Total factor productivity and the measurement of neutral technology

Alban Moura

No 143, BCL working papers from Central Bank of Luxembourg

Abstract: TFP measures constructed from chain-aggregated output, such as those published by the Bureau of Labor Statistics or Fernald (2014), confound contributions from neutral and sector-specifc technology. Therefore, they should not be used to infer the path of neutral technology in presence of investment-specific technical change. Two theory-consistent, utilization-adjusted measures of neutral technology at the quarterly frequency are proposed for the US business sector. Both indicate that neutral technology progress declined dramatically after the mid-1970s. In particular, its contribution to US growth fell from more than 85% before 1973 to less than 25% afterward. The associated welfare loss is enormous: if neutral technology had continued on its pre-1970s trend, 2017 US output would have been 70% higher.

Keywords: total factor productivity; neutral technology; investment-specific technology; sources of growth. (search for similar items in EconPapers)
JEL-codes: E22 E23 E32 O41 O47 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-05
New Economics Papers: this item is included in nep-eff, nep-mac and nep-tid
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Citations: View citations in EconPapers (1)

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Working Paper: Total factor productivity and the measurement of neutral technology (2020)
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