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Decomposing Productivity Growth under Production Risk

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  • Orea, Luis
  • Wall, Alan

Abstract

Production risk has generally not been taken into account when decomposing productivity growth. Interpreting productivity measures as indicators of firm production performance, we incorporate the effect of production risk on total factor productivity (TFP), extending previous work under production certainty. We outline a series of minimal characteristics an index of TFP should have in order to capture the impact of risk on producers and a simple index is proposed. Changes in total factor productivity under uncertainty are decomposed into terms related with changes in expected average productivity (technical change and changes in scale efficiency) and changes in production risk and risk preferences.

Suggested Citation

  • Orea, Luis & Wall, Alan, 2002. "Decomposing Productivity Growth under Production Risk," Efficiency Series Papers 2002/12, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    • Handle: RePEc:oeg:wpaper:2002/12
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    File URL: https://www.unioviedo.es/oeg/ESP/esp_2002_12.pdf
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    References listed on IDEAS

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    1. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
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    3. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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