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ON THE MEASUREMENT OF TOTAL FACTOR PRODUCTIVITY: A LATENT VARIABLE APPROACH

Published online by Cambridge University Press:  22 March 2010

J. Rodrigo Fuentes  and
Marco Morales
J. Rodrigo Fuentes*
Affiliation:
Pontificia Universidad Católica de Chile
Marco Morales
Affiliation:
Universidad Diego Portales
*
Address correspondence to: J. Rodrigo Fuentes, Instituto de Economía, Pontificia Universidad Católica de Chile Avda. Vicuña Mackenna 4860, Macul, Santiago, Chile; e-mail: rfuentes@faceapuc.cl.
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Abstract

Despite the important role that total factor productivity (TFP) has played in the growth literature, few attempts have been made to change the methodology to estimate it. This paper proposes a methodology based on a state-space model to estimate TFP and its determinants. With this methodology, it is possible to reduce the measurement of our ignorance. As a by-product, this estimate yields the capital share in output and the long-term growth rate. When applied to Chile, the estimation shows a capital share around 0.5 and long-term growth of TFP around 1%. Capital accumulation tends to explain the growth rate in the fast growth periods under the econometric estimation more than the traditional growth accounting methodology.

Keywords

Productivity MeasurementLatent Variables
Type
Articles
Information
Macroeconomic Dynamics , Volume 15 , Issue 2 , April 2011 , pp. 145 - 159
Copyright
Copyright © Cambridge University Press 2010

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