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A model of TFP. (English) Zbl 1201.91103
Summary: This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of H. S. Houthakker (1955–1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in [D. T. Mortensen and C. A. Pissarides, Rev. Econ. Stud. 61, No. 3, 397–415 (1994; Zbl 0800.90319)]. An aggregate production function is derived by aggregating across micro-production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labour market as summarized by the job-destruction decision. The model is also used to study the effects of labour-market policies on the level of measured TFP.

91B40 Labor market, contracts (MSC2010)
91B38 Production theory, theory of the firm
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