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Integrated Industry and Economy-wide TFP-Measures with Different Prices in Different Uses

Author

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  • Pirkko Aulin-Ahmavaara
  • Perttu Pakarinen

Abstract

We derive a consistent system of industry and economy-wide measures of TFP growth based on weaker assumptions than used in the literature so far. We allow different industries to pay different prices for the same product. These price differences are not assumed to cancel out at the economy-wide level. Our economy-wide concepts of output are the average growth rates of deliveries to final demand and of the industries' value added. In the case of the former, both net taxes on products and imported intermediates contribute, in addition to labour and capital, to the output growth and even the reallocation of intermediates contributes to the economy-wide TFP growth. In the case of the latter only capital and labour contribute to the output growth and the contribution of the reallocation of intermediates is largely offset by that of value added. We demonstrate the consequences of the non-additivity of the Tornqvist index formula.

Suggested Citation

  • Pirkko Aulin-Ahmavaara & Perttu Pakarinen, 2007. "Integrated Industry and Economy-wide TFP-Measures with Different Prices in Different Uses," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 253-276.
    • Handle: RePEc:taf:ecsysr:v:19:y:2007:i:3:p:253-276
    DOI: 10.1080/09535310701571927
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    Cited by:

    1. Marshall B. Reinsdorf, 2010. "Terms Of Trade Effects: Theory And Measurement," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 177-205, June.
    2. Bert M. Balk, 2015. "Measuring and relating aggregate and subaggregate total factor productivity change without neoclassical assumptions," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 69(1), pages 21-48, February.

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