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A univariate model of aggregate labour productivity

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In this article, we set out a model of labour productivity which distinguishes between shocks which change productivity permanently and shocks which have transient affects on productivity. We show that this model is a type of unobserved components model – a random walk with drift plus noise model. The advantage of this approach is that it provides a coherent framework to identify the deterministic trend growth component and also the productivity enhancing (or technology related) stochastic components. The model is applied to aggregate labour productivity in Australia and the time series of technology shocks extracted is used to shed some light on the contributions of policy reforms to productivity.

Keywords: C22; O40; O47; economic growth; labour productivity; technological change

Document Type: Research Article


Affiliations: 1: Department of Economics,The University of Melbourne, Melbourne,VIC 3010, Australia 2: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne,VIC 3010, Australia

Publication date: 2012-06-01

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