Factor productivity and technical change

Abstract

This paper deals with (i) decomposing total factor productivity growth into input-specific components, (ii) measuring input-specific productivity/efficiency growth, and (iii) testing several neutrality hypotheses in technical change. These issues are addressed in a general framework without assuming any functional form on the underlying production technology, and without imposing any structure on the behaviour of input productivity/efficiency growth. Using NBER panel data on 450 U.S. manufacturing industries for the period 1959–1992, it is found that technical change can be characterized by neither Hicks, Harrod, nor Solow neutral form. It is also found that productivity of capital has increased, on average by 6.5%, whereas those of labour and material declined by 5.10% and 0.4%, respectively.