Accounting for Productivity Growth When Technical Change is Biased

James Bessen

Working Papers from Research on Innovation

Abstract: Solow (1957) decomposed labor productivity growth into two components that are independent under Hicks neutrality: input growth and the residual, representing technical change. However, when technical change is Hicks biased, input growth is no longer independent of technical change, leading to ambiguous interpretation. Using Solow’s model, I decompose output per worker into globally independent sources. Adding a simple calculation to Solow’s framework, I show that technical bias directly contributes to labor productivity growth above what is captured in the Solow residual. This contribution is sometimes large, leading to rates of total technical change that substantially exceed the Solow residual.

JEL-codes: N11 N61 O33 O47 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-dge and nep-eff
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Citations: View citations in EconPapers (2)

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http://www.ssrn.com/abstract=1338765 Revised version, 2009

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Persistent link: https://EconPapers.repec.org/RePEc:roi:wpaper:0802

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