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Measuring Productivity Growth in the Presence of Adjustment Costs, Markups and Variable Capacity Utilization

Author

Listed:
  • Diego Comin

    (Dartmouth College)

  • Antonella Trigari

    (Università Bocconi)

  • Javier Quintana Gonzalez

    (Bocconi University, Milan)

  • Tom Schmitz

    (Bocconi University)

Abstract

Standard growth accounting measures of Total Factor Productivity (TFP) growth do not take into account changes in factor utilization. Currently, the leading way to deal with this problem, introduced by Basu, Fernald and Kimball (2006), is to use changes in hours per worker as a proxy for unobserved changes in factor utilization. In this paper, we show that this proxy is problematic for a range of European countries. We propose using an alternative proxy, based on surveys of firm capacity utilization. We show that this yields new insights on TFP growth in the Great Recession, especially in Southern Europe.

Suggested Citation

  • Diego Comin & Antonella Trigari & Javier Quintana Gonzalez & Tom Schmitz, 2019. "Measuring Productivity Growth in the Presence of Adjustment Costs, Markups and Variable Capacity Utilization," 2019 Meeting Papers 666, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:666
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    References listed on IDEAS

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