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A Note on Reconciling Gross Output TFP Growth with Value Added TFP Growth

Walter Diewert

Economics working papers from Vancouver School of Economics

Abstract: The paper obtains relatively simple exact expressions that relate value added Total Factor Productivity growth (TFP growth or Multifactor Productivity Growth) in a value added framework to the corresponding measures of TFP growth in a gross output framework when Laspeyres or Paasche indexes are used to aggregate outputs and inputs. Basically, as the input base becomes smaller, the corresponding estimates of TFP growth become larger. A fairly simple approximate relationship between Fisher indexes of gross output TFP growth and the corresponding Fisher index of value added TFP growth is also derived. The methodology developed in this note can be applied in other situations.

Keywords: Total Factor Productivity growth; TFP growth; Multifactor Productivity growth; MFP growth; Laspeyres; Paasche and Fisher index number formulae; magnif (search for similar items in EconPapers)
JEL-codes: C43 D24 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2014-12-17, Revised 2014-12-17
New Economics Papers: this item is included in nep-eff, nep-fdg and nep-gro
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