Decomposing Value Added Growth over Sectors into Explanatory Factors

Walter Diewert and Kevin Fox

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: A decomposition of nominal value added growth over multiple sectors of an economy into explanatory factors is presented. The explanatory factors over a single sector are changes in the efficiency of the sector, growth of primary inputs, changes in sectoral output and input prices, technical progress and returns to scale. In order to implement the decomposition for a sector, an estimate of the sector’s cost constrained value added function for the two periods under consideration is required, which is taken to be the free disposal hull of past observations. The problems associated with aggregating over sectors are also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014.

Keywords: Measurement of output; input and productivity; value added functions; revenue functions; variable profit functions; duality theory; economic price and (search for similar items in EconPapers)
JEL-codes: C43 D24 D61 E23 H44 O47 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2016-09-27, Revised 2016-09-27
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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