VERTICALLY INTEGRATED PRODUCTIVITY MEASURES: TESTS OF STANDARD ASSUMPTIONS

Jack L. Miller and John Gowdy

Review of Income and Wealth, 1992, vol. 38, issue 4, 445-453

Abstract: In this paper we use an input‐output framework to examine two criticisms of standard measures of total factor productivity. These criticisms are (1) that the contribution of capital to productivity growth is underestimated, and (2) that the use of cost shares to weigh factor input contribution is questionable. Using various vertically integrated productivity measures we find that capital's productivity contribution is underestimated in the neoclassical formulation. We also find that in a Pasinetti‐Rymes growth model, factor shares do not approximate output elasticities. We conclude that the argument made by Pasinetti, Rymes, and others is supported, that in long‐run productivity analysis capital should not be treated as a primary input, but should be measured as an intermediate, produced input.

Date: 1992
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https://doi.org/10.1111/j.1475-4991.1992.tb00454.x

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