US TFP Growth

[Derek Sicklen <derek@xxxxxxxxxxxxxx>]

A recent OECD publication (Technology and Industrial Performance, 1996)
argues that US Total Factor Productivity - TFP - growth has increased quite
substantially since around 1977.

TFP is defined as the "weighted average of labour and capital productivity,
with the period averages for factor shares used as weights" (p59).

This contrasts quite sharply with trends in other measures of US
productivity including real non-farm output per hour, which have shown
almost no growth over the same period.

Further, the use of the TFP measure shows that US productivity growth has
been far superior to that of other G7 countries over the period.

Thus the "US model" could be said to deliver better productivity growth than
that of those other countries.

1.  Are PKT members happy with the use of TFP?

2.  My understanding of TFP is that it requires a neoclassical production
function approach which implies the notion of the marginal productivity of
capital.

3.  If this is the case, didn't the Cambridge capital debates of the late
1960s and early 1970s effectively destroy the concept of the marginal
productivity of capital?

This is an important issue, as the choice of productivity measure will in
part determine one's assessment of US economic performance both in absolute
and relative terms. The policy implications of choosing either definition
could well be total opposites.

Could I get some feedback please?


Derek



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Derek Sicklen
Director
Australian Economic Analysis Pty Limited
Kirribilli NSW 2061 Australia
Email: derek@xxxxxxxxxxxxxx
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