A model of TFP

Ricardo Lagos

    Research output: Contribution to journalArticle

    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 languageEnglish (US)
    Pages (from-to)983-1007
    Number of pages25
    JournalReview of Economic Studies
    Volume73
    Issue number4
    DOIs
    StatePublished - Oct 2006

    ASJC Scopus subject areas

    • Economics and Econometrics

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