Decomposing Productivity Growth under Production Risk

Luis Orea and Alan Wall

No 2002/12, Efficiency Series Papers from University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG)

Abstract: Production risk has generally not been taken into account when decomposing productivity growth. Interpreting productivity measures as indicators of firm production performance, we incorporate the effect of production risk on total factor productivity (TFP), extending previous work under production certainty. We outline a series of minimal characteristics an index of TFP should have in order to capture the impact of risk on producers and a simple index is proposed. Changes in total factor productivity under uncertainty are decomposed into terms related with changes in expected average productivity (technical change and changes in scale efficiency) and changes in production risk and risk preferences.

Keywords: Production Risk; Total Factor Productivity; Productivity Decomposition (search for similar items in EconPapers)
Pages: 22
Date: 2002
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