Productivity change in a multisectoral economic system

Abstract

ABSTRACTWe estimate productivity growth without recourse to data on factor input shares or prices. In the proposed model, the economy is represented by the Leontief input–output model, which is extended by the constraints of primary inputs. A Luenberger productivity indicator is proposed to estimate productivity change; this is then decomposed in a way that enables us to examine the contributions of individual production factors and individual commodities to productivity change. The results allow for the identification of inputs or outputs that are the drivers of the overall productivity change. Their contributions are then decomposed into efficiency change and technical change components. Using input–output tables of the US economy for the period 1977–2006, we show that technical progress has been the main source of productivity change. Technical progress was mostly driven by capital, whereas low-skilled labour contributed negatively.