Quantity index of combined inputs = Quantity index of (different types of) labour, capital,
energy, services, each weighted with its current-price share in total gross output.
Interpretation Shows the time profile of how productively combined inputs are used to generate gross
output. Conceptually, the KLEMS productivity measure captures disembodied technical
change. In practice, it reflects also efficiency change, economies of scale, variations in
capacity utilisation and measurement errors. When capital and intermediate input
measures are aggregators of detailed types of assets and products, each weighted by
their respective share in total cost, and based on prices that reflect quality change, the
effects of embodied technical change are picked up by the capital and intermediate inputs
terms, and only disembodied technical change enters the MFP measure.
Purpose Analysis of industry-level and sectoral technical change.
Advantages Conceptually, KLEMS-MFP is the most appropriate tool to measure technical change by
industry as the role of intermediate inputs in production is fully acknowledged;
“Domar” aggregation of KLEMS-MFP across industries provides an accurate picture of
the contributions of industries to aggregate MFP change.
Drawback and
limitations
Significant data requirements, in particular timely availability of input-output tables that are
consistent with national accounts;
Inter-industry links and aggregation across industries more difficult to communicate than
in the case of value-added based MFP measures.
2.4. Growth accounting and main assumptions underlying the conceptual framework
11. The
Quantity index of combined inputs = Quantity index of (different types of) labour, capital,
energy, services, each weighted with its current-price share in total gross output.
Interpretation Shows the time profile of how productively combined inputs are used to generate gross
output. Conceptually, the KLEMS productivity measure captures disembodied technical
change. In practice, it reflects also efficiency change, economies of scale, variations in
capacity utilisation and measurement errors. When capital and intermediate input
measures are aggregators of detailed types of assets and products, each weighted by
their respective share in total cost, and based on prices that reflect quality change, the
effects of embodied technical change are picked up by the capital and intermediate inputs
terms, and only disembodied technical change enters the MFP measure.
Purpose Analysis of industry-level and sectoral technical change.
Advantages Conceptually, KLEMS-MFP is the most appropriate tool to measure technical change by
industry as the role of intermediate inputs in production is fully acknowledged;
“Domar” aggregation of KLEMS-MFP across industries provides an accurate picture of
the contributions of industries to aggregate MFP change.
Drawback and
limitations
Significant data requirements, in particular timely availability of input-output tables that are
consistent with national accounts;
Inter-industry links and aggregation across industries more difficult to communicate than
in the case of value-added based MFP measures.
2.4. Growth accounting and main assumptions underlying the conceptual framework
11. The
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