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Total factor productivity: an unobserved components approach

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  • Raul Crespo

Abstract

This work examines the presence of unobserved components in the time-series of total factor productivity (TFP), which is an idea central to modern Macroeconomics. The main approaches in both the study of economic growth and the study of business cycles rely on certain properties of the different components of the time-series of TFP. In the study of economic growth, the Neoclassical growth model explains growth in terms of technical progress as measured by the secular component of TFP. While in the study of business cycles, the Real Business Cycle approach explains short-run fluctuations in the economy as determined by temporary movements in the production function, which are reflected by the cyclical component of the time-series of the same variable. The econometric methodology employed in the estimation of these different components is the structural time-series approach developed by Harvey (1989), Harvey and Shephard (1993), and others. An application to the time-series of TFP for the 1948-2002 US private nonfarm business sector is presented.

Suggested Citation

  • Raul Crespo, 2008. "Total factor productivity: an unobserved components approach," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2085-2097.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:16:p:2085-2097
    DOI: 10.1080/00036840600949314
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    Cited by:

    1. Heaton, Chris & Oslington, Paul, 2010. "Micro vs macro explanations of post-war US unemployment movements," Economics Letters, Elsevier, vol. 106(2), pages 87-91, February.
    2. Robert Dixon & David Shepherd, 2010. "Models of labour services and estimates of total factor productivity," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3629-3634.
    3. Rolando Peláez, 2012. "The housing bubble in real-time: the end of innocence," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(1), pages 211-225, January.
    4. Akintoye Victor Adejumo & Oluwabunmi Opeyemi Adejumo, 2019. "Role of Productivity Growth in Economic Growth: Evidence from Nigeria (1970–2010)," Global Business Review, International Management Institute, vol. 20(6), pages 1324-1343, December.
    5. Tomáš Volek & Martina Novotná, 2015. "Gross Value Added and Total Factor Productivity In Czech Sectors," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(1), March.
    6. Donadelli, M. & Paradiso, A. & Livieri, G., 2019. "Adding cycles into the neoclassical growth model," Economic Modelling, Elsevier, vol. 78(C), pages 162-171.

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