Total Factor Productivity Growth in Finland 1960 − 1999

Our study encompasses two main objectives. One, using the 2001 OECD National Account database we compute Total Factor Productivity growth (TFPG) for Finland for the years from 1960 until 1999 using a chained Fisher index. We report that over the 4 decades Finland’s TFPG has grown on a 2.4% annual basis. Additionally our results echo other studies in estimating a slow-down in productivity growth for the 1974- 1991 period with TFPG registering a scant 0.7% average annual growth rate compared to a torrid 3.35% pace set in the previous period from 1960-1973. On a more positive note we document that TFPG growth accelerates quite dramatically for the decade of the 90s with an average growth rate of some 4.7% for the period from 1993 until 1999 suggesting that the Finnish economy might reprise its high growth performance last seen in the pre-1973 period.Second, we compute estimates of technical progress for Finland by specifying a Normalized Quadratic profit function analogous to the one used by Diewert & Fox (1999) in the producer context. We obtain as well estimates of producer (own and cross) supply price elasticities for the 1960-99 period. We estimate demand price elasticities in the consumer context by utilizing a Normalized Quadratic model once again for the same period and report finding rising trends in the annual producer and consumer price elasticities for Finland over the forty years period. It is alleged that these trends in elasticities in tandem with the high tax rates would lead to rising increasing deadweight losses over time which in combination with high inflation rampant in the decade of the 70s and 80s might possibly account for the productivity slump found in that period.