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Dynamic Analysis of Structural Change and Productivity Measurement

Finn Førsund and Lennart Hjalmarsson

No 27/2008, Memorandum from Oslo University, Department of Economics

Abstract: A dynamic analysis of structural change is reviewed based on a vintage model of substitutability between inputs including capital before investment, but no substitution possibilities after investment, and ex post production possibilities characterised by fixed input coefficients. Key elements in understanding structural change are the entering of capacity embodying new technology and exiting of capacity no longer able to yield positive quasi-rent. Three production function concepts are identified: the ex ante micro unit production function as relevant when investing in new capacity, the ex post micro production function, and the short-run industry production function giving the production possibilities at the industry level. Productivity measurement, taking these types of production functions into consideration, leads to different interpretations of productivity change than traditional approaches not being clear about which production function concept is used.

Keywords: Structural change; productivity measurement; putty-clay; ex ante production function; short-run industry production function (search for similar items in EconPapers)
JEL-codes: C43 D24 L61 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-10-01
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (2) Track citations by RSS feed

Published as Førsund, Finn R., 'Dynamic Efficiency Measurement' in Indian Economic Review, 2010, pages 125-159.

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