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

Zhen Huo, Andrei Levchenko and Nitya Pandalai-Nayar

No 26803, NBER Working Papers from National Bureau of Economic Research, Inc

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 co-movement.

JEL-codes: F41 F44 (search for similar items in EconPapers)
Date: 2020-02
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Published as Zhen Huo & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2023. "Utilization-adjusted TFP across countries: Measurement and implications for international comovement," Journal of International Economics, .
Published as Utilization-Adjusted TFP across Countries: Measurement and Implications for International Comovement , Zhen Huo, Andrei A. Levchenko, Nitya Pandalai-Nayar. in NBER International Seminar on Macroeconomics 2022 , Forbes, Gourinchas, and Reis. 2023

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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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