Is a Theory of Total Factor Productivity Really Needed?

35 Pages Posted: 9 Feb 2007

See all articles by Jesus Felipe

Jesus Felipe

Asian Development Bank

John McCombie

University of Cambridge - Department of Land Economy

Abstract

This paper addresses the question of whether or not a theory of total factor productivity (TFP) is needed in order to explain the observed large per capita income differences across countries. As the argument that it is needed has been reached by calculating TFP empirically, we show that the way the estimates of TFP have been computed is not an innocuous issue. To illustrate our point, we discuss how two well-known textbooks on growth theory present the arguments and the problems associated with these expositions. We conclude that the tautological nature of the estimates of TFP lies at the heart of an important question that the empirical literature on economic growth has been dealing with during recent years. Hence, our arguments cast doubt on the need for a theory of TFP.

Suggested Citation

Felipe, Jesus and McCombie, John S. L., Is a Theory of Total Factor Productivity Really Needed?. Metroeconomica, Vol. 58, No. 1, pp. 195-229, February 2007, Available at SSRN: https://ssrn.com/abstract=962214 or http://dx.doi.org/10.1111/j.1467-999X.2007.00265.x

Jesus Felipe

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

John S. L. McCombie (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

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