A model of TFP

Ricardo Lagos

doi:10.1111/j.1467-937X.2006.00405.x

A model of TFP

Ricardo Lagos

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Abstract

This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro-production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labour market as summarized by the job-destruction decision. The model is also used to study the effects of labour-market policies on the level of measured TFP.

Original language	English (US)
Pages (from-to)	983-1007
Number of pages	25
Journal	Review of Economic Studies
Volume	73
Issue number	4
DOIs	https://doi.org/10.1111/j.1467-937X.2006.00405.x
State	Published - Oct 2006

ASJC Scopus subject areas

Economics and Econometrics

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10.1111/j.1467-937X.2006.00405.x

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title = "A model of TFP",

abstract = "This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro-production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labour market as summarized by the job-destruction decision. The model is also used to study the effects of labour-market policies on the level of measured TFP.",

author = "Ricardo Lagos",

note = "Funding Information: Acknowledgements. I thank Gadi Barlevy, Marco Bassetto, Jeffrey Campbell, Xavier Gabaix, Nobu Kiyotaki, Erzo G. J. Luttmer, Marc Melitz, Ed Prescott, Esteban Rossi-Hansberg, the Editor (Fabrizio Zilibotti), and two anonymous referees for useful comments and suggestions. Financial support from the National Science Foundation (grant SES-0232583) and the C. V. Starr Center for Applied Economics at New York University is gratefully acknowledged. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. Copyright: Copyright 2008 Elsevier B.V., All rights reserved.",

year = "2006",

month = oct,

doi = "10.1111/j.1467-937X.2006.00405.x",

language = "English (US)",

volume = "73",

pages = "983--1007",

journal = "Review of Economic Studies",

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N1 - Funding Information: Acknowledgements. I thank Gadi Barlevy, Marco Bassetto, Jeffrey Campbell, Xavier Gabaix, Nobu Kiyotaki, Erzo G. J. Luttmer, Marc Melitz, Ed Prescott, Esteban Rossi-Hansberg, the Editor (Fabrizio Zilibotti), and two anonymous referees for useful comments and suggestions. Financial support from the National Science Foundation (grant SES-0232583) and the C. V. Starr Center for Applied Economics at New York University is gratefully acknowledged. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. Copyright: Copyright 2008 Elsevier B.V., All rights reserved.

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N2 - This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro-production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labour market as summarized by the job-destruction decision. The model is also used to study the effects of labour-market policies on the level of measured TFP.

AB - This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro-production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labour market as summarized by the job-destruction decision. The model is also used to study the effects of labour-market policies on the level of measured TFP.

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JO - Review of Economic Studies

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A model of TFP

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