The Tyranny of the Identity: Growth Accounting Revisited

Jesus Felipe () and John McCombie

International Review of Applied Economics, 2006, vol. 20, issue 3, 283-299

Abstract: It has been argued in the literature that growth accounting may be undertaken by directly differentiating the national income and product accounts identity where total income equals labour's total compensation and total profits. This paper shows that this is simply an exercise in the manipulation of an accounting identity without necessarily having any theoretical foundation. Simulations show that the estimates of total factor productivity growth resulting from growth accounting performed with aggregate monetary data are not equivalent to the true rate of technological progress implied by the micro-data. This suggests that results from the orthodox growth accounting approach may be very misleading.

Keywords: Total factor productivity growth; accounting identity (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (21)

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DOI: 10.1080/02692170600735963

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