Solow residuals without capital stocks
Michael Burda () and
Battista Severgnini ()
Journal of Development Economics, 2014, vol. 109, issue C, 154-171
We use synthetic data generated by a prototypical stochastic growth model to assess the accuracy of the Solow residual (Solow, 1957) as a measure of total factor productivity (TFP) growth when the capital stock in use is measured with error. We propose two alternative measurements based on current investment expenditures: one eliminates the capital stock by direct substitution, while the other employs generalized differences of detrended data and the Malmquist index. In short samples, these measures can exhibit consistently lower root mean squared errors than the Solow–Törnqvist counterpart. Capital measurement problems are particularly severe for economies still far from their steady state. This drawback of the Solow residual is thus most acute in applications in which its accuracy is most highly valued. As an application, we compute and compare TFP growth measures for developing countries in the Heston–Summers dataset.
Keywords: Total factor productivity; Solow residual; Measurement error; Malmquist index (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Solow Residuals without Capital Stocks (2010)
Working Paper: Solow Residuals without Capital Stocks (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:109:y:2014:i:c:p:154-171
Access Statistics for this article
Journal of Development Economics is currently edited by M. R. Rosenzweig
More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().