Dynamic Productivity Decomposition with Allocative Efficiency

Kaoru Hosono and Miho Takizawa
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Miho Takizawa: Gakushuin University

No 12, Working Papers on Central Bank Communication from University of Tokyo, Graduate School of Economics

Abstract: We propose a novel approach to decomposing aggregate productivity growth into changes in technical efficiency, allocative efficiency, and variety of goods as well as relative efficiency of entrants and exiters. We measure technical efficiency by the aggregate production possibility frontier and allocative efficiency by the distance from the frontier. Applying our approach to establishment- and firm-level datasets from Japan, we find that the allocative efficiency among survivors declined during the banking crisis period, while the technical efficiency declined during the Global Financial Crisis period. Furthermore, we find that both entrants and exiters were likely to be more efficient than survivors.

Keywords: Productivity decomposition; Allocative efficiency; Japan. (search for similar items in EconPapers)
JEL-codes: D24 O40 O47 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2019-09
New Economics Papers: this item is included in nep-bec and nep-eff
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Working Paper: Dynamic Productivity Decomposition with Allocative Efficiency (2019)
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