Aggregation of economic growth rates and of its sources

Aggregation of economic growth rates and of its sources

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Article ID: iaor20113869
Volume: 212
Issue: 1
Start Page Number: 190
End Page Number: 198
Publication Date: Jul 2011
Journal: European Journal of Operational Research
Authors:
Keywords: aggregation
Abstract:

In this paper we consider the question of measuring aggregate economic growth and its sources. We derive a theoretically justified solution for aggregating (across firms, industries, countries, etc.) growth rates and their sources within the framework of growth accounting method. The resulting aggregation scheme turns out to be quite intuitive and, in fact, the one that is sometimes used in practice, but with theoretical justification missing and so the main value of our work is that our formal derivations show under what conditions this scheme has economic theory justification. We also provide a small empirical illustration of our method on the real data set and show how different the conclusions can be depending on the aggregation scheme used.

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