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The Tyranny of the Identity: Growth Accounting Revisited

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  • Jesus Felipe
  • John McCombie

Abstract

It has been argued in the literature that growth accounting may be undertaken by directly differentiating the national income and product accounts identity where total income equals labour's total compensation and total profits. This paper shows that this is simply an exercise in the manipulation of an accounting identity without necessarily having any theoretical foundation. Simulations show that the estimates of total factor productivity growth resulting from growth accounting performed with aggregate monetary data are not equivalent to the true rate of technological progress implied by the micro-data. This suggests that results from the orthodox growth accounting approach may be very misleading.

Suggested Citation

  • Jesus Felipe & John McCombie, 2006. "The Tyranny of the Identity: Growth Accounting Revisited," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 283-299.
    • Handle: RePEc:taf:irapec:v:20:y:2006:i:3:p:283-299
    DOI: 10.1080/02692170600735963
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    References listed on IDEAS

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    2. Matteo Deleidi & Walter Paternesi Meloni & Antonella Stirati, 2018. "Structural change, labour productivity and the Kaldor-Verdoorn law: evidence from European countries," Departmental Working Papers of Economics - University 'Roma Tre' 0239, Department of Economics - University Roma Tre.
    3. Carey W. King, 2022. "Interdependence of Growth, Structure, Size and Resource Consumption During an Economic Growth Cycle," Biophysical Economics and Resource Quality, Springer, vol. 7(1), pages 1-30, March.
    4. John S.L. McCombie, 2011. "'Cantabrigian Economics' and the aggregate production function," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 165-182.
    5. Kronenberg, Tobias, 2010. "Finding common ground between ecological economics and post-Keynesian economics," Ecological Economics, Elsevier, vol. 69(7), pages 1488-1494, May.
    6. Javier López-Bernardo & Félix López-Martínez & Engelbert Stockhammer, 2016. "A Post-Keynesian Response to Piketty's ‘Fundamental Contradiction of Capitalism’," Review of Political Economy, Taylor & Francis Journals, vol. 28(2), pages 190-204, April.
    7. Francis Cripps & Alex Izurieta & Ajit Singh, 2011. "Forum 2011," Development and Change, International Institute of Social Studies, vol. 42(1), pages 228-261, January.
    8. Jamee K. Moudud, 2010. "Strategic Competition, Dynamics, and the Role of the State," Books, Edward Elgar Publishing, number 4241.
    9. James Bessen, 2008. "Accounting for Productivity Growth When Technical Change is Biased," Working Papers 0802, Research on Innovation.
    10. Fernández, Rafael & Palazuelos, Enrique, 2018. "Measuring the role of manufacturing in the productivity growth of the European economies (1993–2007)," Structural Change and Economic Dynamics, Elsevier, vol. 46(C), pages 1-12.
    11. Richters, Oliver, 2015. "Integrating Energy Use into Macroeconomic Stock-Flow Consistent Models," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 154764, March.
    12. Ikonomou, Constantinos, 2023. "Another View on Growth Matters: Investment, Capital, and Solow Residual," MPRA Paper 119003, University Library of Munich, Germany.
    13. Fabrizio Ferretti, 2008. "Patterns of technical change: a geometrical analysis using the wage-profit rate schedule," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(5), pages 565-583.
    14. Rup Singh, 2015. "Forces of economic growth in China, India, and other Asian countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 29(1), pages 62-81, May.
    15. Carey W. King, 2021. "Interdependence of Growth, Structure, Size and Resource Consumption During an Economic Growth Cycle," Papers 2106.02512, arXiv.org.
    16. Filewod, Ben, 2024. "What can we learn from industry-level (aggregate) production functions?," LSE Research Online Documents on Economics 122388, London School of Economics and Political Science, LSE Library.
    17. Silveira, Fabricio, 2022. "Firm size distribution and growth: An empirical investigation," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 422-434.
    18. Kenneth Carlaw & Richard Lipsey, 2011. "Sustained endogenous growth driven by structured and evolving general purpose technologies," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 563-593, October.
    19. W. Robert J. Alexander, 2015. "The Keynesian IS-MR Model and Military Spending," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(2), pages 213-221, April.
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    21. Villar Otálora, Juan Camilo, 2021. "Una revisión sobre los métodos convencionales de la contabilidad del crecimiento: La tiranía de la identidad [A review of the conventional methods of growth accounting: The tyranny of identity]," MPRA Paper 106683, University Library of Munich, Germany.

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