Utilization-Adjusted TFP Across Countries: Measurement and Implications for International Comovement

Andrei Levchenko, Zhen Huo and Nitya Pandalai-Nayar

No 14438, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: 2020-02
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Utilization-adjusted TFP across countries: Measurement and implications for international comovement (2023)
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)
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