Measuring Productivity Growth When Technological Change is Biased - A New Index and an Application to UK Agriculture

Bailey, Alastair and Balcombe, Kelvin and Irz, Xavier (2004) Measuring Productivity Growth When Technological Change is Biased - A New Index and an Application to UK Agriculture. Agricultural Economics, 31 (2-3). 285 - 295. ISSN 0169-5150. (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1111/j.1574-0862.2004.tb00265...

Abstract

Productivity growth is conventionally measured by indices representing discreet approximations of the Divisia TEP index under the assumption that technological change is Hicks-neutral. When this assumption is violated, these indices are no longer meaningful because they conflate the effects of factor accumulation and technological change. We propose a way of adjusting the conventional TFP index that solves this problem. The method adopts a latent variable approach to the measurement of technical change biases that provides a simple means of correcting product and factor shares in the standard Tornqvist-Theil TFP index. An application to UK agriculture over the period 1953–2000 demonstrates that technical progress is strongly biased. The implications of that bias for productivity measurement are shown to be very large, with the conventional TFP index severely underestimating productivity growth. The result is explained primarily by the fact that technological change has favoured the rapidly accumulating factors against labour, the factor leaving the sector.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Alastair Bailey
Date Deposited: 06 Oct 2008 08:36
Last Modified: 15 Apr 2014 14:33
Resource URI: http://kar.kent.ac.uk/id/eprint/8126 (The current URI for this page, for reference purposes)
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