Introduction: New Directions in Productivity Analysis

Abstract

Today, economists acknowledge the basic relationship between productivity growth and improvements in living standards and all agree about the need to provide a more accurate assessment of productivity gain across time and space. But, beyond this basic consensus, the stream of empirical productivity analysis is certainly one of the most vividly debated in the economic literature. Since the surge of growth accounting exercises in the 1950’s, each decade witnessed important controversies which lead to new developments and further improvements. In the last decade, these renewals have been profound and motivated by three main sources. Firstly, the resumption of productivity growth in the 1990s after the productivity slowdown of the 1970s and 1980s provoked controversies among policymakers and researchers, and forced economists to reexamine the fundamental question of measurement techniques (Hulten et al. , 2001). Secondly, the important contribution of Philippe Aghion and Peter Howitt’s 1992 paper opened up new directions for empirical productivity analysis. In formalizing aggregate productivity growth as the outcome of a process of creative destruction, they invited us to explore the correlation between productivity growth and the endogenous flow of firm entry and exit and the endogenous rate of capital obsolescence. Thirdly, the new and growing availability of large scale longitudinal firmlevel datasets, provided radically new ways to connect micro-and aggregate productivity growth dynamics. Following on the pioneering micro-