Journal of Productivity Analysis

, Volume 37, Issue 3, pp 249–259 | Cite as

Problems with (dis)aggregating productivity, and another productivity paradox



Using a standard definition of productivity growth, it is shown that a country may have higher productivity growth than another country in each sector, but may have a lower productivity growth rate overall. Also, it is shown that popular methods for aggregating firm/industry estimates of productivity growth have a serious problem in that productivity of all firms/industries can go up, but aggregate productivity can fall. This is not necessarily due to changes in the reallocation of resources across firms/industries. Hence, there are problems for the interpretation of previously published articles which use these methods. There can be inappropriate assessments of the cyclical properties of productivity, and the productivity impact of industry dynamics, micro-economic reforms and regulatory change. Index-number methods that avoid these aggregation problems are introduced.


Productivity measurement Industry dynamics Index numbers 

JEL classification

C43 D24 E23 



The author gratefully acknowledges the hospitality of the Universitat Autònoma de Barcelona, helpful comments from an anonymous referee, Bert M. Balk, Erwin Diewert, Ulrich Kohli, Nathan McLellan, Valentyn Zelenyuk, and seminar participants at: the Swiss National Bank; The Australian National University; LaTrobe University; Australasian Econometric Society Meeting, Brisbane; Centre for Efficiency and Productivity Analysis, University of New England; the Australasian Macroeconomics Workshop, Wellington; the Econometric Study Group Winter Meeting, Dunedin; and the University of Canterbury; and financial support from the Australian Research Council (DP0559033, LP0884095).


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Centre for Applied Economic Research and School of EconomicsThe University of New South WalesSydneyAustralia

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