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VERTICALLY INTEGRATED PRODUCTIVITY MEASURES: TESTS OF STANDARD ASSUMPTIONS
Author(s) -
Miller Jack L.,
Gowdy Johan M.
Publication year - 1992
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1992.tb00454.x
Subject(s) - economics , productivity , total factor productivity , argument (complex analysis) , capital (architecture) , econometrics , factor shares , solow residual , microeconomics , macroeconomics , growth accounting , production (economics) , history , biochemistry , chemistry , archaeology
In this paper we use an input‐output framework to examine two criticisms of standard measures of total factor productivity. These criticisms are (1) that the contribution of capital to productivity growth is underestimated, and (2) that the use of cost shares to weigh factor input contribution is questionable. Using various vertically integrated productivity measures we find that capital's productivity contribution is underestimated in the neoclassical formulation. We also find that in a Pasinetti‐Rymes growth model, factor shares do not approximate output elasticities. We conclude that the argument made by Pasinetti, Rymes, and others is supported, that in long‐run productivity analysis capital should not be treated as a primary input, but should be measured as an intermediate, produced input.