Dynamic Productivity Decomposition with Allocative Efficiency

Kaoru Hosono and Miho Takizawa

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We propose a novel approach to decomposing aggregate productivity growth into changes in technical efficiency, allocative efficiency, and variety of goods as well as relative efficiency of entrants and exiters. We measure technical efficiency by the aggregate production possibility frontier and allocative efficiency by the distance from the frontier. Applying our approach to establishment- and firm-level datasets from Japan, we find that the allocative efficiency among survivors declined during the banking crisis period. We also find that the technical efficiency declined during the Global Financial Crisis period. Furthermore, we find that both entrants and exiters were likely to be more efficient than survivors.

Pages: 57 pages
Date: 2019-09
New Economics Papers: this item is included in nep-bec and nep-eff
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Working Paper: Dynamic Productivity Decomposition with Allocative Efficiency (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:19069

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