Aggregate Productivity and the Productivity of Aggregates

Susanto Basu and John Fernald ()

No 5382, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Explanations of procyclical productivity play a key role in a variety of business-cycle models. Most of these models, however, explain this procyclicality within a representative-firm paradigm. This procedure is misleading. We decompose aggregate productivity changes into several terms, each of which has an economic interpretation. However, many of these terms measure composition effects such as reallocations of inputs across productive units. We apply this decomposition to U.S. data by aggregating from roughly the two-digit level to the private economy. We find that the compositional terms are significantly procyclical. Controlling for these terms virtually eliminates the evidence for increasing returns to scale, and implies that input growth is uncorrelated with technology change.

JEL-codes: C43 D24 (search for similar items in EconPapers)
Date: 1995-12
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Published as Basu, Susanto and John G. Fernald. "Aggregate Productivity And Aggregate Technology," European Economic Review, 2002, v46(6,Jun), 963-991.

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Working Paper: Aggregate productivity and the productivity of aggregates (1995)
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