Productivity Growth in Goods and Services Across US States: What Can We Learn from Factor Prices?

46 Pages Posted: 21 Jan 2012

See all articles by Areendam Chanda

Areendam Chanda

Louisiana State University, Baton Rouge - Department of Economics

Bibhudutta Panda

University of Minnesota - Morris - Division of Social Sciences

Date Written: November 20, 2011

Abstract

This paper exploits the dual accounting technique to uncover multi-factor productivity growth patterns for goods and services across US states from 1980 to 2007. Due to changes in sectoral classifications, the period is divided into two parts, 1980-1997 and 1998-2007. Over both periods, states exhibit a wide range of productivity growth rates with the goods sector showing much larger variations. The variations are larger for the second time period with some states recording productivity growth as high as almost nine percent annually while other states showing declines at more than two percent. Underlying the wide variation in productivity growth are variations in both wage growth and real user cost growth. Since 1998, the real user cost declines at almost two per cent annually. Incorporating human capital into the analysis makes wage growth and, hence, productivity growth lower in both sectors, and on average negative in the second period. Scaling up the analysis to the national level, we also find that there are large differences between the growth rates of primal based measures of marginal product of capital and our calculations of real user cost growth. This can only be partially explained by the anomalous behavior of particular industries such as mining and real estate services, and to some degree due to the declining relative price of investment goods.

Keywords: Multi-Factor Productivity Growth, Regional Economic Growth, Real User Cost, Multi Sector Models, Investment Specific Technological Change, Growth Accounting

JEL Classification: E22, O41, O47, R11

Suggested Citation

Chanda, Areendam and Panda, Bibhudutta, Productivity Growth in Goods and Services Across US States: What Can We Learn from Factor Prices? (November 20, 2011). Available at SSRN: https://ssrn.com/abstract=1989059 or http://dx.doi.org/10.2139/ssrn.1989059

Areendam Chanda (Contact Author)

Louisiana State University, Baton Rouge - Department of Economics ( email )

Department of economics
Baton Rouge, LA 70803-6308
United States
225-578-3791 (Phone)

Bibhudutta Panda

University of Minnesota - Morris - Division of Social Sciences ( email )

600 E 4th St
Morris, MN 56267
United States

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