Description

Despite the important role that total factor productivity (TFP) has played in growth literature, few attempts have been made to change the methodology to estimate it. This paper proposes a methodology based on state–space model to estimate TFP and its determinants. With this methodology it is possible to reduce the measurement of our ignorance. As a by-product, this estimation yields the capital share in output and the long-term growth rate. When applied to Chile, the estimation shows a capital share around 0.5 and long term growth of TFP around 1%. Capital accumulation tends to explain more the growth rate in the fast growth periods under the econometric estimation compared to the traditional growth accounting methodology.