Neoclassical Growth Accounting and Frontier Analysis: A Synthesis

T. Ten Raa, P. Mohnen

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Abstract

The standard measure of productivity growth is the Solow residual.Its evaluation requires data on factor input shares or prices.Since these prices are presumed to match factor productivities, the standard procedure amounts to accepting at face value what is supposed to be measured.In this paper we determine total factor productivity growth without recourse to data on factor input prices.Factor productivities are defined as Lagrange multipliers to the program that maximizes the level of domestic final demand.The consequent measure of total factor productivity is shown to encompass not only the Solow residual, but also the efficiency change of frontier analysis and the hitherto slippery terms-of-trade effect.Using input-output tables from 1962 to 1991 we show that the source of Canadian productivity growth has shifted from technical change to terms-of-trade effects.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages21
Volume2000-67
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-67

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    Ten Raa, T., & Mohnen, P. (2000). Neoclassical Growth Accounting and Frontier Analysis: A Synthesis. (CentER Discussion Paper; Vol. 2000-67). Macroeconomics.