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Technology and Productivity: A Critique of Aggregate Indicators

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  • Fred Block

Abstract

Economic analysts have used trends in total factor productivity (TFP) to evaluate the effectiveness with which economies are utilizing advances in technology. However, this measure is problematic on several different dimensions. First, the idea that it is possible to separate out the relative contribution to economic output of labor, capital, and technology requires ignoring their complex interdependence in actual production. Second, since TFP growth has declined in recent decades in all of the developed market societies, there is good reason to believe that the decline is an artifact of the slower rates of economic growth that are linked to austerity policies. Third, reliance on TFP assumes that measures of gross domestic product are accurately capturing changes in economic output, even as the portion of the labor force producing tangible goods has declined substantially. Finally, there are other indicators that suggest that current rates of technological progress might be as strong or stronger than in earlier decades.

Suggested Citation

  • Fred Block, 2022. "Technology and Productivity: A Critique of Aggregate Indicators," Economics Working Paper Archive wp_998, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_998
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    More about this item

    Keywords

    Total Factor Productivity; Technology; Economic Growth; Economic Output;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • 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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