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The Existing Total Factor Productivity Measurement Method: Problems and Policy Options (No.196, 2018)
2019-01-30
By He Jianwu, Department of Development Strategy and Regional Economy, DRC
Research Report, No.196, 2018 (Total 5471) 2018-11-20
Abstract: China’s economy has shifted from the high-speed phase to the high-quality development phase. One of the important missions for working toward high-quality development is to turn quantity expansion into quality and efficiency pursuit, which fundamentally means to enlarge the contribution of Total Factor Productivity (TFP) to economic growth. TFP measurement not only affects the policy formulation for high-quality development, but also relates to the evaluation of the relevant policy outcomes. This paper analyzes the possible existing problems with TFP measurement method from different angles such as the traditional accounting means, the service industry, the digital economy and new development concepts. First, the traditional accounting method causes TFP measurement results to feature procyclicality and is prone to underestimate the speed of technological progress. Second, the innate characteristics of the service industry have restricted the preciseness of TFP measurement. Third, the TFP measurement on the digital economy evidently underestimates its development. Fourth, the existing TFP measurement does not get along with the green development concept. Correspondent policy options have been brought up at the end of the paper for better TFP measurement.
Key words: Total Factor Productivity, high-quality development, high-speed growth
