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The Effects of Operating and Capital Subsidies on Total Factor Productivity: A Decomposition Approach
Author(s) -
Obeng K.,
Sakano R.
Publication year - 2000
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2000.tb00342.x
Subject(s) - subsidy , productivity , economics , total factor productivity , capital (architecture) , decomposition , productivity model , econometrics , public economics , microeconomics , macroeconomics , market economy , geography , archaeology , ecology , biology
Past studies relied on ad hoc associations to establish relationships between productivity on one hand and operating and capital subsidies on the other. This article deviates from these studies. It builds on recent research based on private cost to derive a total factor productivity formula that includes subsidy effects. It specifies an empirical model to estimate the required parameters to apply the formula. The application to urban transit systems shows that the effects of these subsidies on productivity through technical change reinforce the decline in productivity.