Utilization-adjusted TFP across countries: Measurement and implications for international comovement

Zhen Huo, Andrei Levchenko and Nitya Pandalai-Nayar

Journal of International Economics, 2023, vol. 146, issue C

Abstract: This paper develops estimates of TFP growth adjusted for movements in unobserved factor utilization for a panel of 29 countries and up to 37 years. When factor utilization changes are unobserved, the commonly used Solow residual mismeasures actual changes in TFP. We use a general equilibrium dynamic multi-country multi-sector model to derive a production function estimating equation that corrects for unobserved factor usage. We compare the properties of utilization-adjusted TFP series to the standard Solow residual, and quantify the roles of both TFP and utilization for international business cycle comovement. Utilization-adjusted TFP is virtually uncorrelated across countries, and does not generate much GDP comovement through its propagation. Shocks to factor utilization can more successfully account for international comovement.

Keywords: TFP; Utilization; Solow residual; International Comovement (search for similar items in EconPapers)
JEL-codes: F41 F44 (search for similar items in EconPapers)
Date: 2023
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Related works:
Chapter: Utilization-Adjusted TFP across Countries: Measurement and Implications for International Comovement (2022)
Working Paper: Utilization-Adjusted TFP Across Countries: Measurement and Implications for International Comovement (2020)
Working Paper: Utilization-Adjusted TFP Across Countries: Measurement and Implications for International Comovement (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:146:y:2023:i:c:s0022199623000399

DOI: 10.1016/j.jinteco.2023.103753

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