Natural Resources and Missing Inputs in International Productivity Comparisons

Walter Diewert, Daan Freeman and Robert Inklaar

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: Standard theory for cross-country productivity comparisons assumes all countries use the same factor inputs in production. This assumption is violated when including natural resources, such as oil, gas and gold, because countries do not extract the full set of resources. In this paper we propose a solution by viewing it as a ‘missing goods’ problem and assigning missing inputs a reservation price equal to the world resource price. We show that this has a substantial impact on relative productivity levels for countries heavily reliant on natural resources for generating their income. Under our new productivity measure, resource-rich countries are no longer uncommonly productive.

Keywords: Productivity measurement; natural resources; development accounting; reservation prices; missing goods. (search for similar items in EconPapers)
JEL-codes: E22 O13 O47 O57 Q32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-11-26, Revised 2018-11-26
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Natural Resources and Missing Inputs in International Productivity Comparisons (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:erwin_diewert-2018-11

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