Productivity Growth and Capacity Utilization - ARCHIVED

Articles and reports: 11F0027M2013085


This paper presents a non-parametric approach for adjusting the multifactor productivity growth (MFPG) measure for variations in capacity utilization over time. In the framework developed here, a capital utilization measure is derived from the economic theory of production and is estimated by comparing the ex-post return with the ex-ante expected return on capital. The non-parametric approach is then compared with the parametric approach and the standard growth accounting framework. Both the non-parametric and parametric approaches correct for the cyclical bias in the standard MFPG measure, but the non-parametric approach offers more practical adjustment for capacity utilization, because it is easier to implement and more in line with the non-parametric approach long used by statistical agencies and researchers.

Issue Number: 2013085
Author(s): Gu, Wulong; Wang, Weimin
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HTMLJuly 23, 2013
PDFJuly 23, 2013