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3 - Productivity Estimation

Published online by Cambridge University Press:  14 April 2022

Carlo Altomonte  and
Filippo di Mauro
Carlo Altomonte
Affiliation:
Università Commerciale Luigi Bocconi, Milan
Filippo di Mauro
Affiliation:
IWH-Halle and CompNet
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Summary

TFP is generally estimated as a residual – the difference between a firm's actual output and its predicted output. This requires a two-step procedure: first we predict the value of output based on information on a firm's use of inputs, a theoretical framework explaining how the inputs are combined and a consistent empirical estimation that measures this combination. Then we take the difference between the (correctly estimated) predicted output and the actual (observed) output. This residual will explain which part of the actual output we are not able to explain by looking at the way that firms have used inputs.

Keywords

total factor productivty. production functionTFP estimates
Type
Chapter
Information
The Economics of Firm Productivity
Concepts, Tools and Evidence
 , pp. 36 - 53
Publisher: Cambridge University Press
Print publication year: 2022

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