Total Factor Productivity Estimation: A Practical Review

31 Pages Posted: 4 Jan 2012

See all articles by Ilke Van Beveren

Ilke Van Beveren

De Nederlandsche Bank; KU Leuven - Faculty of Business and Economics (FEB)

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Date Written: February 2012


This paper aims to provide empirical researchers with an overview of the methodological issues that arise when estimating total factor productivity at the establishment level, as well as of the existing (parametric and semi‐parametric) techniques designed to overcome them. Apart from the well‐known simultaneity and selection bias, attention is given to methodological issues that have emerged more recently and that are related to the use of deflated values of inputs and outputs (as opposed to quantities) in estimating productivity at the firm level, as well as to the endogeneity of product choice. In discussing the estimation procedures applied in the literature, attention is given to recent developments in the field. Using data on single‐product firms active in the Belgian food and beverages sector, the most commonly applied estimators are illustrated, allowing for comparison of the obtained productivity estimates by way of a simple evaluation exercise.

Keywords: Imperfect competition, Multi‐product firms, Selection bias, Semi‐parametric estimation, Simultaneity bias, Total factor productivity

Suggested Citation

Van Beveren, Ilke, Total Factor Productivity Estimation: A Practical Review (February 2012). Journal of Economic Surveys, Vol. 26, Issue 1, pp. 98-128, 2012, Available at SSRN: or

Ilke Van Beveren (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000

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