Decomposing Value Added Growth into Explanatory Factors

36 Pages Posted: 9 Feb 2017

See all articles by W. Erwin Diewert

W. Erwin Diewert

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Kevin J. Fox

UNSW Australia Business School, School of Economics

Date Written: January 20, 2017

Abstract

A method for decomposing nominal value added growth is presented, which identifies the contributions from efficiency change, growth of primary inputs, changes in output and input prices, technical progress and returns to scale. In order to implement the decomposition, an estimate of the relevant cost constrained value added function for the two periods under consideration is required. This is taken to be the free disposal hull of past observations. Aggregation over sectors is also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014.

Keywords: Measurement of Output, Input and Productivity, Value Added Functions, Revenue Functions, Variable Profit Functions, Duality Theory, Economic Price and Quantity Indexes, Technical Progress, Total Factor Productivity, Revenue Efficiency, Aggregation over Sectors

JEL Classification: C43, D24, D61, E23, H44, O47

Suggested Citation

Diewert, W. Erwin and Fox, Kevin J., Decomposing Value Added Growth into Explanatory Factors (January 20, 2017). UNSW Business School Research Paper No. 2017-02. Available at SSRN: https://ssrn.com/abstract=2913920 or http://dx.doi.org/10.2139/ssrn.2913920

W. Erwin Diewert

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada
604-822-2544 (Phone)
604-822-5915 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Kevin J. Fox (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia
(02)9385-3320 (Phone)
(02)9313-6337 (Fax)

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