Measuring Industry Contributions to Labour Productivity Change: A New Formula in a Chained Fisher Index Framework

• Main Author: Marshall Reinsdorf
• Format: Article
• Language: English
• Published: Centre for the Study of Living Standards 2015-04-01
• Series: International Productivity Monitor
• Subjects: labour productivity; fisher index; gead formula
• Online Access: http://www.csls.ca/ipm/28/reinsdorf.pdf

Canada and the United States use Fisher indexes in their input-output accounts. Existing methods for decomposing aggregate labour productivity growth into industry contributions in a Fisher index framework either leave some productivity growth unaccounted for or are poorly suited for answering relevant questions about the industry sources of productivity growth. This article derives formulas for analyzing industry contributions to productivity change that add up exactly to the aggregate change in productivity and that have useful economic interpretations. These formulas show that the manufacturing sector made a positive contribution to productivity growth in the Canada in 2000-2010 and in the United States in 1998-2012, whereas the widely used GEAD formula implies that manufacturing made a negative contribution. Methods that can be used to decompose chained Laspeyres measures of productivity growth are also developed. These methods would be applicable in countries other than Canada and the United States.