International-price and terms-of-trade effects on factor productivity: international comparisons

Abstract: In this paper, we present a technique to decompose changes in factor prices into the contribution of major determinants, namely movements in domestic and international prices, changes in capital and labour quantities, and technological progress. This is done in an open-economy framework. While building on the same principles as GDP growth accounting, our technique considers the specific form of factor demand functions when these are derived from a GDP Translog function. We also break down the combined effect of changes in export and import (i.e. international) prices into a pure terms-of-trade effect and a residual international-price effect. This distinction is important, and is illustrated by the fact that an equiproportional change in international prices, while not affecting terms of trade, can trigger changes in factor productivity and therefore impact on workers' and capital owners' welfare. Decomposition of movements in factor productivity is implemented empirically using data from ten OECD countries.

Keywords: factor productivity; GDP functions; international prices; terms of trade (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: Written 2004-08-12
Note: Type of Document - pdf; pages: 40
View list of references

Downloads: (external link)
http://129.3.20.41/eps/it/papers/0408/0408002.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in International Trade from EconWPA
Series data maintained by EconWPA ().