Is there an inflation-productivity trade-off? Some evidence from the manufacturing sector in Greece

George Bitros () and Epaminondas Panas

Applied Economics, 2001, vol. 33, issue 15, 1961-1969

Abstract: This paper examines the effect of inflation on total factor productivity growth (TFP), using time-series data for every two digit Greek manufacturing industries. In order to do the above a translog flexible cost function is estimated and used to decompose TFP growth into scale economies, inflation and technical change. The advantage of estimating a very general and flexible cost function is that it allows us, for the first time, to examine empirically a large number of significant relationships between TFP growth and economies of scale, inflation and technical change. The main conclusion drawn from this analysis is that inflation reduces TFP growth in a way, which is sizeable. Furthermore, using standard causality test the direction of causality between inflation and TFP growth was tested at the manufacturing level.

Date: 2001
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DOI: 10.1080/00036840110043730

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