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Total factor productivity and the measurement of neutral technology

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  • Alban Moura

Abstract

TFP measures constructed from chain-aggregated output, such as those published by the Bureau of Labor Statistics or Fernald (2014), confound contributions from neutral and sector-specifc technology. Therefore, they should not be used to infer the path of neutral technology in presence of investment-specific technical change. Two theory-consistent, utilization-adjusted measures of neutral technology at the quarterly frequency are proposed for the US business sector. Both indicate that neutral technology progress declined dramatically after the mid-1970s. In particular, its contribution to US growth fell from more than 85% before 1973 to less than 25% afterward. The associated welfare loss is enormous: if neutral technology had continued on its pre-1970s trend, 2017 US output would have been 70% higher.

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  • Alban Moura, 2020. "Total factor productivity and the measurement of neutral technology," BCL working papers 143, Central Bank of Luxembourg.
    • Handle: RePEc:bcl:bclwop:bclwp143
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    1. Moura, Alban, 2021. "Are neutral and investment-specific technology shocks correlated?," European Economic Review, Elsevier, vol. 139(C).

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    More about this item

    Keywords

    total factor productivity; neutral technology; investment-specific technology; sources of growth.;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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