Cost Efficiency Components
One of the problems with index number methods for computing TFP growth is that during recessions, these methods show declines in TFP and this seems to imply that technical progress is negative during these periods. This is rather implausible since it implies technological regress; i.e., that that the production frontier has contracted. The paper works out a nonparametric method where one can decompose TFP growth into two components: a technical progress component (i.e., a shift in the production frontier over time) and an inefficiency component that is due to the fixity of capital and labour in the short run. The new decomposition is illustrated using the new Bureau of Economic Analysis (BEA) Integrated Macroeconomic Accounts which facilitated the construction of a set of productivity accounts for two key sectors of the US private business sector: the Corporate Nonfinancial Sector and the Noncorporate Nonfinancial Sector. The analysis sheds light on productivity growth slowdowns over the period 1960 to 2014.
|Date of creation:||30 Jun 2016|
|Date of revision:||30 Jun 2016|
|Contact details of provider:|| Web page: http://www.economics.ubc.ca/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diewert, W. Erwin & Fox, Kevin J., 2014.
"Reference technology sets, Free Disposal Hulls and productivity decompositions,"
Elsevier, vol. 122(2), pages 238-242.
- Diewert, Erwin & Fox, Kevin, 2013. "Reference Technology Sets, Free Disposal Hulls and Productivity Decompositions," Economics working papers erwin_diewert-2013-40, Vancouver School of Economics, revised 18 Sep 2013.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
- Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
- Robert B. Archibald, 1977. "On the Theory of Industrial Price Measurement Output Price Indexes," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 6, number 1, pages 57-72 National Bureau of Economic Research, Inc.
- Shekhar Aiyar & Carl-Johan Dalgaard & Omer Moav, 2008. "Technological progress and regress in pre-industrial times," Journal of Economic Growth, Springer, vol. 13(2), pages 125-144, June.
- Aiyar, Shekhar & Dalgaard, Carl-Johan & Moav, Omer, 2006. "Technological Progress and Regress in Pre-Industrial Times," CEPR Discussion Papers 5454, C.E.P.R. Discussion Papers.
- Henry Tulkens, 1993. "On FDH efficiency analysis: Some methodological issues and applications to retail banking, courts, and urban transit," Journal of Productivity Analysis, Springer, vol. 4(1), pages 183-210, June.
- Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 331-360.
- Martin L. Weitzman, 1995. "Recombinant Growth," Harvard Institute of Economic Research Working Papers 1722, Harvard - Institute of Economic Research.
- Weitzman, Martin L., 1998. "Recombinant Growth," Scholarly Articles 3708468, Harvard University Department of Economics.
- Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
- Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
- Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
- Diewert, W. Erwin, 2014. "Decompositions of profitability change using cost functions," Journal of Econometrics, Elsevier, vol. 183(1), pages 58-66.
- W. Erwin Diewert, 2010. "Decompositions of Profitability Change using Cost Functions," CEPA Working Papers Series WP092010, School of Economics, University of Queensland, Australia.
- Diewert, Erwin, 2010. "Decompositions of Profitability Change using Cost Functions," Economics working papers erwin_diewert-2010-16, Vancouver School of Economics, revised 13 Jul 2010.
- Chad Syverson, 2017. "Challenges to Mismeasurement Explanations for the US Productivity Slowdown," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 165-186, Spring.
- Chad Syverson, 2016. "Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown," NBER Working Papers 21974, National Bureau of Economic Research, Inc.
- W. Diewert, 2011. "Measuring productivity in the public sector: some conceptual problems," Journal of Productivity Analysis, Springer, vol. 36(2), pages 177-191, October.
- Diewert, Erwin, 2010. "Measuring Productivity in the Public Sector: Some Conceptual Problems," Economics working papers erwin_diewert-2010-6, Vancouver School of Economics, revised 13 Jul 2010.
- Olsson, Ola, 2000. "Knowledge as a Set in Idea Space: An Epistemological View on Growth," Journal of Economic Growth, Springer, vol. 5(3), pages 253-275, September.
- W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters,in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc.
- Kevin Fox & Ulrich Kohli, 1998. "GDP growth, terms-of-trade effects, and total factor productivity," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 87-110.
- Kholi, U. & Fox, K., 1996. "GDP Growth, Terms-of-Trade Effects and Total Factor Productivity," Papers 96/28, New South Wales - School of Economics.
- Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
- Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-570, August.
- W. Diewert, 2012. "The measurement of productivity in the nonmarket sector," Journal of Productivity Analysis, Springer, vol. 37(3), pages 217-229, June.
- Diewert, W E, 1980. "Capital and the Theory of Productivity Measurement," American Economic Review, American Economic Association, vol. 70(2), pages 260-267, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ubc:pmicro:erwin_diewert-2016-8. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maureen Chin)
If references are entirely missing, you can add them using this form.