Problems with (dis)aggregating productivity,and another productivity paradox |
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Authors: | Kevin J Fox |
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Institution: | (1) Centre for Applied Economic Research and School of Economics, The University of New South Wales, Sydney, NSW, 2052, Australia |
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Abstract: | Using a standard definition of productivity growth, it is shown that a country may have higher productivity growth than another
country in each sector, but may have a lower productivity growth rate overall. Also, it is shown that popular methods for
aggregating firm/industry estimates of productivity growth have a serious problem in that productivity of all firms/industries
can go up, but aggregate productivity can fall. This is not necessarily due to changes in the reallocation of resources across
firms/industries. Hence, there are problems for the interpretation of previously published articles which use these methods.
There can be inappropriate assessments of the cyclical properties of productivity, and the productivity impact of industry
dynamics, micro-economic reforms and regulatory change. Index-number methods that avoid these aggregation problems are introduced. |
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Keywords: | |
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