Working Paper: NBER ID: w31006
Authors: Diego A. Comin; Javier Quintana; Tom G. Schmitz; Antonella Trigari
Abstract: We compute new estimates of Total Factor Productivity (TFP) growth in the five largest European economies. Our estimates account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact: our estimated TFP growth series are substantially less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of profit and utilization-adjusted quarterly TFP growth in Europe.
Keywords: Total Factor Productivity; TFP Growth; Utilization-Adjusted TFP
JEL Codes: E01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| utilization-adjusted TFP growth (O49) | more accurate reflection of productivity dynamics (O49) |
| firm surveys as a proxy for unobserved changes in factor utilization (L20) | less volatile TFP growth series (O49) |
| positive profits (D33) | lower output elasticity of capital (D24) |
| lower output elasticity of capital (D24) | affecting TFP growth estimates (O49) |
| utilization proxy (J68) | captures more variation in unobserved utilization (C29) |
| utilization proxy (J68) | less volatile TFP growth series (O49) |
| aggregate TFP growth has increased (O49) | previously suggested output growth less attributed to capital (O49) |