Total Factor Productivity Growth when Factors of Production Generate Environmental Externalities

Vouvaki, Dimitra and XEPAPADEAS, Anastasios (2008): Total Factor Productivity Growth when Factors of Production Generate Environmental Externalities.

Abstract

Total factor productivity growth (TFPG) has been traditionally associated with technological change. We show that when a factor of production, such as energy, generates an environmental externality in the form of CO₂ emissions which is not internalized because of lack of environmental policy, then TFPG estimates could be biased. This is because the contribution of environment as a factor of production is not accounted for in the growth accounting framework. Empirical estimates confirm this hypothesis and suggest that part of what is regarded as technology's contribution to growth could be attributed to the use of environment in output production.

• Item Type: MPRA Paper
• Language: English
• Keywords: Total Factor Productivity, Sources of Growth, Environmental Externalities, Energy, Environmental Policy
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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