TY  - JOUR
AU  - Young,Alwyn
TI  - Paasche vs. Laspeyres:  The Elasticity of Substitution and Bias in      Measures of TFP Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6663
PY  - 1998
Y2  - July 1998
UR  - http://www.nber.org/papers/w6663
L1  - http://www.nber.org/papers/w6663.pdf
N1  - Author contact info:
Alwyn Young
London School of EconomicsAB  - In recent papers, Nelson and Pack (1995) , Rodrik (1997), and Hsieh (1997a) argue that standard measures of total factor productivity growth in countries where the capital-labour ratio has risen rapidly, e.g. the East Asian NICS, will understate true productivity growth if the elasticity of substitution is less than one and there is labour augmenting technical change.  This note shows that this argument increases a Paasche measure of productivity, at the expense of lowering a Laspeyres estimate. The conditions under which total factor productivity growth is consistently underestimated are clarified.
ER  -