A BEJEAP Topics article.

Abstract

For both primal and dual TFP growth accounting to properly account for productivity growth, assumptions of constant returns to scale and perfect competition are necessary. This paper shows that without these assumptions, while both TFP growth accounting measures remain equal if factor shares are constant, they are also equally bad at measuring productivity growth. This paper proposes a structural regression to estimate productivity growth based on more general production and cost functions. Using Singapore's industries as illustrations, this paper finds that the assumptions are widely rejected, and the estimated productivity growth exceeds both the accounting measures. When the same methodology is applied to the aggregate Singapore data, the estimated productivity growth is 4.4 percent per year, significantly higher than that of Young's (1992) and Hsieh's (2002).

Submitted: August 19, 2003 · Accepted: October 26, 2004 · Published: October 26, 2004

Originally published in Topics in Economic Analysis & Policy.

Recommended Citation

Kee, Hiau Looi (2004) "Estimating Productivity When Primal and Dual TFP Accounting Fail: An Illustration Using Singapore's Industries," Topics in Economic Analysis & Policy: Vol. 4 : Iss. 1, Article 26.
Available at: http://www.bepress.com/bejeap/topics/vol4/iss1/art26