A dynamic model to estimate the “pure” productivity

Albu, Lucian-Liviu (2005): A dynamic model to estimate the “pure” productivity. Published in: Romanian Journal of Economic Forecasting , Vol. 1, (March 2005): pp. 30-34.

Abstract

As asserted in standard literature, there is an implicit circular relationship between the productivity growth and the potential level of production (and, consequently, the estimation of the natural rate of unemployment is also altered). In order to avoid such emerging impediment in any estimating macroeconomic model, an autonomous dynamic model to estimate the trend of productivity growth must be used. Moreover, taking into account that the current level of productivity is implicitly influenced by the actual unemployment rate, it is usually recommended as a more accurate solution to try to obtain firstly an estimate for the “pure” productivity. This must be neutral relating to the short-term changes in employment, but in long run, it is affected by factors such as the general technological progress, the increase in the educational level, the growth of the R&D system, the expansion of the “new economy”, etc. In this paper, we use a simple dynamic model to estimate the growth of pure productivity independently of the actual level of employment and, implicitly, of the unemployment rate. Afterwards, the estimated changes in the pure productivity level are compared with the potential production trend in the case of the Romanian economy during the transition period.

• Item Type: MPRA Paper
• Language: English
• Keywords: pure productivity; potential GDP; natural rate of unemployment; smoothing filters
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis

References

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