Measuring Productivity Growth in the Presence of Adjustment Costs, Markups and Variable Capacity Utilization

Diego Comin, Antonella Trigari (), Javier Quintana González and Tom Schmitz

No 666, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Standard growth accounting measures of Total Factor Productivity (TFP) growth do not take into account changes in factor utilization. Currently, the leading way to deal with this problem, introduced by Basu, Fernald and Kimball (2006), is to use changes in hours per worker as a proxy for unobserved changes in factor utilization. In this paper, we show that this proxy is problematic for a range of European countries. We propose using an alternative proxy, based on surveys of firm capacity utilization. We show that this yields new insights on TFP growth in the Great Recession, especially in Southern Europe.

Date: 2019
New Economics Papers: this item is included in nep-eff
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