Alternative Measures of Total Factor Productivity Growth
CentER Discussion Paper No. 2006-54
21 Pages Posted: 26 Jul 2006
Date Written: May 2006
The four main approaches to the measurement of total factor productivity (TFP)-growth and its decomposition are (i) Solow's residual analysis, (ii) the Index Number Approach, (iii) Input-Output Analysis (IO), and (iv) Data Envelopment Analysis (DEA). The corresponding measures of TFP growth are based on different assumptions, which we expose and interrelate. The Solow Residual serves as the benchmark for our comparisons. The interrelationships between the alternative measures permit an interpretation of the differences among them. We consolidate the four alternative measures in a common framework.
Keywords: TFP, Solow residual, Index numbers, Input-output, DEA
JEL Classification: O47, C67
Suggested Citation: Suggested Citation