Measuring Productivity

Abstract

Quantifying productivity is a conditio sine qua non for empirical analysis in a number of research fields. The identification of the measure that best fits with the specific goals of the analysis, as well as being data-driven, is currently complicated by the fact that an array of methodologies is available. This paper provides economic researchers with an up-to-date overview of issues and relevant solutions associated with this choice. Methods of productivity measurement are surveyed and classified according to three main criteria: i) macro/micro; ii) frontier/non-frontier; iii) deterministic/econometric.

Keywords: productivity measurement, TFP, Solow residual, endogeneity, simultaneity, selection bias, Stochastic Frontier Analysis, DEA, Growth accounting, GMM, Olley-Pakes, firm heterogeneity, price dispersion

JEL Classification: O40, O33, O47, C14, C33, C43