Skip to main content Accessibility help
×
Home

ON THE MEASUREMENT OF TOTAL FACTOR PRODUCTIVITY: A LATENT VARIABLE APPROACH

  • J. Rodrigo Fuentes (a1) and Marco Morales (a2)

Abstract

Despite the important role that total factor productivity (TFP) has played in the growth literature, few attempts have been made to change the methodology to estimate it. This paper proposes a methodology based on a state-space model to estimate TFP and its determinants. With this methodology, it is possible to reduce the measurement of our ignorance. As a by-product, this estimate yields the capital share in output and the long-term growth rate. When applied to Chile, the estimation shows a capital share around 0.5 and long-term growth of TFP around 1%. Capital accumulation tends to explain the growth rate in the fast growth periods under the econometric estimation more than the traditional growth accounting methodology.

Copyright

Corresponding author

Address correspondence to: J. Rodrigo Fuentes, Instituto de Economía, Pontificia Universidad Católica de Chile Avda. Vicuña Mackenna 4860, Macul, Santiago, Chile; e-mail: rfuentes@faceapuc.cl.

References

Hide All
Aghion, P. and Howitt, P. (1998) Endogenous Growth Theory. Cambridge, MA: MIT Press.
Bosworth, B. and Collins, S.M. (2003) The empirics of growth: An update. Brookings Papers on Economic Activity 2, 103206.
Chen, B. and Zadrozny, P.A. (2009) Estimated US manufacturing capital and technology based on an estimated dynamic economic model. Journal of Economic Dynamics and Control 33, 13981418.
Chumacero, R. and Fuentes, J.R. (2006) Chilean growth dynamics. Economic Modelling 23, 197214.
Costello, D.M. (1993) A cross-country, cross-industry comparison of productivity growth. Journal of Political Economy 101 (2), 207222
Durbin, J. and Koopman, S.J. (2001) Time Series Analysis by State Space Methods. New York: Oxford University Press.
Easterly, W. and Levine, R. (2001) It's not factor accumulation: Stylized facts and growth models. World Bank Economic Review 15 (2), 177219.
Elias, V.J. (1990) Sources of Growth: A Study of Seven Latin American Economies. San Francisco: International Center for Economic Growth.
Esposti, R. and Pierani, P. (2000) Modeling technical change in Italian agriculture: A latent variable approach. Agricultural Economics 22, 261270.
French, M. (2001) Estimating Changes in Trend Growth of Total Factor Productivity: Kalman and H-P Filters versus a Markov-Switching Approach. Federal Reserve Board Finance and Economics Discussion Series 44.
Fuentes, J.R., Larraín, M., and Schmidt-Hebbel, K. (2006) Measuring and explaining total factor productivity in Chile. Cuadernos de Economía 43 (May), 113142.
Gollin, D. (2002) Getting income shares right. Journal of Political Economy 110, 458474.
Greenwood, J. and Jovanovic, B. (2000) Accounting for Growth. Rochester Center for Economic Research Working paper 475, University of Rochester.
Hall, R.E. and Jones, C. (1999) Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics 114 (1), 83116.
Hamilton, J.D. (1994) State-space models. In Engle, R.F. and McFadden, D.L. (eds.), Handbook of Econometrics, Volume IV, pp. 30393080.Amsterdam: Elsevier Science.
Harberger, A.C. (1998) A vision of the growth process. American Economic Review 88 (1), 132.
Harvey, A.C., Henry, S.G.B., Peters, S., and Wren-Lewis, S. (1986) Stochastic trends in dynamic regression models: An application to the employment-output equation. Economic Journal 96, 975985.
Jorgenson, D.W. and Griliches, Z. (1967) The explanation of productivity change. Review of Economics Studies 34 (2),: 249–80.
Klenow, P. and Rodríguez-Clare, A. (1997) The neoclassical revival in growth economics: Has it gone too far? In Bernanke, B. and Rotemberg, J. (eds.), NBER Macroeconomics Annual 1997, pp. 73103. Cambridge, MA: MIT Press.
Lucas, R.E. Jr. (1988) On the mechanics of economic development. Journal of Monetary Economics 22 (1): 342.
Mankiw, N.G., Romer, D., and Weil, D.N. (1992) Contribution to the empirics of economic growth. Quarterly Journal of Economics 107 (2): 407437.
Parente, S.L. and Prescott, E.C. (1994) Barriers to technology adoption and development. Journal of Political Economy 102 (2), 298320.
Prescott, E.C. (1997) Needed: A Theory of Total Factor Productivity. Research Department Staff Report 242, Federal Reserve Bank of Minneapolis.
Romer, P. (1986) Increasing returns and long run growth. Journal of Political Economy 94 (5), 10021037.
Romer, P. (1990) Endogenous technological change. Journal of Political Economy 98 (5, Part 2), S71102.
Slade, M.E. (1989) Modeling stochastic and cyclical components of technical change: An application of the Kalman filter. Journal of Econometrics 41, 363383.
Solow, R. (1957) Technical change and the aggregate production function. Review of Economics and Statistics 39, 312320.

Keywords

ON THE MEASUREMENT OF TOTAL FACTOR PRODUCTIVITY: A LATENT VARIABLE APPROACH

  • J. Rodrigo Fuentes (a1) and Marco Morales (a2)

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed