Aggregate green productivity growth in OECD’s countries

Abstract

Most of previous research about Total Factor Productivity (TFP) at the macro level only emphasizes technical effect and technological progress at the country level, but it ignores structural effect for a group of countries at the aggregate level. This paper attempts to measure the green productivity evolution incorporating carbon dioxide emissions based on the Luenberger productivity indicator for a group of 30 OECD countries over the period of 1971−2011. We propose a novel decomposition for green productivity growth at the aggregate level which separates productivity changes into three components: technological progress, technical efficiency change, and structural efficiency change. The structural effect captures the heterogeneity in the combination of input and output mixes among countries that can impact productivity growth at a more aggregate level. In the literature, this effect has not been quantified for a group of nations such as the OECD countries. Our results indicate that the traditional TFP index underestimates green growth which is motivated by the effective and efficient environmental policies of the OECD. For the last two decades, the green productivity growth has been mainly driven by technology progress.