The sources of total factor productivity growth: Evidence from Canadian data

A dynamic general equilibrium model is constructed and used to identify sources of total factor productivity growth in Canada and to quantify their importance. The model also provides procedures for constructing measures of technological progress. We find that periods of low productivity growth correspond to periods of high growth in investment-specific technology (IST) or high rates of technology embodiment. For example, the growth rate of IST was relatively high between 1974 and 1996. The higher growth rate of IST during this period should have increased the rate of productivity growth by an estimated 0.29 percentage points, ceteris paribus. Yet, productivity growth slowed. Why?     

中国服务业全要素生产率增长的实证分析

本文采用非参数Malmquist指数方法实证分析了中国服务业全要素生产率的增长状况,并将其分解为技术效率和技术进步。结果表明,1990-2003年中国服务业全要素生产率的平均增长率为0.12%,主要原因是技术进步水平的提高,但技术效率下降产生的负面影响也不可忽视,不同时期技术效率和技术进步对中国服务业全要素生产率增长的贡献存在一定差异;同时,东中西部地区之间和地区内部服务业全要素生产率的增长率也存在显著差异,主要原因是技术进步水平不同。     

Technical change and total factor productivity growth: The case of Chinese provinces

In the literature technical change (TC) is mostly assumed to be exogenous and specified as a function of the time trend or time dummies. However, some exogenous external factors other than time can also affect TC. In this paper we model TC via time trend (external non-economic) as well as other exogenous (external economic) factors (technology shifters). For this we define technology indices based on the external economic factors and the time trend. The specification of production function is then amended to accommodate these technology indices which are not necessarily separable from the traditional inputs. That is, these technology indices allow for non-neutral shift in the production function. In doing so we are able to decompose TC (a component of TFP change) into two parts. One part is driven by time and the other part is related to producer-specific external economic factors. The latter can further be decomposed into each external economic factors. The empirical model uses panel data on Chinese provinces. We identify a number of key technology shifters and their effect on technical change and TFP growth of provinces are examined.     

The effects of unions and strikes on the rate of growth of total factor productivity in Canada

In this paper, the performance of the New Keynesian IS curve for the G7 countries is assessed. It is found that there is an IS puzzle for both the purely backward-looking as well as for the forward-looking IS curve. The real interest rate does not have a significantly negative effect on the output gap. Based on an extended specification of the IS curve, also including asset prices and monetary aggregates, a significantly negative interest rate effect on aggregate demand is found for all countries. This finding suggests that a richer specification of the IS curve in empirical work may be necessary in order to obtain an unbiased estimate of the effect of monetary policy on aggregate demand.     

The effects of the Uruguay round: empirical evidence from U.S. industry

This article uses an event study to evaluate the anticipated results of the Uruguay Round on U.S. industry. Economists commonly use computable general equilibrium (CGE) models to predict the net economic efficiency effects of trade agreements. The event study method represents a complementary approach that relies on stock price movements to assess how investors predict that an event, in this case the conclusion of the Uruguay Round, will affect industry profitability. The empirical estimates indicate that U.S. industries with comparative advantage (disadvantage) experience positive (negative) stock price reactions, reflecting an increase (a decrease) in the industry trade and investment opportunities as well as an increased (decreased) return to existing tangible and intangible assets. For the market as a whole, the variation in stock prices does not differ significantly from zero, and the economic magnitude of industry gains and losses is small. These results are consistent with most CGE assessments and with the skeptical attitude that the real impact of the Uruguay Round Agreement remains uncertain.     

Transmission effects of the U.S. and China monetary policy shocks on the world

This paper applies the Markov-switching model to analyse the transition probabilities and generalized method of moments (GMM) with Newey–West heteroscedasticity and autocorrelation consistent covariance estimators (HAC) to examine the continuity of monetary policies in different countries when the U.S. and China change their monetary policies. Our results indicate that the euro area’s monetary authority continues to increase/decrease their money supply to stimulate/depress the economy. In Japan, long-term economic recession motivated the Japanese government to maintain a loose money supply. The continuity of Korea’s monetary policy in expansionary states lasts up to 5.1 years. Besides, the outcomes show the implementation of U.S. quantitative easing (QE), overnight reverse repurchase agreement (RRP), and Chinese RRP policies have significant spillover effects on other nations. Particularly, the effects on the euro area are the largest. Furthermore, although the monetary policies of China and the euro area seem to move in opposite directions, they are interdependent.     

X-Factor updating and total factor productivity growth: the case of peruvian telecommunications, 1996–2003

This paper measures TFP growth of Telefonica del Peru, and based on this growth rate computes a telecommunications X-factor or offset. More broadly the paper analyses the problem of updating an X-factor under existing price cap regulation. A revised offset must account for the possible restructuring of service offerings resulting from improved efficiencies in response to price cap incentives. Our updating framework focuses on efficiency criteria, and based on economic principles emphasizes the continuity between prior and continuing standards. In the case of Peru, based on annual average TFP growth of 1.66%, the X-factor is computed to be 4.06% per year. An erratum to this article can be found at     

'Total factor productivity vs. realism' revisited: the case of the South Korean steel industry

This paper presents key features of the development of the SouthKorean steel industry through the critical examination of anarticle by Truett and Truett. Despite their claim to exhibit‘realism’ by use of a translog cost function, theirmethodology has strong affinities with the methods of measuringtotal factor productivity growth, which have long been knownas invalid but continue to be applied not least to the experienceof East Asian countries. It will be argued that the theoreticaland empirical flaws involved with these methods invalidate theirresults and corresponding policy implications. Above all, byshowing that the assumptions for their calculation do not holdin terms of the economic conditions of the industry, the paperpoints to a different understanding of ‘realism’than that conceived by and for their study.     

Trend shocks and the countercyclical U.S. current account

From 1960 to 2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that shocks to the trend growth rate of productivity can help explain the countercyclical U.S. current account. Our framework is a two‐country, two‐good business cycle model in which international asset trade is limited to a single, non‐contingent bond. We identify trend and transitory shocks to U.S. productivity using generalized method of moments (GMM) estimation. The specification that best matches the data assigns a large role to trend shocks. The estimated model also captures key facts regarding international co‐movement.     

Variation in the effects of government spending shocks with methods of financing: Evidence from the U.S.

Using annual data for the United States, the paper investigates the evidence of variation in the fiscal multiplier with the method of financing government spending. The fiscal multiplier varies in the face of positive and negative shocks and across methods of financing. In general, fiscal expansion appears insignificant on aggregate demand and economic activity. In contrast, the evidence presents a number of significant negative multipliers in the face of fiscal contraction. The combined evidence challenges the effectiveness of fiscal policy and supports arguments to restrain fiscal expansion in an effort to stimulate the economy.     

The impact of knowledge accumulation and geographical spillovers on productivity and efficiency: The case of U. S. shipbuilding during WWII

This paper examines the productivity and efficiency experience of World War II Liberty ship builders using two complementary paradigms which can be viewed as alternative specifications of the endogenous growth model introduced by Romer (1986) and the stochastic frontier production model introduced by Aigner, Lovell, and Schmidt (1977). We develop modifications in the endogenous growth model to allow for learning as well as spatial spillovers by relating productivity growth to cumulative productive experience (the ‘learning curve’) and to worker experience as it is transferred and utilized across different geographical regions. We also consider the relative impact of both proximal and distant simultaneous production on productivity growth. We then utilize a framework in which the efficiency component of productivity growth is explicitly considered using a stochastic frontier model wherein contributions to productivity growth introduced in the endogenous growth model are formally modeled as determinants of efficiency change.     

The contractionary effects of tax shocks on productivity: An empirical and theoretical analysis

I analyze the effects of tax policy changes on US Total Factor Productivity. VAR estimates show that permanent and exogenous tax increases have strong, permanent, and negative effects on TFP which represent about 80% of change in output following the tax increase. I then build a DSGE model which has learning-by-doing and endogenous TFP evolution. The benchmark model is able to replicate the empirical impulse responses. However, when I calibrate the model as in the literature, the effect of taxes on TFP is substantially less elastic than in the data. I argue that this divergence may arise because tax changes labeled as exogenous can give spurious results or because of a mis-specified model.     

The effects of third party certification on voluntary self-regulation of accidents in the U.S. chemical industry

We explore whether the introduction of mandatory third party certification in 2005 under the Responsible Care program has reduced the probability and severity of accidents in participating facilities in the U.S. chemical industry. Using a sample of 10,315 observations from 1136 facilities owned by 566 RC and non-RC firms between 1996 and 2010, we estimate the average treatment effect of third party certification. We find that the difference-in-difference estimate of the average treatment effect is statistically insignificant. This result is robust to various model specifications including the potential endogeniety of third party certification due to a firm’s self-selection into RC.     

Technological change under residual risk regulation: The case of coke ovens in the U.S. steel industry

An engineering-economic model is used within a dynamic setting to determine the least cost mix of investment and import activities as the U.S. steel industry faces successively tighter controls on coke oven emissions over the next 10 years. In response to Maximum Achievable Control Technology (MACT) standards proposed for 1995, U.S. steel producers would likely export their toxic pollution by importing 6 million tons of coke per year. About 4 million tons of coke oven capacity is retrofit and about 1 million tons of annual coke consumption is replaced by new iron technologies, such as Corex. The Lowest Achievable Emission Rate (LAER) standards proposed for 1998 roughly double the coke oven retirements estimated to occur under MACT. Coke imports also are substantial but are no higher than under MACT because the additional time allows the industry to invest in more coke-saving blast furnaces and in new less toxic coke-making technologies, such as the Jewell process. The LAER standards in conjunction with higher capital costs, however, force coke imports to more than 8 million tons per year and sharply increase imports of semi-finished steel. Such a situation could exacerbate existing disputes on international steel trade.The authors are associate professor, instructor, and graduate student, respectively. This research was performed under the sponsorship of the U.S. Department of Interior, Bureau of Mines Distinguished Young Scholar Award Administered by Oak Ridge Associated Universities for the Bureau of Mines. Naturally, the usual disclaimer applies.     

The propagation of U.S. shocks to Canada: Understanding the role of real financial linkages

This paper examines the role of financial frictions in affecting the transmission of U.S. real and financial shocks to Canada using a dynamic stochastic general‐equilibrium model with an active banking sector and financial frictions. We find that the U.S. banking and interbank markets can be a potentially important source of variability of Canadian output and inflation—consistent with the financial crisis. The presence of both the demand and the real supply sides of credit in the model help to capture the stylized facts of both the domestic and the international business cycles.     

The asymmetric effects of monetary shocks: the case of Turkey

This paper examines whether there is an asymmetry in the effects of positive versus negative and small versus big money supply shocks, and whether the effects of the shocks on output and prices vary over the business cycles in the case of Turkey. Negative shocks to money are found to have greater output and smaller price effects compared to the effects of positive shocks, irrespective of the initial state of the economy. It is also found that monetary shocks of different size affect output growth and inflation rates proportionately. These findings can be interpreted as evidence for the view that the short run aggragate supply curve is convex in such a country like Turkey.     

Adjustment costs and time-to-build in factor demand in the U.S. manufacturing industry

In order to explain cyclical behavior of factor demand, the static neoclassical model of the firm has been extended to include either adjustment costs (e.g. Lucas (1967)) or time-to-build considerations as in Kydland and Prescott (1982). This paper presents an intertemporal factor demand model which accounts for adjustment costs and gestation lags. The closed form solution of the model is a highly restricted vector ARMA-process that is estimated using quarterly data for the manufacturing industry in the U.S., 1960–1988. The main conclusion is that both sources of dynamics of factor demand are identifiable and found to be empirically of importance.     

制造业结构调整与经济波动:美国的实例

20世纪90年代以来美国制造业的内部结构发生了深刻的变化,这些变化不仅奠定了美国经济成长的重要基础,而且也使美国的经济波动表现出不同以往的新特征.制造业与美国经济波动的关系表明,全球化条件下技术创新是产业竞争力和国家竞争力得以产生和持续的根本源泉,技术创新推动了经济的高速发展,而创新的停滞同样会导致经济的衰退;信息技术的广泛运用加速了制造业的全球化步伐,而新的全球生产与分工体系的形成,正使各国经济通过生产的全球化而更加紧密地联系在一起.这对当前制造业在产业结构中具有更加重要的地位和贸易依存度更高的中国经济发展来说,给予了许多重要的启示.     

The effect of case management on U.S. hospitals

This quantitative research study assesses the organizational characteristics, market factors, and profitability of U.S. hospitals operating with a case management model. These results have managerial implications associated with individual hospital performance, implications for nursing leadership, and policy implications on resource allocation.